"I think once you realize the amount you're going to save, you can come to terms with the little bit of work that it's going to take, so definitely," she replied.
Health Insurance: Group Versus Individual
Mike is a veterinarian and owner of Leesburg Veterinary Hospital in Leesburg, Va., so the Stricklands have always purchased group health insurance through an association he belongs to, assuming being part of a group was the cheapest way to go. The cost when I met them? About $12,000 a year for their family of nine. Yikes. Believe it or not, it's sometimes less expensive for healthy people to buy individual plans, because group plans have to pad their rates to make up for all the unhealthy people who join. Another reason individual plans can be cheaper is that often employers don't offer employees many choices. An individual plan can sometimes be tailored better to your specific circumstances.
So I arranged for Donna Alcorn of Rust Insurance, a Trusted Choice agency, to shop around for the Stricklands. Consulting an independent broker like Alcorn is a great one-stop way to shop for health insurance, because they have access to lots of different companies and can compare and contrast for you.
It worked for the Stricklands. By switching to an individual plan with another big, well-known insurance company, and inching their deductibles up just a couple hundred dollars, (they rarely met them anyway) Donna was able to cut their healthcare costs by more than half.
"The annual savings by switching carriers is $6,756," Donna announced to the Stricklands.
"That is phenomenal," Kim said. "When I think about how much we've spent, it makes me a little bit ill that we didn't do this sooner."
You may be wondering if people like the Stricklands are giving up some security, in the event that they come down with a serious medical problem, when they switch from a group to an individual plan. Turns out, it's not like car insurance where if you have an accident the company raises your rate. If you are diagnosed with a disease that is expensive to treat, the health insurance company does not raise your rate for that. Health insurance rates are determined by the carrier's book of business and the overall claims in your state, not your individual situation. For that reason, Alcorn said, it's helpful to shop around for health insurance every year or two because your rate can change for reasons that have nothing to do with you.
The Stricklands' mortgage rate is 5.65 percent -- not bad. I found them a new loan at 5 percent. Question is, would that modest rate reduction make refinancing worth it? Mike and Kim were hoping it would, but had heard in the past that the rule of thumb was to refinance if you can get a reduction of two points or more. Well, times have changed. Here's the "Refinancing Rule of 5s" that I developed for SAVE BIG. You should refinance if:
You can reduce your rate by 0.5 percent or more.
You can pay off your closing costs in 5 years or less, preferably much less.
You will not add more than five years to the length of your loan.