Insurance

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Mortgage servicers, regulators and economists are closely watching the delinquency rates for Federal Housing Administration (FHA) loans following a spike in the fourth quarter of 2023.

Industry experts say that although there’s a correlation between unemployment and delinquency rates, some homeownership costs — including insurance — have increased significantly over the past two or three years, which has had a strong financial impact on homeowners. But experts also say the situation is not as bad as the one experienced during the COVID-19 pandemic.

The sources spoke about these issues during this week’s Mortgage Bankers Association (MBA) Servicing Solutions Conference & Expo in Orlando.

The latest MBA data shows that the delinquency rate for one- to four-unit properties rose to 3.88% at the end of 2023, compared to 3.62% in the third quarter, but still below the historic average of 5.25%. Meanwhile, the FHA-insured loan delinquency rate recorded a larger jump during the same period to 10.81%, up from 9.5%, the highest level since Q3 2021.

“We are seeing a bit of a pickup for two quarters in a row, but it’s very important to keep in mind that we were at the absolute lowest point in delinquencies in the third quarter of 2023,” Marina Walsh, MBA vice president of industry analysis, research and economics, said in a market outlook session.

According to Walsh, the delinquency rate for FHA loans increased by 130 basis points from the third to fourth quarters, but the current level is “certainly not nearly where it was at the height of COVID-19.” 

In addition, she said that foreclosures are not picking up, so borrowers are either paying off their loans before entering the severe delinquency stage, or if they are in the serious delinquency stage, they are entering a workout. 

“The question I posed to all of you is, ‘Is this a blip or a bigger trend?’” Walsh said, adding that based on data MBA has received from the industry, she believes the delinquency rate could come down a bit in first-quarter 2024 following the end of the busy holiday shopping season.

“All these increases in costs impact people’s ability to pay, without question,” Steven R. Bailey, senior managing director and chief servicing officer at PennyMac Financial Services, said in an executives’ perspective session. “But we still see the strongest correlation is between unemployment and delinquency.”

Bailey said that although increases in delinquencies are not a trend that servicers want to see, “I don’t look at it with the same fear that I used to look like.” 

Homeowners insurance

According to industry experts, one of the costs affecting homeowners is their insurance, which can lead to increases in delinquencies. California and Florida are among the states where the situation is more evident. 

Seven of the 12 largest insurers in California have either paused or restricted new policies over the past 18 months, including State Farm and Allstate. In September, the state’s top insurance regulator announced that new rules are in the works to persuade insurers to remain.

In Florida, the departure of many insurers and reinsurers has resulted in homeowners paying an average of nearly $4,000 a year, almost three times the U.S. average, according to estimates from the Insurance Information Institute. In some instances, homeowners have seen their insurance costs more than triple, but a new bill seeks to help them.

“That’s a combination of both rates from a carrier perspective, as well as just the increase in home values,” Patrick A. Sullivan, vice president of industry relations and compliance at Assurant, said in a session about homeowners insurance. 

Sullivan said reinsurance is another factor weighing on homeowners insurance costs, a function of the global capital markets. He added that reinsurance costs have more than tripled over the past three years.

“Homeowners insurance is certainly a problem we need to tackle together,” John Bell, executive director of loan guaranty service at the U.S. Department of Veteran Affairs (VA), said during a regulatory session. 

“I hope that there are others on this panel and others out there that want to work together to try to solve some of those rising prices that our homeowners just can’t absorb, and at some point in time, it’s going to hurt the market.”

Bell said that if a home costs $800 per month more than last year, the industry needs to figure out how to solve it. Bell and the VA are working to move forward with options to help veterans avoid foreclosure, including a partial claim solution.

FHA Commissioner Julia Gordon, who announced the agency’s new payment supplement partial claim during the conference, added that the issue of homeowners insurance will take a village to tackle. 

“And that’s going to take real work in the states also, which is hard, and we just have to do it if we want people to be protected,” Gordon said.

Source: housingwire.com

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Among homeowners who have a mortgage escrow account, only 52% fully understand how the account works, according to survey results released Thursday by property tax services provider LERETA.

More than 80% of survey respondents said they know what an escrow account is and its primary purpose — to pay property taxes and other expenses, such as homeowners insurance, flood insurance and mortgage insurance premiums.

But at a time when mortgage escrow expenses across the nation are likely to experience substantial increases due to higher home prices, as well as higher property tax and insurance rates, only half of respondents indicated they “completely understand how their escrow account works.”

