What should I do about the Equifax data breach?

By now, you’ve learned that up to 143 million people in the United States have had their private information stolen through a data breach at Equifax, a national credit reporting agency. What is new and most concerning about this breach is that Equifax is one of the few companies we entrust with our most sensitive financial data.

What was stolen?

Per the Federal Trade Commission, “The hackers accessed names, Social Security numbers, birth dates, addresses and, in some instances, driver’s license numbers. They also stole credit card numbers for about 209,000 people and dispute documents with personally identifiable information for about 182,000 people.”

How do you protect yourself?

If you’ve already enrolled in an identity theft and credit monitoring service, then you have the necessary coverage and don’t need to do anything further.

If you aren’t using such a service, take the following steps: (more…)

Hiring a Financial Advisor

So you’ve decided to hire a financial professional to help you navigate your future. You’ve talked to friends and family members, and while you trust their recommendations, putting your financial future into the hands of someone else is a very big deal. You need to do your own due diligence, but where do you start? Not all financial firms/advisors are created equal. And with all the options available to us, many people decide to go it alone out of fear. They fear they could be hiring the next Bernie Madoff, or that they might end up being a number in a long list of clients. The task can seem so daunting that it’s often easier to hire the first advisor you meet, or do nothing at all.

It’s a big decision and many don’t know what questions to ask and what to look for. The below can help provide anyone looking to hire a financial professional a place to start. The questions are not meant to sway anyone in a certain direction, but rather to help ensure you hire someone you feel comfortable with and confident in.

Understand how the advisor is compensated.

Find out exactly how your advisor is paid and make sure you understand any fees and charges – and have them in writing – before making any final decisions. Fee-only means the advisor does NOT earn any commission, while fee-based advisors can earn commissions.

I believe fee-only advisors are best. I formed this belief working for firms that were fee-based and fee-only, and witnessed the practices at each. Fee-only advisors do their best to align their interests with their clients. They don’t make money off the investments they recommend. In a fee-only structure, anything that comes out of your bottom line in turn comes out of the advisor’s bottom line. Therefore, it’s in the advisor’s best interest to only recommend investments they truly believe are in your best interest.

Fee-based advisors might have incentives to sell certain products. (Have you ever heard: “If you want to buy your financial advisor a new Mercedes, buy an annuity?”) Fee-based advisors can fall prey more easily to their clients’ views and emotions, especially during volatile markets. You want to make sure you are hiring someone that will give you the best advice, even if it isn’t what you want to hear. “The difference between successful people and really successful people is that really successful people say no to almost everything.” – Warren Buffet. You don’t want a “Yes” man. (more…)

Determining Which Term Life Insurance Policy Makes the Most Sense

Term life insurance is used primarily for pure income replacement (i.e., your human capital). When you apply for term life (non-permanent) insurance, you have to choose the amount of coverage you want ($50,000 to more than $2,000,000) and the term of the policy – usually a 10-, 15-, 20- or 30-year policy. The coverage amount and term depend on your specific needs, such as taking care of young children, or paying off the mortgage if you pass away unexpectedly.

Since term life insurance policy premiums stay level, i.e., the same, your premium does not change during the term. This causes the premium to be higher for longer terms. At the end of the term, you either lose life insurance coverage or apply to obtain a new policy with a different term, conditions and premium costs.

How the Premium Is Determined
Your premium is determined by your age, gender and health rating, multiplied by a stated factor for the term and coverage amount you’re applying for. The health rating component requires an insurance physical exam where a nurse visits you at home or at work, or you can go to a doctor’s office.

When deciding how much insurance to get, consider the costs of raising a child and potential college tuition, plus the mortgage, funeral costs and any other potential debt. For lower coverage amounts, such as under $250,000, many companies offer simplified issue insurance, which you usually receive advertisements for by mail from your mortgage lender or homeowner’s insurance company. This type of life insurance doesn’t require a medical exam and can be approved in just a couple of days. (more…)

Ask Merriman: SIPC Coverage

Q: Brokerage houses have additional insurance that covers certain events relative to my deposit. Should I be concerned when the funds on deposit at a major brokerage exceed the insurance limits?

