Smart Money: Finding vehicle insurance difficult in some areas

Dear Bruce: We have always had insurance with the same company, but recently our car rates doubled. They offered us less coverage to make up for the rise in cost. Our kids said they, too, would like to choose another company, because they weren't happy with this company. They are going to go with some obscure company down the road. I said we always paid our premiums because they were a reputable firm, and if something happened, they always paid the bill for the accidents. Lately, it seems they are money hungry. Is there a rating for insurance companies? Claudia, via e-mail

Dear Claudia: While you feel that the insurance companies are money hungry, the fact is that many insurance companies are just not making any money, let alone being money hungry. In various parts of the country different forms of insurance become increasingly difficult to obtain. For example, in South Florida homeowners insurance is very difficult to find on the voluntary market. Hurricane Andrew wiped out the profits insurance companies had made over decades. In some parts of the country, automobile insurance on the volunteer market is virtually nonexistent. If you think that you are paying a great deal of money for car insurance, check with someone living in New Jersey and you will find out how reasonable yours may be. By the way, the company that you mentioned in your letter stopped doing business altogether in several states, because it couldn't make any money. You asked about finding affordable insurance. In many cases, it's about finding insurance, period.

Dear Bruce: My husband has been diagnosed with prostate cancer. I'm 64, and he is 73. We have $1,400 a month income and Social Security. We would like to get a reverse mortgage; our balance is $68,000. We have $11,000 in credit card debt, which costs us $300 a month. We have no supplemental insurance. Our home was appraised at $200,000. If we take the reverse mortgage and decide to sell it in a year or two, it would be costly. We tried to relocate near our children in Connecticut and South Carolina, but neither place worked for us. We don't like condos and apartment dwelling is out. J.C., via e-mail

Dear J.C.: You closed out a lot of possibilities. Given your situation, the best alternative might be to sell your home, given the fact that there are no taxes on the proceeds. You could retire the mortgage, all of your debt and have about $100,000 remaining. While you may not like apartment living, it might be your best alternative, particularly if you locate somewhere with lower living expenses. Properly invested, the equity in your home could go a long way toward your rent. Your Social Security income could be used entirely for living purposes.

Dear Bruce: I have a 401(k) plan which contains about $20,000. I no longer contribute, because it was from a previous employer's plan. Sixty-three percent is in a stable fund and 37 percent is in a growth and income fund. I have a cash account with another employer that has about $80,000 in it but is only currently returning about 4 percent. What should I do with these funds? Vernon, via e-mail

Dear Vernon: You haven't really given me enough information, a problem with many letters that I receive. Your age is a clear variable here. If you are 40 years old, one move might be appropriate. If you are 65, another would be called for. Unless your circumstances are quite unusual, the older one gets, the more conservative your investment plan should be. The $80,000 is apparently invested in a conservative way since you mentioned the low interest rate, although you may be interpreting what little growth and dividends are being thrown off as interest. For a younger person, it is my contention that over the long pull a more aggressive stance is called for and will pay dividends.

Dear Bruce: We are in a quandary. We bought a small house in Florida to spend our winter months. We paid $40,000 for the house with a V.A. loan. Last year, my sister offered to sell us a house in the same area with more room and a lot more house. We contacted a real estate broker in our area, but after making loan payments of approximately $350 a month the mortgage balance is still $39,000, and the broker says the house will have to bring at least $43,000 just for us to break even. It's been on the market for seven months, and no offer has been made for more than $40,000. Most of the homes in the area are under that price range. Naturally, we would like to get the V.A. loan off of our shoulders, but with virtually nothing going for principal after four years, we hate to cough up $2,400 to $3,000 to get it off of our backs. H.G., via e-mail

Dear H.G.: If you get off even, I think you are doing really well. If you have to cough up the money that you mention, that is the price for getting involved in real estate with little or no money down. You did have the use of the place for four years, which you can't totally discount. The fact that you have had it on the market for seven months and cannot get your price tells me that the market won't support that price. Every month that goes past costs another $350. I'd bite the bullet and lower the price to a point where the house will move. Oftentimes, it's costly to move quickly to take advantage of a bargain, but don't discount the extra value you receive in buying your sister's house. That has to be factored into the equation.

Dear Bruce: I read your column about selling the trailer belonging to the father-in-law who had been on Medicaid. I had the same experience with my sister. It takes months to hear from Medicaid, but they will send a bill for the total amount that was spent on the father-in-law and expect to receive any money derived from the sale of his assets. They will forgive the rest of the bill. If he has been on Medicaid, they know he has the trailer. I sold my sister's trailer while she was in a nursing home before she died, and they took all of that money plus everything she had in the bank before she went on Medicare. P.C., Lubbock, Texas

Dear P.C.: Your experience is not unusual. While there is legislation in some states to change these laws at this writing, if you take Medicaid, which is a form of welfare, the estate is expected to reimburse the government within its ability. In this writer's opinion, that's as it should be.

(Bruce Williams is a national radio talk show host and syndicated columnist. He can be contacted through the Business Journal by writing to PO Box 1365, Springfield 65801 or via e-mail at sbj@sbj.net.)