The survey, conducted in February, included the responses of more than 1,000 people who have purchased or refinanced a home in the past four years and have an escrow account.

“The findings reinforce what our associates are hearing every day at our tax service call centers,” John Walsh, CEO of LERETA, said in a statement. “In 2023, 60% of the calls were related to escrow accounts, specifically shortages due to rising property taxes or insurance costs.”

Property taxes across the country are expected to rise due to surging home-price appreciation over the past few years. The average U.S. home price has jumped 29% since the start of the COVID-19 pandemic in 2020, according to Zillow data, which suggests the likelihood of double-digit tax increases for many homeowners.

In addition, homeowners insurance premiums at the national level jumped 21% during the year ending in May 2023, according to insurance marketplace Policygenius.

These findings are supported by the LERETA survey, which found that 57% of respondents have experienced an increase in property taxes, while 38% have seen costs for homeowners insurance rise.

Escrow accounts also frequently handle mortgage insurance payments as conventional loan borrowers with less than 20% equity in their homes are required to have mortgage insurance. Federal Housing Administration (FHA) borrowers must pay mortgage insurance for the life of their loan regardless of equity levels. About 80% of all U.S. mortgage holders have an escrow account, LERETA reported.

The LERETA survey also found 36% of respondents with a fixed-rate mortgage believe their monthly payment cannot change, even though it can. And 28% are either “somewhat aware” or “not aware” that changes in escrow accounts can affect monthly payments.

At the national level, homeowners insurance costs jumped by 35% in the two years ending in May 2023, according to Policygenius, led by Florida with a hike of 68%. Large insurance carriers are pulling out of some states entirely and the growing lack of competition is expected to increase the cost of coverage.

“Many will be financially challenged, and some homeowners will need help to make these payments and keep their homes,” Walsh said. “Our goal is to help mortgage companies increase communications and educational outreach to customers about escrow accounts to help address this looming problem.”

Source: housingwire.com

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Many people choose Medicare Advantage plans without exploring their options or noticing what changes their plan may have made, according to research from KFF, a health policy nonprofit. But now that a new year has started, you may realize the plan you picked during Medicare’s fall open enrollment doesn’t work for you. Or maybe you stuck with your old plan and it changed this year. (That can happen, too.)

“It’s set up especially for people who begin the year enrolled in a Medicare Advantage plan and allows them to make certain changes,” says David Lipschutz, associate director of the Center for Medicare Advocacy.

Here’s where to start.

Still deciding on the right carrier? Compare Medicare Advantage plans

Does your current coverage work for you?

Even if you haven’t had a chance to stress test your plan yet, do some research while you still have time to change your mind. Are there providers or specialists you want to see or hospitals you prefer? Make sure they’re in your network.

Check your medications, particularly if you’re on a newer drug that may be covered differently by different plans. How much do your prescriptions cost under your plan?

Then, think about your situation this year. “Are there any procedures, like a surgery that’s coming up?” says Christopher Fong, director and co-founder of Smile Insurance Group in Mesa, Arizona. “Is it outpatient? Inpatient? How many emergency room visits do you have? Do you need an electric scooter?” The more you can predict your health care usage, the more accurately you can determine whether you’re in the right plan.

Next, consider your lifestyle. Do you travel or plan to spend part of the year in another state? Make sure your insurance offers an extended network or travel benefit. Or consider Original Medicare, which allows you to see any doctor in the country who accepts Medicare.

What can you do during Medicare Advantage open enrollment?

During this time, people who are already enrolled in a Medicare Advantage plan can switch — once — to another Medicare Advantage plan, or they can return to Original Medicare and purchase a Medicare Part D prescription drug plan. But if you don’t already have Medicare Advantage, you can’t join a plan now.

That said, although you can return to Original Medicare, you may not be able to sign up for Medicare Supplement Insurance, or Medigap. Medigap’s open enrollment period — when insurance companies must offer you a plan at the same price as everyone else, regardless of health issues — lasts for six months after you’re 65 and have Medicare Part B. After that, aside from a few states and situations, you’ll be subject to medical underwriting to qualify.

“While you can get in and out of a Medicare Advantage plan on an annual basis, your rights to purchase a Medigap policy are usually far more restrictive,” Lipschutz says.

Should you switch plans?

Some circumstances are red flags — meaning you should probably change your coverage. If your primary care physician or primary hospital system is now out of network, for instance, you’ll want to look for a plan that includes them.

