Posted by Canadian Dream on June 25, 2010
So last night was a nightmare to get home from work. It took me an hour and a half when it is normally 20 minutes. Why? We had such a heavy rainfall most of the underpasses flooded and could not be passed. I’ve lived in Regina for most of my life and I can honestly say I don’t recall this EVER happening before.
Heck, even the creek by my house looks close to overflowing, but the good news is my basement is still dry, but my teleposts need to be adjusted since all this extra water is expanding all the clay in the area and causing my basement floor to heave up a bit more than usual.
Yet what got me thinking about all of this mess was the fact how utterly unprepared most people are for an disaster. What happens when the power goes out and doesn’t come back on? How would you cook something or what would you eat? Do you have any drinking water? Could you keep warm?
In my case I’m not completely screwed. I do have a fireplace to provide some heat in a disaster and I do keep some water set aside along with a camping stove and some fuel. We also have some canned food. Not huge amounts of anything, but enough to get buy for a couple of days if required.
Of course the personal finance side you would also ask: do you know what your insurance will cover? Or won’t cover? In my case I’ve ready to go, mostly, our coverage is up for renewal right away and my premiums are increasing a fair bit to cover the higher value of rebuilding the house if required. I might complain a bit, but in the end I’ll shut up and pay because it’s cheaper than rebuilding my house by myself. Also I do get a claims free discount and I’ve increased my deductible to help keep my yearly cost down.
So how would you do if a disaster strikes? Could you survive the short term? Do you have insurance?
Posted by Canadian Dream on April 22, 2010
Yesterday I had a refreshing reminder on why I carry car insurance. I was pulling into a parking spot and was about half way in when the car that was partly in front of my vehicle started to pack up. I slammed on the horn and luckily the driver stopped. My car had no damage, but it was a close call since I had less than six inches of room to spare.
I consider myself a fairly good driver given my age. By virtue of several of my jobs over the years I’ve logged more time behind the wheel of a vehicle than I care to admit. Yet at the same time I’m aware I’m not perfect I can screw up. So if I can screw up then the average driver is much more likely to screw up, hence I better have some insurance to protect myself from other people’s stupidity. The same goes for life insurance and house insurance. I’m not so worried about my wife or me setting fire to the house, but I am concerned enough about my two curious boys to not leave out matches near them.
I think insurance is highly underestimated how critical it is to your overall financial well being until you are making a claim. At that point you are likely damn happy to have it and glad you have been paying premiums for years. Now some people would question isn’t that a waste of money to pay premiums? No, in my mind I’m not wasting the money. I’m paying someone else to take on the risk in my place. I’m getting a service for my money and I’m happy to send them a cheque for it. If they can make a profit on it, so be it.
On the other hand I firmly believe insurance should be used reasonably. Insurance in my mind is for those high cost items that could wipe me out financially speaking, not for every little thing I buy at the electronics store. It is very possible to have too much insurance and then be wasting money. One way to reduce your insurance costs is to keep your deductibles on the large side and self-insure for those minor items in life.
For whatever reason life insurance tends to be a common one people go over kill on. In my family’s case both my wife and I carry $500,000 policies at the moment. That number was chosen for both of use to have enough money to finish raising the kids and pay off the mortgage. It’s also income replacement for me and childcare replacement for my wife. Now that I’m on a campaign to kill off the mortgage that value will likely come down by $100,000 in the next two years. Then as my saving increase and we are less dependent on my future income we will continue to drop the insurance value down. There really isn’t a reason to have life insurance once you are financially independent since your income comes from your savings and not you.
So when planning for other people’s stupidity make sure you don’t start going stupid yourself. Use insurance wisely to cover those huge “Oh my GOD!” events and suck up the “Oh, shit” minor events. And of course, be prepared to use your horn to stop stupid people from hitting your car.
Posted by Canadian Dream on February 11, 2010
Well finally the government did something reasonable and extended Employment Insurance (EI) to self employed people. You would think this would be a great thing, but it may not really be for everyone.
There are a few requirements you should be aware of if you are thinking about this:
- The program states that you must pay in for a full year prior to making your first claim at the regular employee rate (1.73% of earning in 2010 up to $747.36 a year).
- If you ever make a claim you must continue to pay into the program as long as you are self employed. If you don’t make a claim you can stop paying in (no refunds).
- You can only qualify for special benefits such as maternity, parental, sickness and compassion care leave. Since you can’t lose your job (in the traditional sense), you can’t claim regular benefits.
- You must make at least $6000/year of self employed income to be part of the program.
So in reality you would only really pay into EI if you planned on using maternity (max 15 weeks) or parental leave benefits (max 35 weeks), otherwise it would be somewhat wasteful to pay that much money in only to occasionally claim sickness (max 15 weeks) or compassion care (max 6 weeks). I’ve never claimed sickness or compassion care leave myself yet. Keep in mind too that the maximum you can get from EI is about $1600/month. So its not a lot of money.
So what’s the break even point of this program? Well if you claimed the full 50 weeks of maternity or parental leave at the maximum rate you would get about $20,000 for the year. So divide that by the max contribution rate of $747.36, you need to pay in for 26 years to be even. So if you have more than one child this program is likely a good deal or you could be ok with a child if you are older (30+) and plan to retire early you could do well at least for right now.
You have to recall that the EI program is currently under a rate freeze but you can expect a sharp increase right after 2011 so that will change these numbers a fair bit.
So is getting EI a good idea for a self employed person? If you plan on two kids or more and will be taking the majority of the maternity and parental leave, then likely yes it is a good idea. If you only have one kid, you might want to think about. If you aren’t planning on kids, skip it.
