5 Best Places to Find Insurance for Freelancers

According to the U.S. Bureau of Labor Statistics, 10 million workers are self-employed in the country. Being a self-employed worker can be liberating, but it also means you’re your own HR department, too. One of the biggest challenges you’ll face is finding affordable insurance options. With a traditional employer, you had a limited array of […]

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How to Prevent Your Health Insurance Provider from Denying Your Claim

You need pre-authorization or a referral 

Did you need to undergo a medical procedure such as an MRI or a CT scan? If so, your insurance provider may require a referral or pre-authorization from your physician.

Even if the facility agrees to provide the procedure without a referral or pre-authorization, your insurance provider may not agree to cover the cost. To rectify the situation, see if your doctor can reach out to your insurance carrier and let them know about ordering the procedure for you. (Physicians and other healthcare specialists using services like Fortis Medical Billing may have an easier time working with your insurance carrier.)

Your policy does not cover the procedure

Even with proper pre-authorization or a referral, you must check with your insurance provider or look over your policy to ensure your plan includes the procedure. Even if your carrier previously covered the procedure, your latest plan may not include it. 

You used an out-of-network provider

Something else to double-check on your insurance plan is whether the provider you want to see is in your current provider network.

Provider networks are common for exclusive provider organizations and health maintenance organizations. If you do not use an approved provider who agrees to your carrier's payment terms, your insurance carrier may deny your claim. Occasionally, insurance companies will accept a claim from an out-of-network provider, but you may have to pay a higher percentage of the costs than you normally would.

If you want to have the option of using out-of-network providers, ask your current carrier if you can include out-of-network benefits on your current health insurance plan. That way, you receive non-emergency and/or elective treatment. 

Your claim contains typos

A clerical error on your part may be the reason for your denial. Check to see whether you listed your birth date, name, address, and all other personal information correctly on your claim. If you notice a typo, reach out to your provider's customer service department to correct it.

Your physician billed the wrong provider

Perhaps the mistake was your doctor's and the wrong insurance carrier received your claim. This sometimes happens if you go to a doctor or another healthcare provider you have not been to in a while. They may have outdated or inaccurate policy information on file. 

Do you have multiple health insurance policies? Maybe you and your spouse have separate plans through your employers but see the same physician. If so, your doctor may have sent the bill to your spouse's carrier rather than yours.

If your physician billed the wrong provider, see that the office sends the bill to the right company as soon as possible. Waiting too long could result in a denial because the bill did not arrive on time to qualify for approval.  

Your service was not considered medically necessary

Another reason insurance companies deny claims is that they do not feel the requested service qualifies as medically necessary. Even though you may need a procedure, treatment, or service, you may have to make your policy provider understand why you need it.

Team up with your doctor to supply your carrier with adequate evidence of your medical need. Also, ask yourself if you truly need the service to improve your health or if you only want the service for vanity or nonessential reasons.

You did not choose the less-expensive option

Insurance companies are a business, which means they want more money coming in than they do funneling out. If you opt for a more expensive medical option when a less expensive one achieves the desired result, your carrier may deny your claim based on cost-efficiency.

Always choose the less-expensive procedure or treatment first. If results do not work the way your physician would like, then you can see if your provider would cover the more expensive option.

Do not lose hope if your carrier denies your claim. A phone call and the right information could change everything for the better.

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3 Things Rideshare and Delivery Drivers Should Know About Car Insurance

Food delivery and ridesharing are great ways to earn extra income. The market for food delivery has increased as restaurants have had to adapt to COVID-19 precautions, and just about everyone could use some extra income as we continue to navigate life during a pandemic. If you’re considering joining a food delivery or rideshare company as a… Read More

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What Is a Life Underwriter Training Council Fellow (LUTCF)?

New insurance agents can get a grounding in the basic skills, such as underwriting, needed to succeed in the field by becoming a Life Underwriter Training Council Fellow (LUTCF). After completing the required training, agents will have greater expertise in … Continue reading →

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Instacart Layoffs: Here’s What the Cuts Mean for Your Side Gig

Grocery delivery service Instacart is laying off nearly 2,000 employees in the coming months as it shifts away from having shoppers embedded in stores. Instacart unveiled the shift to a new “Partner Pick” model in a post on Medium. Under that model, Instacart will rely more on grocery store employees to fulfill orders. The announcement […]

This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.

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What is A.M. Best Ratings and Why Should You Care?

When you are selecting an insurance company, it is important that you are aware of the insurer’s financial strength. Luckily, there are financial rating companies that do the hard work for you. One of these companies is A.M.  Depending on the rating, you’ll be able to determine which insurance company is best for you. It […]

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What Is a Mortgage Refinance? 5 Ways to Know If It’s a Good Idea

Jason says:

Hi, Money Girl. I’m interested in refinancing and getting a lower interest rate on my mortgage; however, I may need to sell my home and relocate in a year or so. In that case, does a refinance still make sense? If so, what factors should I consider?