If an expensive medication isn’t covered, see if there’s a plan that includes it. (You can input your medications into the plan finder on Medicare.gov to see options.) Make sure, when you’re estimating drug costs, that you’re as accurate as possible about what you’re taking, including name and dosage. “Some people will get confused between the generic version and the brand name version, and there’s a huge difference,” says Emily Gang, CEO of the Medicare Coach, a site that provides Medicare guidance.

If you had a health event and found that you weren’t covered in the way that you expected, give switching plans some thought, but consider that any money you’ve paid is a sunk cost. You’ve already spent it, Gang says. And it may not make sense to start over in a new plan with a new deductible.

In general, resist switching plans for the perks alone. “We’re not proponents of benefit chasing unless everything else lines up correctly for the member,’” Fong says.

Then, next year, do your homework during Medicare’s fall open enrollment from Oct. 15 to Dec. 7. “Ideally, you look at the plan details in advance to avoid any surprises,” Gang says.

This article was written by NerdWallet and was originally published by The Associated Press. 

Source: nerdwallet.com

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Nearly 215 million U.S. drivers carry car insurance, and many may ask themselves, “Why is my car insurance so high?” If you’re one of those Americans, know that there are ways you can take control of the situation and reduce your insurance premiums. 

We’ll guide you through why your car insurance may be higher than normal and ways you can proactively work to lower the costs. 

1. Credit Score

Most insurance providers consider your credit score when determining insurance rates. Maintaining a good credit score can help individuals maintain a lower insurance premium. However, those with poor credit scores often need to pay more since they are seen as being higher risk. 

Factors that impact your FICO® credit score include:

  • Length of credit history
  • Payment history
  • Credit mix
  • Amount owed
  • New credit 

Keep in mind that credit score is only one factor used by insurers to set premiums. 

2. Driving Record 

Your driving record can significantly impact your insurance premium costs. Those with clean driving records without any traffic violations or accidents tend to pay lower insurance premiums. However, policyholders who have been in vehicle accidents and accrued traffic violations may pay for higher insurance premiums. Your insurance provider can increase your premium for:

  • Speeding tickets
  • DUIs and DWIs
  • Parking tickets

Your insurance may provide safe driver discounts to those with good driving records and who are accident-free for a required period. These discounts can decrease your insurance premiums. 

3. Coverage Levels and Types

Your insurance rates can be significantly affected by the coverage type and insurance level you opt for. Depending on where you reside, your state has regulations and criteria for minimum policy coverage. 

For example, Washington requires drivers to have the following minimum coverage:

  • $25,000 per person for bodily injury or death in an accident
  • $50,000 per person for bodily injury or death of any two people in an accident
  • $10,000 of injury to or destruction of property of others in an accident

Depending on other factors, like your vehicle type and whether it’s leased, you may require additional coverage on top of the minimum state requirements. 

4. Claim History

Similar to your driving record, you want to keep your claim history as unscathed as possible. However, accidents happen, whether they result from your actions or those of another driver. Multiple filed claims can impact premium costs, especially if they are large claims, like a totaled vehicle. Plus, claims have a long-lasting impact—an at-fault accident can increase your rates for at least three years following the claim.

5. Location 

Insurance premiums can greatly vary by location, especially if you live in a city versus a more rural area. Insurance premiums in each state are affected by various factors, including:

  • Rate of uninsured motorists
  • Frequency of filed claims
  • Minimum insurance limits

Things like road conditions and crime rates can also impact your auto insurance. For example, If you live in an area with high auto theft rates and poorly planned roads that are prone to cause accidents, you’ll likely be paying higher insurance rates. 

6. Type of Vehicle

When insurers determine insurance premiums, they consider vehicle types. Certain car models have a lower likelihood of ensuring the safety of passengers or cost more to repair in the case of an accident, leading to higher insurance rates. 

Vehicles that typically have higher rates are:

  • Smaller cars: Compact vehicles sustain more extensive damage in a crash, so they’ll usually have higher coverage rates. 
  • Leased cars: Leasing companies typically require full coverage for leased vehicles, including comprehensive and collision coverage, to cover damage in a potential accident. 
  • Cars with premium features: Trim levels and technological features, such as touch screens, can be expensive to repair when damaged. Providers keep this in mind when providing a premium. However, a vehicle with advanced safety features is at lower risk, resulting in a lower premium. 

Vehicles that typically have lower rates are:

  • Small SUVs and minivans: Safer and bigger cars tend to have the most reasonable insurance rates. 
  • Older cars: Most car values depreciate over time. In the case of an accident, your provider will need to pay out less than a newer vehicle. The exception is collector and classic vehicles. 

