Zero percent car insurance

Car insurance dealers may often make announcements of zero percent auto financing, and you may be tempted to go for this great deal. It would be a dream to drive away a new car with zero percent financing. This means a $15,000 car may fetch you savings in thousands, versus five-year car insurance with interest. However, you should know that this 0% car financing is not available for everyone. Many people even make the mistake of buying a more expensive car with no cost car insurance, thinking there will be no interest that they have to pay. Unfortunately, this happening is very rare.

Zero percent car insurance takes credit report into consideration to qualify for this insurance financing, and the guidelines for credit are extremely demanding too. There would be so many conditions of eligibility along with this offer that eventually only a few can actually get a great deal with the dealers. It is seen that car insurance with an interest rate offers a much better deal. Most of the time, this zero percent car insurance is offered only on some select vehicles; mostly on slow vehicles as the dealer’s main aim is to get rid of the vehicles.

If you are a first time buyer, or you have a limited budget for your car, you should carefully investigate the different insurance policies available, as some might suit you better financially. So do some research, as it is possible to get cheap motor insurance as well as keep the premium on the policy very low.

Tips on car insurance

Some important tips to remember are:

Higher excess: You can opt yourself to pay a higher excess in the event of an insurance claim.
Do thorough research on the internet, as online car insurance is a lot cheaper.
You get cheaper insurance if you get an approved immobilizer fitted in your car.
Get an insurance broker, as he can help you pick the right insurance.
If you are a student, you may gain some concession from the companies.
You can also get a cheap car with a small engine, as the more costly the car is, the higher the premium will be.
By building and protecting a ‘no claims’ bonus you will have a great impact on your insurance rates.
If your car was very cheap, it may be cost-effective to have third-party, fire and theft insurance, instead of fully comprehensive cover.
Never give your price first, and never take the first quote from an insurer.
If you can, get your own copy of Credit Report and show it to the insurance companies, as they will charge you to get it for you during the approval process.

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The Two Approaches to Life Insurance

You can use one of two approaches to estimate how much life insurance you should buy: the needs approach or the replacement-income approach. Using the needs approach, you calculate the amount of life insurance necessary to cover your familys financial needs if you die. Using the replacement-income approach, you calculate the amount of life insurance you need to equal the income your family will lose. Lets look briefly at each approach.

You need how much?

Using the needs approach, you add up the amounts that represent all the needs your family will have after your death, including funeral and burial costs, uninsured medical expenses, and estate taxes. However, your family depends on you to pay for other needs, such as your childs college tuition, business or personal debts, and food and housing expenses over time.

The needs approach is somewhat limiting. The task of identifying and tallying family needs is difficult, and separating the true needs of your family from what you want for them is often impossible.

Replacing Income

Using the replacement-income approach for estimating life insurance requirements, you calculate the life insurance proceeds that would replace your earnings over a specified number of years after your death.

Life insurance companies sometimes approximate your replacement income at four or five times your annual income. A more precise estimation considers the actual amount your family members need annually, the number of years for which they will need this amount, and the interest rate your family will earn on the life insurance proceeds, as well as inflation over the years during which your family draws on the life insurance proceeds.
Note: Do remember as you quantify the income you want to replace that Social Security provides generous survivors benefits if youve qualified. These benefits can easily total $2,000 a month or more.

Calculating Replacement-Income Amounts with Excel

If youve got access to a computer running Microsoft Excel, the popular spreadsheet program, you can use your computer to calculate the amount of insurance you need to replace a specified number of years of income. Suppose, for example, that you want to buy enough life insurance to replace the income from a $50,000-a-year job for 15 years. If you figure your family will earn 5% on the life insurance proceeds should the worst case scenario occur, you enter the following formula into a cell in an Excel workbook to calculate the replacement income life insurance amount:

=-PV(5%,15,50000)

Excel returns the formula result 518,982.90 indicating that you would need roughly $520,000 of life insurance, invested at 5%, to payout $50,000 a year for 15 years.

Two Calculation Tips

If you want to factor in inflation because youre trying to replace income over a long period of time, you should use a real rate of return rather a regular, or nominal, rate of return.
To calculate a real rate of return, subtract the inflation rate from the interest rate in the formula. For example, if you expect 2% inflation, you could replace the formula shown earlier with this formula:

=-PV(5%-2%,15,50000)

Heres a final calculation tip: You probably want to round up your number. For example, if the formula provided earlier returns the value 518982.90, you might want to round up this value to $600,000. Or $750,000.

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Should I lease a car or buy it?

