Q: We’re completely debt-free, and my husband and I have been very conservative with our investments our entire lives. Considering the current state of the economy, we were wondering if a credit union would be a safer place than a traditional bank for some of our savings.
A: With a traditional bank, you’ve got the Federal Deposit Insurance Corporation looking out for you. Late last year, Congress temporarily increased the basic FDIC insurance coverage limit from $100,000 to $250,000. This change is scheduled to remain in effect throughout 2009. The National Credit Union Administration is the FDIC of the credit union world, and they also increased their coverage limits in 2008.
The biggest thing you want to look at is the “hassle factor” if your institution goes broke and closes up shop. I haven’t done business with big banks for years, primarily because of the awful customer service you get at most of them. I like local, community banks, and I believe whole-heartedly in credit unions. As a rule, these institutions practice excellent customer service. Plus, most of them didn’t get mixed up the subprime debacle.
Community banks and credit unions are both safe, and in most cases, they’re both fabulous places to put your money.
Q: My wife and I are a few months away from being completely debt-free, except for our house. Our combined income is about $100,000 a year. We’ve been looking into long-term disability insurance. What is non-cancellable guaranteed long-term disability insurance, and how much should we get?
A: Ask yourself this question: If I become disabled, how much money will I need to live on? In most cases, the maximum you can get is around $75,000. Since you guys have a pre-tax income of $100,000, you’d be able to live on that, even a little bit less, if something happened to one of you.
Check out the tax situation. Historically, employer-furnished disability payments were taxable as replacement income, while payments on individual policies were considered insurance proceeds, and not taxable. This will make a big difference in how much available cash you will be getting.
I don’t worry about short-term disabilities, because if you’re debt-free and have an emergency fund, you can handle those. It’s the things that could incapacitate you for years, or even the rest of your life that should concern you.
If you get into a bad health situation, non-cancelable, long-term disability is definitely the kind you want as long as the additional premium for such a feature isn’t sky high. But if you can get this for a few more dollars a month, I’d go for it.
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