Medicare Part D participants: For 2010, you better shop around

Medicare has announced its Part D drug plan costs for 2010. More seniors than ever will be combing through that data to try and find a better deal. Sixteen percent say they are likely to, or are considering, switching plans in 2010, according to a recent survey of seniors by Allsup, a provider of Social Security disability, Medicare and workers' compensation services. That’s a big jump; only five percent have switched since they’ve been eligible for the program.

However, figuring out which program is best for you can be a pain. You may have dozens of private plans to choose from, with different levels of coverage.

But staying put can cost you plenty, in terms of both access to the medicines you take and the amount of money you will spend. Consumers Union has been monitoring the total cost of buying five common drugs in five states since the Part D program began in 2006. Next year Illinois residents, for example, may be able to save more than $2,200 year if they switch to a better plan. Stay stuck in the wrong one, however, and your costs may rise by more than $1,500.

Open enrollment starts November 15 and runs through the end of the year. You can find out how to switch plans (or enroll) by going to the Centers for Medicare and Medicaid Services Web site.–Mandy Walker

Variable annuities may be getting even worse

Regular readers of Consumer Reports will know that we’ve never been big fans (or even small fans) of variable annuities, insurance contracts that promise you payments based, in part, on the performance of whatever mutual funds you pick when you sign up. 

So we were interested to see this Wall Street Journal article on variable annuities the other day, indicating that many insurers may be reducing the guarantees on their products, making them an even worse deal for consumers.

While annuities have a tax advantage over conventional mutual funds, in that your earnings are tax-deferred until you take money out, they also have some serious drawbacks. Those typically include high sales charges and considerably higher annual fees than regular mutual funds, plus punishing surrender charges if you need to get your money out early.  And don’t even get us started on the aggressive sales tactics often used to push them.

The only reasonable case we can see for buying an annuity is if you don’t have access to other tax-deferred accounts, such as a 401(k) plan or an IRA, or if you have already maxed-out on them. If you must buy one, be sure it’s from a really solid insurer. 

Subscribers to our Consumer Reports Money Adviser newsletter will find a more comprehensive analysis of variable annuities in their December issue.  

Think you're fully insured against a hurricane? Think again.

The potential impact of Hurricane Bill has yet to be determined, according to accounts today. But whether you're affected or not, it's a good time to review your homeowners insurance policy to see what's covered. As we note in a recent Consumer Reports article, in many areas insurance companies have reduced coverage for perils like wind storms and hurricanes, typically by increasing the deductibles for those events.

Flood damage, whether related to a hurricane or not, is never covered by a traditional homeowners insurance policy. For that protection, you'll have to buy national flood insurance from the federal government. As the hurricane season revs up, now is the time to buy such coverage, since it takes 30 days after purchase to go into effect. And FEMA experts say that fully a quarter of flood damage takes place in locations deemed moderate- and low-risk.–Tobie Stanger

Homeowners insurers don't like some dog breeds

Your dog may be the darling of your household, but in the eyes of your homeowners insurance company, your cuddly critter could be a potential liability. As we mention in our latest report on homeowners coverage, insurers are increasingly limiting liability coverage for certain dog breeds. According to the Insurance Information Institute, a New York-based trade organization, dog bites account for one-third of all homeowners liability claims.

The III says most carriers will insure you for liability if you own a dog. But once your dog bites someone, you may find it hard or more costly to maintain coverage. But a recent Los Angeles Times article cites several breeds that might be blacklisted by carriers from the get-go, including pit bulls and pit bull mixes, doberman pinschers, akitas, and chow-chows. Animal advocates say it's wrong to blame the breed, and that bad dog behavior is instead the result of bad owner behavior.

For advice on dealing with the liability issues of dog ownership, check out the III's article here. If you're looking for new homeowners' insurance, consult our Ratings of 16 different insurance groups, including the largest carriers. And if you want to know whether to purchase medical insurance for your pet, check out our report on saving money on pet care  from Consumer Reports Money Adviser.

Care to share your experience with animals and insurance? Feel free to comment below.

New and current homebuyers: Check your homeowners coverage!

News today that pending sale figures on existing homes were above expectations is a welcome development for the economy. Buyers have apparently been taking advantage of relatively low mortgage rates, a federal tax incentive and lower prices.

Whether you're one of those lucky buyers or a current homeowner, it's a good time to review your homeowners insurance. Our recently-published survey of readers found more than half of those who'd been with their insurer for four years or less found less expensive coverage with their new carrier.

But new buyers may be surprised at what's covered and not covered. You're not likely to get coverage anymore for dog bites or mold. And you may be on the look for a larger deductible in the event your home is hit by a wind storm. Click here for more on the coverage quagmire, and for our Ratings of 16 homeowners insurance groups.–Tobie Stanger

Lightning strikes twice? Not quite, but it's hitting homes more often.

[ Photo courtesy of vimages ]

Now that thunderstorm season is here, you’ve probably already been home when a streak of lightning seemed especially bright, the following thunder shook your house, and you thought, “Wow, that must have been close.”

For an increasing number of us, those strikes are direct hits. Homeowner claims for damage due to lightning strikes have increased dramatically, up nearly 45 percent from 2004 to 2008, according to the Insurance Information Institute (III). The III blames the increase in hits on an usually large number of storms last year, including a record season for tornadoes, which are usually accompanied by severe thunderstorms.

The average claim has risen 64 percent over that same time period. Last year about 177,000 homeowners had damages that totaled more than $1 billion (well, that’s the amount insurers covered, anyway). Claims averaged $4,329, although some losses were much higher, the result of fire or electrical surges that wiped out a home’s appliances and electronics.