Think of a term life insurance policy as leasing a car. When you lease a car you get the benefits of using the car, but when you stop paying you don’t have a car anymore. As with term insurance as long as you pay your premiums you get the benefit of the term life insurance policy, but when you stop paying, you no longer have any coverage.

Whole life or “permanent policies” are designed to build up a cash value. So similar to buying a car you have an asset that you can keep. Unlike a car, hopefully this asset will grow in value. Whole life, Universal life and Variable Universal life are all different types of permanent insurance. Permanent insurance, most of the time, is meant to keep until you die or as a saving vehicle.

The way the policy grows in value gives you the different names of insurance such as, Whole Life, Universal Life, and Variable Universal Life. That leads to the understanding of the different types of permanent policies.

“Whole Life- Is an insurance policy where premium payments are usually the same throughout the life of the policy, as is the death benefit. You usually need to pay the premiums as long as the policy is in force.

“Universal Life – Is an insurance policy where premium payments may be changed and the death benefit can also be changed by the owner. Usually if the death benefit is being raised you will have to show some evidence of insurability (medical information) or other information requested. Your policy grows at a stated interest rate which changes every so often.

“Variable Universal Life – Is an insurance policy where premium payments may be changed and the death benefit can also be changed by the owner. Usually if the death benefit is being raised you will have to show some evidence of insurability (medical information) or other information requested. Your policy grows at the rate of your investment choice you choose. Since you may invest in market instruments similar but not exactly like mutual funds. Your policy can lose value causing larger premium payments than expected.

Take a step back and think about it from the insurance company’s point of view, its easier to understand the difference. A portion of the cash value that builds in the insurance contract will pay for the “cost of insurance”.

Whole life- The insurance company is taking most of the risk. They are paying a death benefit to you no matter what happens to the cash value in the account. As long as you make your payments the insurance company has to pay your death benefit. This may be the most expensive.

Universal life – The insurance company is taking some risk. The policy grows give the current interest rate it pays. At times you are only able to earn low interest rates. You may need to make up more payments to keep your policy.

Variable Universal life – The insurance company has taken the least amount of risk. In the Variable policy the rate of return is variable, meaning you don’t know how fast your policy will grow or shrink. This type of policy is most likely used for someone who is younger and can ride out the volatility of their portfolio. Since you take on the most risk in this type of policy it usually has the smallest premiums.

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Should I lease a car or buy it?

Think of a term life insurance policy as leasing a car. When you lease a car you get the benefits of using the car, but when you stop paying you don’t have a car anymore. As with term insurance as long as you pay your premiums you get the benefit of the term life insurance policy, but when you stop paying, you no longer have any coverage.

Whole life or “permanent policies” are designed to build up a cash value. So similar to buying a car you have an asset that you can keep. Unlike a car, hopefully this asset will grow in value. Whole life, Universal life and Variable Universal life are all different types of permanent insurance. Permanent insurance, most of the time, is meant to keep until you die or as a saving vehicle.

The way the policy grows in value gives you the different names of insurance such as, Whole Life, Universal Life, and Variable Universal Life. That leads to the understanding of the different types of permanent policies.

“Whole Life- Is an insurance policy where premium payments are usually the same throughout the life of the policy, as is the death benefit. You usually need to pay the premiums as long as the policy is in force.

“Universal Life – Is an insurance policy where premium payments may be changed and the death benefit can also be changed by the owner. Usually if the death benefit is being raised you will have to show some evidence of insurability (medical information) or other information requested. Your policy grows at a stated interest rate which changes every so often.

“Variable Universal Life – Is an insurance policy where premium payments may be changed and the death benefit can also be changed by the owner. Usually if the death benefit is being raised you will have to show some evidence of insurability (medical information) or other information requested. Your policy grows at the rate of your investment choice you choose. Since you may invest in market instruments similar but not exactly like mutual funds. Your policy can lose value causing larger premium payments than expected.

Take a step back and think about it from the insurance company’s point of view, its easier to understand the difference. A portion of the cash value that builds in the insurance contract will pay for the “cost of insurance”.

Whole life- The insurance company is taking most of the risk. They are paying a death benefit to you no matter what happens to the cash value in the account. As long as you make your payments the insurance company has to pay your death benefit. This may be the most expensive.

Universal life – The insurance company is taking some risk. The policy grows give the current interest rate it pays. At times you are only able to earn low interest rates. You may need to make up more payments to keep your policy.

Variable Universal life – The insurance company has taken the least amount of risk. In the Variable policy the rate of return is variable, meaning you don’t know how fast your policy will grow or shrink. This type of policy is most likely used for someone who is younger and can ride out the volatility of their portfolio. Since you take on the most risk in this type of policy it usually has the smallest premiums.

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