Overall, newer, luxurious, smaller vehicles tend to have more expensive premiums.

7. Gender or Age

Gender can impact your insurance premiums in the majority of states. However, there are states that have banned gender in insurance rating, including:

  • California
  • Michigan
  • Massachusetts
  • Pennsylvania 
  • North Carolina
  • Montana
  • Hawaii

Your age is another uncontrollable factor that impacts your insurance rates. Your insurer will likely charge you more if you have young drivers under 25 on your insurance policy. This is because they’re viewed as less experienced drivers with a higher risk of filing a claim. 

8. Insurance Company

Rates vary across insurance providers. It’s easy to stick to renewing the same policy every year, but you could be losing out on savings by switching insurance companies. Among the leading auto insurance companies across the country, the average annual car insurance rate stands at $1,547 per year. Yet, a driver with identical coverage may pay as little as $1,022 with one company or as much as $2,135. 

9. Driving Patterns

When you apply for insurance, expect your insurance provider to inquire about your occupation and residence. How often you drive and how much time you spend behind the wheel can increase your insurance premiums. 

Those with longer work commutes increase their risk of being in an accident while they’re on the road. If you work in an expensive city and live in the suburbs outside the city to save on housing costs, you could, unfortunately, be paying a higher insurance rate. 

10. Deductibles

Your deductible is the amount you would need to pay if your car is damaged and you file a claim. Your insurance provider pays the remaining total cost to fix your vehicle. For example, if you have a $500 deductible and file a claim for $2,500 in damages, you’ll need to pay the $500 and your insurance will cover the final $2,000. 

If you pay for a lower deductible on your policy, there’s more risk for your insurance provider. Therefore, you’ll likely have to pay for higher insurance premiums. 

11. Policy Add-ons 

Take a look at your policy add-ons. You may be paying for additional coverage you don’t currently need. Evaluate whether it’s necessary to cover items like:

  • Car rental coverage
  • Roadside assistance
  • Comprehensive and collision coverage

While some of these additional coverage items can be beneficial, they aren’t essential expenses. 

12. Car Insurance History

Your car insurance history can impact your insurance premium costs. If you have lapses in your insurance history, periods where you didn’t hold insurance, you can be penalized with higher premiums. Reasons for having gaps in your insurance history include:

  • Being dropped from your insurance provider
  • Your insurance expires and you can’t review your policy
  • You don’t have a vehicle and therefore don’t require auto insurance

You should always have auto insurance when you own a vehicle. Consider acquiring nonowner car insurance if you don’t own a vehicle—it provides coverage when driving cars you don’t own and prevents future premium increases when you do own one.

5 Ways to Lower Your Car Insurance Premium 

As noted above, various factors can skyrocket your car insurance costs. Luckily, there are steps you can take to help lower your premiums and keep more money in your pocket.

1. Maintain a Good Credit Score

Your credit score can greatly impact how expensive your premium is. Improving your credit can help you find lower premiums in the future. Actions that can potentially improve a credit score is:

  • Reviewing your credit report for inaccuracies and errors and correcting them
  • Paying off any outstanding revolving debt
  • Opening a secured credit card if you don’t qualify for a traditional card 
  • Completing payments on time

Improving your credit takes time, especially if you have multiple derogatory marks on your report. Be patient and smart while building your credit back up. 

2. Get Rid of Unnecessary Coverage 

Review your current coverage and evaluate whether you’re paying for add-on coverage you don’t need. For example, if you aren’t frequently renting cars, you likely don’t need car rental coverage. If you do rent a car for occasions like a business trip or vacation, your insurance should cover any damage caused to the rented vehicle.

3. Bundle Your Policies

For homeowners, bundling your home and auto policies can help lower your premiums. We recommend comparing bundling quotes from both of the providers before deciding which provider policy to cancel. Not only can you potentially save on both your premiums, but you will also be able to manage these expenses with one provider.

4. Raise Your Deductible  

Opting for a higher deductible on your car insurance can help lower your premium rate. Your deductible is what you would pay “out of pocket” in a claim. However, you should be able to pay your deductible in case of an accident. If you increase your deductible too much, your insurance won’t cover smaller damages and repairs. 

5. Compare Multiple Quotes

Has it been a while since your insurance premium was set? Shopping around at different insurance providers is the easiest way to get a lower insurance premium. If it’s time to renew your policy and you have a clean driving record, it may be a good time to compare quotes and see if other providers can provide a lower premium. 