Let’s assume this refers to SIPC coverage brokerage firms use. While loosely similar to the more familiar FDIC insurance to cover bank deposits, SIPC insurance is much more limited in scope.

Essentially, SIPC insurance provides coverage from loss due to the brokerage firm going out of business. It provides up to $500,000 of protection on securities and up to $250,000 in cash in excess of what is recovered. It does not provide coverage from a decline in the value of investments.

To help visualize an example of when SIPC would come into play, let’s use an example of a $5 million client account:

· Assume the brokerage firm fails, resulting in $5 billion of client claims on assets.

· Assume 90% of clients’ assets ($4.5 billion) are recovered. The actual historical recovery rate is 98.7% according to SIPC.

· The client in this example holding $5 million in SIPC eligible assets would receive $4.5 million from recovered assets and $500,000 from SIPC. The loss to the $5 million client account would be zero.

It’s exceedingly rare for a client to be entitled to recover damages under SIPC and not be made whole because of the $500,000 limit.

Also, most large brokerage firms purchase “excess of SIPC” insurance, which insures clients for any losses above the $500,000 limit.

Ultimately, clients do not need to be concerned when funds at a brokerage exceed the coverage limits.

More detailed information about SIPC coverage can be found here.


 

Do you have a question about investments, taxes, retirement or insurance? Send it to “Ask Merriman” and one of our financial advisors will help you find an answer.

COBRA vs. ACA

Due to the recent presidential election, parts of the Affordable Care Act described below may change. The current rules will likely stay in place through 2017. We’ll provide updates as they occur.

When you leave a job, a key decision you need to make is what to do about health insurance when your current coverage ends. If you’re under age 65 and not yet eligible for Medicare, then your two major options are either COBRA, or policies on health insurance exchanges set up under the Affordable Care Act (ACA).

istock_000018475056xsmallConsider the following factors to help you decide.

Cost

A big difference is cost. If you continue your existing coverage under COBRA, you pay 100% of the cost of coverage, plus an additional 2% in administrative costs. COBRA coverage is not eligible for any sort of subsidies to reduce the cost.

Policies sold through health insurance marketplaces generally cost less, especially some of the more “stripped down” policies. Also, as discussed in a previous post, low- and middle-income households may be eligible for a subsidy to further reduce the cost. The amount is based on household size and income. A family of four with less than $97,200 of household income may qualify for a significant subsidy.

Coverage

One benefit of COBRA is that you keep the same coverage. You know that your doctor is already in-network, so you won’t have to change care providers. And, your deductibles and copays remain the same.

COBRA allows former employees to continue comprehensive medical insurance, dental, and vision plans. COBRA does not apply to life insurance or disability benefits. (more…)

Health and Auto Insurance – What’s Covered When You’re Traveling?


iStock_67785693_XSmallBefore traveling, it’s a good idea to figure out what your health insurance covers in case you have to make an unplanned visit to the hospital. Also, if you rent a car while traveling, the rental agency will ask if you want to buy rental car insurance, so it’s good to know whether you need it. Understanding how and where your health and auto insurance extend when out of town is important, especially if you want to avoid being on the hook for a big bill. First things first, though – make sure you travel with your healthcare insurance card for you and your family members, and bring proof of auto coverage.

What different types of healthcare cover?

Emergency careHMO, PPO, HDHP, Medicare and Medicare Advantage healthcare plans cover medical emergencies no matter where you are. Emergency care is defined as medical conditions that require rapid or advanced treatments, such as surgery in a hospital setting. When traveling abroad, you’re still covered for emergency care (except in the case of Medicare and Medicare Advantage), but you may have to pay up front. Your healthcare provider will reimburse you afterward.

