Tuesday, March 13, 2012

7 Travel Insurance Tips for Your Next Vacation

The news of the cruise ship disaster off the coast of Italy was particularly noteworthy for my family. On April 1, we set sail on a seven-day Caribbean cruise. My daughter is already freaking out, and my son is not helping matters. He's plastered pictures of the Costa Concordia all over the house.
One issue the tragedy has brought into focus for us is travel insurance. My travel agent and I discussed travel insurance when I booked our cruise. Frankly, after spending thousands of dollars on airfare and a cruise, spending even more money on insurance is not my idea of a good time. But because of the cost of our trip, it's an issue we can't afford to avoid.
While I'm not an expert in travel insurance, my research has been quite revealing.

1. Only insure what you can't afford to lose. Not every trip needs travel insurance. If your potential loss is a few hundred dollars in airfare, travel insurance is probably not worth the cost or aggravation. On the other hand, a once-in-a-lifetime $20,000 vacation is worth protecting. In this way, travel insurance is no different than most other types of insurance.

2. There are many options. Before my research, I assumed there was just one type of travel insurance. In turns out that there are many types, including travel insurance for trip cancellation, trip interruption, medical, lost baggage, evacuation, and flight insurance. My primary concern is trip cancellation insurance, but there are many options to consider. Many travel insurance companies offer bundled insurance packages that combine two or more types of travel insurance.

3. Age matters. Whether it's medical insurance or trip cancellation insurance, your physical health is an important factor in determining a premium. While you won't have to get a physical like you would with life insurance, your age will affect the cost of the insurance.

4. Health insurance may not cover you. I was also surprised to learn that not all health insurance policies, including Medicare, cover you overseas or on a cruise flying under a foreign flag. The key is to contact your health insurance provider to find out what coverage you do have when you're traveling. Only then can you make an informed decision about this type of travel insurance.

5. Timing issues. I was surprised to learn from my travel agent that we didn't have to decide on travel insurance when we booked our cruise. In fact, you can buy travel insurance just days before your departure. This are risks, however, in waiting. Some types of travel insurance may require you to purchase the insurance within a set time period after you've booked your travel. And for trip cancellation insurance, you won't be covered if you buy the insurance after you've become ill or the hurricane has wiped out your vacation destination.

6. Costs vary. It's wise to compare costs before making a decision. While your travel agent will have options for you, they may not be the best or the least expensive. Some of the more well-known travel insurance companies include Access America, Travel Guard, and Travel Insured. And you can use sites like insuremytrip.com to compare travel insurance options.

7. Travel rewards cards won't help. At first I assumed that a top-notch travel rewards credit card would have some travel insurance. But apart from limited baggage insurance, accident insurance, and rental car insurance with some cards, however, travel insurance is not part of the benefits. If you want trip cancellation or interruption insurance, you'll have to buy it.

Friday, March 2, 2012

How to Write a Personal Financial Plan

Financial plans are written, organized strategies for maintaining financial health and accomplishing financial goals. Whether or not you employ a professional financial planner, it is your responsibility to contemplate and develop your own financial plan, centered on your unique circumstances, desires and objectives. Follow these steps for how to write a personal financial plan.
1)                Set goals. Personal financial planning revolves around goals. Consider what you want your lifestyle to be like in the present, near future and distant future, then create an outline of your goals that is comprehensive enough to cover every facet of your life:
o                  Intellectual goals. Furthering your education, participating in leadership retreats, sending your children to college and attending seminars are types of intellectual goals.
o                  Occupational goals. Personal financial planning requires that you produce a stream of income, and you need to consider the ways in which you plan to produce income, whether it be earning raises at work or switching careers altogether.
o                  Lifestyle goals. This category encompasses the things you do for fun and entertainment, and the things you feel are necessary to the quality of life you aim for.
o                  Residence goals. Your financial plans should account for any desire you might have to move to a new location.
o                  Retirement goals. Consider the lifestyle you want when you retire, and set personal financial planning goals that will provide for a retirement that is comfortable to your standards.
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2)                Organize your financial records. Create a filing system of your tax returns, bank account statements, insurance policy information, contracts, receipts, wills, deeds, titles, bills, investment plan statements, retirement account statements, pay stubs, employee benefits statements, mortgages and any other type of document that is related to your financial life.
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3)                Create a preliminary budget. Your budget is a starting point for determining how you will reach your financial goals, as it allows you to identify and assess your spending habits. Write out all of your current monthly expenses, as well as your current monthly income.
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4)                Determine which spending habits you need to change. Using your budget as a reference, identify unnecessary monthly expenses so that you can redirect any wasted money into accomplishing the goals outlined in your personal financial plan.
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5)                Estimate your projected income. Take into account your future plans for increasing your income, as well as your timeline for those projected changes. Consider the following 3 income-producing methods when forecasting your income, and decide which you intend to employ:
o                  Career. Traditional employment under an employer, either salaried or hourly, constitutes career income.
o                  Business. If your financial plans include starting a home business or profiting from a hobby or interest, then that income would be classified under business.
o                  Investments. Investing is an activity that leverages money to produce a return, and includes things like stocks, bonds, real estate, money market accounts and certificates of deposit.
o                  Inheritance. In addition to active forms of income production, be sure to include any anticipated inheritance money to your projected income.
o                  Unexpected income. There may be circumstances in your future where you find yourself with an unexpected lump sum of money (i.e. lottery winnings, gifts, bonuses and/or property value increases). Plan for this possibility by deciding how you will use that money. For example, you may allot 50 percent to your retirement account and the other 50 percent to growing a business, or you may choose to put the entire amount into an interest-bearing savings account.
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6)                Set a time frame for accomplishing your goals. Separate goals into categories, starting with present goals and dividing the rest into immediate future (within 1 year), near future (within 5 years), extended future (within 10 years) and distant future (onward to retirement) goals.
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7)                Create an extended budget. This budget is different from your preliminary budget in that it uses your projected income and takes into account what your future goals will cost you. Be sure to include necessary expenses as well as luxury expenses.
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8)                Devise an income strategy that will sustain your goals. Taking your projected income, time frame and goal expenses into account, calculate how much of your income you need to dedicate toward each goal category on a monthly and yearly basis. This amount may fluctuate in correlation with your future income projections.
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9)                Commit to your financial plan. It is not enough just to write your plans on paper. You must commit to adhering to the steps you outline for yourself if you want your personal financial plan to be effective.
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10)           Reframe your financial plan as necessary. Remember that personal financial planning is a goal - not a process - and that you may need to update it as your life's circumstances change. If you find that your income is not enough to accommodate your goals, then formulate a plan to create more income through career, business and/or investments, or reset your goals within a more realistic framework.