FAQ

Below are frequently asked questions about car insurance expenses and factors. 

Does My Credit Score Affect My Car Insurance Rates?  

Your credit score is factored in when your provider calculates your insurance premiums. Those with poorer credit scores (below 580 on the FICO scale and below 601 on the VantageScore® scale) tend to pay higher rates than those with good credit scores. Improving your credit score will help you secure favorable insurance rates and in other financial situations, like when you’re applying for a loan. 

How Can I Lower My Auto Insurance Premiums? 

There are a few actions you can take to potentially lower your insurance premiums, including:

  • Purchase a smaller, older vehicle
  • Remove unnecessary policy add-ons
  • Improve your credit 
  • Raise your deductible 
  • Bundle your home and auto policies
  • Shop around for rates 

Why Does It Cost More to Insure an Expensive Vehicle? 

There are several reasons why auto insurance costs are higher for an expensive vehicle. Luxury cars have more expensive parts, such as high-tech and advanced safety features. Also, if your vehicle is severely damaged and declared totaled, your insurance provider will need to cover the value of your car. 

View New Car Loan Rates With Credit.com

Now that you know why your car insurance is so high, it’s time to take steps to reduce your premiums. Credit.com can provide you with a free credit score and credit report so you can see where you need to start working on your credit and lowering your premium rates. 

If you’re shopping for a new auto loan, Credit.com offers custom  that won’t impact your credit. Get prequalified and see your rates today.

Source: credit.com

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What is a term life insurance rider?

A term insurance rider adds temporary coverage to a permanent life insurance policy for a set amount of time, usually 10, 20 or 30 years. Life insurance riders offer additional coverage to complement standard policies and the options vary among insurers.

Adding term insurance to a permanent policy

Term life riders can typically be added to permanent policies, such as whole life insurance or universal life insurance, often for an extra fee. The payout from a term life rider can be used to cover temporary or short-term costs in the event of your death. For example, you may want to add a term life rider that lasts as long as your mortgage or until your children finish college so these larger expenses are covered if you die unexpectedly.

Let’s say you take out a permanent life insurance policy worth $100,000, which may be sufficient to cover your beneficiaries if you die after retirement or with fewer financial obligations. Adding a 20-year term life insurance rider worth $100,000 could help fulfill financial needs and bridge gaps if you die within that time frame.

It’s often cheaper to add a term life insurance rider to a permanent policy instead of buying a term policy now and a permanent life insurance policy later.

🤓Nerdy Tip

Most life insurance riders can’t be added to an existing policy. If you’re in the market for life insurance, explore all the riders and opt in to the ones you want or need when you buy a policy.

Types of term and permanent insurance riders

There are two main types of life insurance: term life insurance, which offers coverage for a fixed number of years and pays out if you die during the “term,” and permanent life insurance, which typically covers you for your entire life.

While the names can be confusing, a term life rider generally refers to temporary coverage added to a permanent life insurance policy. Some companies allow you to add a term life rider to a term life insurance policy to bump up your coverage even more, though this is rare.

Some of the most common life insurance riders include:

Alternatives to a term life rider

Assessing your needs can help you determine whether you need a permanent life insurance policy with a term life rider, or a different type of life insurance altogether. For many people, a standalone term life insurance policy is enough to provide their beneficiaries’ with a financial cushion.

Since the premiums for a term policy are usually cheaper than a permanent policy, you could save and invest the difference to plan ahead for yourself or your loved ones after the term ends. If you want to leave the option for permanent coverage open, consider adding a term conversion rider to your term life policy. This allows you to upgrade your policy to a permanent life insurance policy before a deadline specified by your insurer.

Frequently asked questions

Source: nerdwallet.com

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Cigna Medicare Advantage offers plans in 29 states and Washington, D.C., and the company’s member experience ratings, including metrics like care coordination and customer service, are above average for major providers. Although Cigna’s average star ratings from the Centers for Medicare & Medicaid Services (CMS) are higher than those from Anthem, neither company is above the industry average.

Anthem-branded Medicare Advantage plans are available in 14 states, and Anthem’s average member experience scores from CMS fall below the average for major providers. Anthem also offers 4-star plans in only three states.

Here’s a look at how Cigna and Anthem compare.

Cigna Medicare Advantage

Medicare.gov or call 800-MEDICARE (800-633-4227, TTY 877-486-2048).

Source: nerdwallet.com