Urgent Care – If you need urgent care, HMO, PPO, HDHP, Medicare and Medicare Advantage (in most cases) healthcare plans cover you no matter where you are. This is for an injury or illness that requires immediate attention but is not an emergency, such as a sprained ankle or a severe sore throat that needs to be treated outside your regular doctor’s office hours.

Non-emergency, routine care – This type of care covers everything else. Plans differ on their coverage for non-emergency, routine care.

  • HMO – You have to contact your primary care doctor first and get a referral. There are limits on the coverage when you travel outside of your plan’s network and around the country. Your primary care physician will direct your care. By coordinating through your primary care physician, you ensure that the care you receive is covered by insurance.
  • PPO – Make sure to select doctors and hospitals in your provider’s network to keep costs down. Insurers like Blue Cross have large networks across the country with many doctors and facilities.
  • HDHP paired with an HSA – Like with a PPO, visit doctors and hospitals in your provider’s network to get the best rates and reduce out-of-pocket expenses.
  • Medicare – When traveling in the U.S., you can get the care you need at no extra cost. Medicare (original Medicare) doesn’t cover healthcare when traveling outside the U.S. There are a few exceptions, though, such as if you live in the U.S. but a Canadian hospital is closer to your home. There are Medigap policies that can provide coverage when traveling internationally.
  • Medicare Advantage – Like with the other health plans, you may be subject to higher out of pocket expenses for seeing out-of-network doctors. Also, you may need to obtain prior authorization before you’re treated. Since private healthcare carriers manage Medicare Advantage, your coverage depends on your plan when traveling outside the U.S.

Rental cars

When renting a car, you’ll be asked whether you want to buy insurance coverage for the vehicle. The daily rate may be reasonable, but you don’t want to pay extra for coverage that’s unnecessary.

Primary coverage

  • Comprehensive and liability – If you carry comprehensive and liability coverage on your personal car, this coverage extends to your rental car and should be adequate, unless you’re renting a car worth much more than your personal car. Any gaps not covered by your primary insurance coverage may be covered by your secondary insurance provider, such as your credit card. Keep in mind, though, that this coverage does not extend beyond the U.S., Canada, and in some cases, Mexico. If you’re traveling outside the U.S, your secondary coverage, such as your credit card, becomes your primary.
  • Personal effects coverage – Your homeowner’s, renter’s or condo insurance covers personal items if they’re stolen out of your rental car.
  • Personal accident insurance – If you have personal accident insurance, the coverage extends to your rental car in the event of a crash.

Secondary coverage

Credit cards can provide secondary rental insurance. The car must be rented with a credit card under your name and you must decline full coverage from the rental car company for this coverage to be in effect. If you don’t have personal auto insurance, your secondary credit card coverage becomes your primary. In this case, consider buying the rental car insurance if they offer liability protection because credit cards don’t provide liability insurance.

Here’s what the following credit cards cover:

  • VISA offers rental car coverage on all of its credit cards.
  • Mastercard offers rental car coverage only with their Gold, Platinum, World and World Elite credit cards.
  • American Express offers premium coverage for a small fee, and has options for increased coverage.
  • Discover’s coverage is limited to a few cards (Escape, Motiva, Open Road, and More), and only covers collision costs.

For more information, see Rental Car Insurance: Which Credit Cards Have You Covered.

Your credit card is typically your secondary coverage. However, when traveling abroad, it becomes your primary because most personal auto policies don’t extend coverage beyond the U.S. and Canada. Check with your credit card provider to see if they offer coverage in the country you’re traveling to. If they do, find out what the coverage is, and ask if they charge something to upgrade the coverage, such as a daily rate or flat fee. If your credit card company doesn’t provide coverage in the country you’re traveling to and your personal auto insurance doesn’t extend, then it’s a good idea to buy the insurance the rental car company offers.

The experience of traveling can be a great way to live life to its fullest. However, being aware of what coverage you have and how it extends to the place you’re visiting is important because it can save you money, and more importantly, many headaches.