Jason, thanks for your question! It’s a perfect time for homeowners to consider refinancing because interest rates are at historic lows.

If you’re a homeowner, your mortgage payment is probably your largest monthly expense, so it’s wise to stay alert for opportunities to reduce it by refinancing. Plus, your financial circumstances and needs today may be very different than they were when you originally got your mortgage.

It’s a perfect time for homeowners to consider refinancing because interest rates are at historic lows.

I'll answer Jason’s question by reviewing what a mortgage refinance is, explaining common reasons to consider doing one, and covering five ways to know if it’s a good idea for your situation.

What is a mortgage refinance?

Refinancing is when you apply for a new loan to pay off an existing loan balance. The new loan could be with your same institution or with a different lender. The idea is to swap out a higher-interest loan for a lower-interest one, which decreases the amount of interest you have to pay and may also reduce your monthly payments.

When you take out a mortgage to buy a home, various factors determine the interest rate you get offered. While your credit, down payment, and income history are critical, lenders base mortgages on the prevailing interest rates. 

An interest rate is simply the cost of money for borrowers. Rates in the U.S. fluctuate according to the monetary policy of the Federal Reserve or Fed, which is our central bank. 

A good rule of thumb is to consider refinancing when the current rate dips at least one percentage point below what you’re paying for your mortgage.

When interest rates are low, it’s like money’s on sale, as strange as that sounds! Banks should display a big banner on their front door or website that reads “bargain basement prices on dollars” or “we sell money cheap” because that’s what happens when interest rates go down. Low rates are great for borrowers, but not so good for lenders. 

The Freddie Mac website shows historical data for interest rates on 30-year mortgages since 1971. In August 2020, the average for a fixed-rate, 30-year mortgage was 2.94%. A year earlier, the same loan was 3.62%, and ten years before, it was 4.43%. 

Since interest rates change periodically, the rate you’re currently paying on a mortgage may be significantly different than the going rate. A good rule of thumb is to consider refinancing when the current rate dips at least one percentage point below what you’re paying for your mortgage.

What’s the cost to refinance a mortgage?

You need at least one percentage point between the going rate and yours because there’s a cost to do a refinance. Closing a loan means you must pay fees to various companies, including your lender or mortgage broker, property appraiser, closing agent or attorney, and surveyor. Plus, there are fees required by the local government for recording the mortgage, and maybe more costs, depending on where you live. 

The total upfront cost of a refinance depends on the lender and property location. It could be as high as 3% to 6% of your outstanding loan balance. The trick to knowing if it’s worth it is to figure out when you’d break even on those costs. In other words, when do you go from the red to black on the deal? 

If you pay for a refinance but don’t keep your home long enough to recoup the cost, you’ll lose money. But if you do keep the property beyond the financial break-even point (BEP), you’ll feel like a genius because you saved money in the long run!

If you pay for a refinance but don’t keep your home long enough to recoup the cost, you’ll lose money.

You may be able to roll closing costs for a refinance into the new loan, which means you would have nothing or little to pay out-of-pocket. But adding them increases the amount you borrow and may also increase the interest rate you pay for the life of the loan. For that reason, it’s essential to ask the lender for a side-by-side comparison of all the terms for each loan option so you can carefully evaluate them. 

So, how do you figure the BEP to know if doing a refinance is wise? Here’s a simple BEP formula: Refinance break-even point = Total closing costs / Monthly savings.

For instance, if your closing costs are $5,000 and you save $150 a month on your mortgage payment by refinancing, it would take 34 months or almost three years to recoup the cost. The calculation is $5,000 total costs / $150 savings per month = 33.3 months to break even.

For help crunching your numbers, check out the Refinance Breakeven Calculator at dinkytown.com.

Since how long you own your home after a refinance is critical for making it worthwhile, I’m glad that Jason brought it up in his question. For instance, if he finds out that he’d need to own his home for five years to break-even, but he only plans on staying in it for two years, that should be a deal-breaker.

How to get approved for a mortgage refinance

If you believe that doing a refinance could be wise, you’ll also need to consider if you qualify. Lenders have different underwriting requirements, but most require you to have a minimum amount of equity in your property.

Equity is the difference between your home’s market value today and what you owe on it. A critical ratio for refinancing is known as the loan-to-value or LTV.

For example, if your home value is $300,000 and you have a $150,000 mortgage outstanding, you have $150,000 in equity, an LTV ratio of 50%. But if you owed $250,000, that would be an LTV of 83%. 

You typically need an LTV less than 80% to qualify for a mortgage refinance.

You typically need an LTV less than 80% to qualify for a mortgage refinance. So, Jason should do some quick math to make sure he doesn’t owe more for his home than this threshold based on the current market value. Lenders may still work with you if you have a high LTV and good credit, but they may charge a higher interest rate.

If you have an existing FHA or VA mortgage, you may qualify for a “streamlined” refinance program that requires less paperwork and less equity than a conventional refinance. Check out the FHA Refinance program and the VA Refinance program to learn more.

Reasons to consider refinancing your mortgage

There are a variety of reasons why it may make sense for you to refinance a mortgage. Here are some situations when doing a refinance may be a good solution.

  • Rate-and-term refinance. This is when you get a new loan with a lower interest rate, a different term (length of the loan), or both. It’s probably the most common reason why homeowners refinance their mortgages. 

    Example: If you have a 30-year, fixed-rate mortgage at 5%, you could refinance with a 30-year mortgage at 3%. That would reduce your monthly payments and the amount of interest you pay over the life of the loan.
     

  • Cash-out refinance. This is when you get a larger loan than your existing mortgage, so you walk away from the closing with cash. 

    Example: Let’s say your home’s market value is $200,000, and your mortgage balance is $100,000. If you need $25,000 to pay for college or renovate your home, you could do a cash-out refinance for $125,000. After paying off the original mortgage of $100,000, you’d have $25,000 left over to spend any way you like.  
     

  • Cash-in refinance. This is when you pay cash at the closing to pay off an existing mortgage balance. That could be necessary if you don’t have enough equity to qualify for a refinance, or you owe more than your home is worth. 

    Example: You might do a cash-in refinance if having a lower LTV qualifies you for a lower mortgage rate or allows you to get rid of private mortgage insurance (PMI) payments. Read or listen to How to Avoid PMI on Your Home Loan for more information.

You may also need to refinance a mortgage if you want to remove a co-borrower, such as an ex-spouse, from your loan. But if one spouse doesn’t have sufficient income and credit to qualify for a refinance on his or her own, your best option may be to sell the property instead of refinancing the mortgage.

5 ways to know if it’s the right time to refinance

Here are five ways to know if doing a rate-and-term refinance is a good idea.

1. You have an adjustable-rate mortgage (ARM)

Buying a home with an adjustable-rate mortgage comes with lots of advantages like a lower rate, a lower monthly payment, and being able to qualify for a larger loan compared to a fixed-rate mortgage. With an ARM, when interest rates go down, your monthly payments get smaller. 

Instead of worrying about how high your adjustable-rate payment could go, you might refinance to a fixed-rate loan.

But when ARM rates go up, you can feel panicked as your mortgage payment increases month after month. There are caps on annual increases, but your rate could double within just a few years if rates have a significant spike.

Instead of worrying about how high your adjustable-rate payment could go, you might refinance to a fixed-rate loan. That move would lock in a reasonable rate that will never change and make it easier to manage money and stick to a spending plan.

2. You could get a lower interest rate

If you bought a home when mortgage rates were higher than they are now, you’re in a great position to consider refinancing. As I mentioned, you need to do your homework to understand the cost and BEP fully. 

I recommend shopping for a refinance with the lender who holds your current mortgage, plus one or two different companies. Let your mortgage company know that you’re shopping for the best offer. They may be willing to waive specific fees if some of the necessary work, such as a title search, survey, or appraisal, is still current for your home.

3. You don’t plan on moving for several years

Once you know what a refinance will cost, make sure you’ll own your home long enough to pass the BEP, or you’ll end up losing money. For most homeowners, it typically takes owning your home for at least three years after a refinance to make it worthwhile.

4. You have enough home equity

As I mentioned, you typically need at least 20% equity to qualify for a refinance. If you have less, you may still find lenders that will work with you. However, unless your credit is excellent, you’ll typically pay a higher interest rate when you have low equity.

Also, if you don’t have 20% equity, lenders charge PMI. Adding that to your new loan could cut your savings and give you a much longer break-even point. 

5. Your finances are in good shape.

The higher your income and credit, and the lower your debt, the better your refinancing terms will be. If you’re unemployed or your credit took a dive due to a hardship, wait until your overall financial situation has improved before making a mortgage application. Good credit can save thousands in mortgage interest.

Good credit can save thousands in mortgage interest.

If you investigate doing a refinance and decide that it’s not worth the cost, another strategy to save money is to ask your lender for a mortgage modification on your existing loan. You may be able to negotiate modified terms, such as a lower interest rate, without having to pay for a full-blown refinance.

If you’re unsure how much home equity you have or know that you have very little, don’t let that stop you from inquiring about your refinancing options and saving money. Getting advice and refinancing quotes from your lender is free and will help you understand your range of financial options.

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The 5 Things Single Parents Need to Consider about Life Insurance

As a parent, one of the scariest things to think about is what your children will do if something happens to you someday. This can be even scarier if you’re a single parent without a partner to fall back on. But here’s the thing: you are the sole provider for your children. It’s even more… Read More

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