So how do you protect yourself from lightning-quick losses? Damage caused by strikes, such as fire, is covered by standard homeowners insurance policies. Check your policy to see if you are also covered for damage caused by power surges.

The III suggests ways you can reduce the risk that lightning will wreak havoc in your home:

•Install a whole-house surge protector, which can protect the electrical, telephone, and cable or satellite TV lines entering your house. An electrician and your utility company can help you pick the best unit for your home. Expect to pay at least $100 to $300, plus the cost of installation if you’re not a DIY-er.

•Bond all utilities to the same grounding point. They should enter your home within 10 feet of your electrical service entrance ground wire.

For more details, as well as tips on staying safe in lightning storms, check out this advice from the Institute for Business and Home Safety.

And, for help on getting the best homeowners insurance coverage without skimping, read our article on  shoring up your coverage from Consumer Reports Money Adviser.–Amanda Walker

Is the proposed Consumer Financial Protection Agency elitist?

Why do consumers need consumer protection when choosing financial products? Because many financial products are hard to understand, and deceptive marketing that exploits that complexity can lead even smart consumers to make bad choices.

That sounds like common sense. But opponents of the proposed Consumer Financial Protection Agency (CFPA), say such protections could be "elitist" because they would effectively restrict the sale of innovative and potentially beneficial products only to the most sophisticated buyers. "Conservatives have long argued that liberalism reflects a paternalistic desire on the part of elites to control and limit others’ choices while leaving themselves unaffected," stated Peter F. Wallison of the American Enterprise Institute in his comments yesterday before a Senate subcommittee. "The [proposal] seems to validate exactly that critique. Providers will be at risk if they offer some products to ordinary consumers but could feel safe in offering the same products to those who are well educated and sophisticated."

Harvard Economist Sendhil Mullainathan, who specializes in behavioral economics–the melding of economics and psychology–has an answer to that. Sophisticated or not, educated or not, we can't all be experts in everything. And without some protections, many people make very damaging mistakes. 

In his testimony yesterday, he illustrated by comparing how we shop for paint and how we buy digital cameras and mortgages. Though Benjamin Moore has 140 types of white, the process of selecting white–or any other color–doesn't necessarily require expert skills (apologies to interior decorators). 

One reason why we need a Consumer Financial Protection Agency

At today's Senate Banking, Housing & Urban Affairs Committee hearing on the proposed Consumer Financial Protection Agency, representatives from both the American Bankers Association and the American Enterprise Institute outlined the chilling effect such a new regulatory body would have on financial innovation. The proposed agency would require purveyors of more-exotic financial products, such as payment option adjustable-rate mortgages, to also provide consumers with "plain vanilla" alternatives such as 30-year fixed mortgages, and with simple disclosures for meaningful comparison. The agency also could ban certain unfair terms and practices, and require brokers and other financial intermediaries to determine if their products really were affordable to the borrower.

Saddled with those requirements, among others, many financial institutions won't bother to offer innovative products to consumers who might indeed benefit, noted Edward L. Yingling, president and CEO of the American Bankers Association. The costs of compliance would be too high, he asserted. That could stifle choice and competition, which ultimately would be bad for consumers. "Ideas that could give consumers benefits or lower costs would never see the light of day," he said.

Hail, hail Consumers Union!

A freak July hailstorm pelted Consumers Union's Yonkers, N.Y. headquarters last night, leaving huge, bizarre piles of white pellets in our parking lot. Winds felled trees, flattened grass, and left the ground covered in green leaves peeled from branches and limbs.

This out-of-season storm reminded me of the importance of getting the right homeowners insurance for the unexpected, and of checking your current policy to see what's covered. Hail is a covered peril in the typical homeowners policy, as is damage from wind storms, fire and theft. Flood, however, is not covered, and you'd be surprised what's defined as flooding. Mudflows and water seepage through your foundation's walls, for instance, are not covered by homeowners insurance provided by a private insurer; for those risks, you'll need to buy National Flood Insurance from the Federal Government.

Click here for more on getting the best coverage for your home, and avoiding home insurance traps. For more on saving on homeowners coverage, click here. And for information on National Flood Insurance,  click here. 

Thanks to Gannett's Journal News for the video. But please, spell our facilities manager's name correctly: It's Caluori!–Tobie Stanger

What would a new Consumer Financial Protection Agency do?

President Obama yesterday unveiled his 89-page blueprint for Financial Regulatory Reform. Here's a summary, supplied by the Wall Street Journal, of proposed consumer financial protections:

For regulations protecting consumers and investors, the proposal:

• Creates a new agency, the Consumer Financial Protection Agency, with broad authority over consumer-oriented financial products, such as mortgages and credit cards. The new agency would work with state regulators.
• Gives the new agency power to write rules and levy fines based on a wide range of existing statutes.
• Proposes new authority for the Federal Trade Commission over the banking sector, in areas such as data security.
• Creates an outside advisory panel to keep an eye on emerging industry practices.
• Says the new agency should play “a leading role” in educating consumers about finance.
• Gives the new agency authority to ban or restrict mandatory arbitration clauses.
• Improves transparency of consumer products and services disclosures.
• Says the new regulator should have authority to define standards for simple “plain vanilla” products, such as mortgages, which would have to be offered “prominently” by companies.
• Proposes the government “do more” to promote these simple products.
• Beefs up the agency’s power to regulate unfair, deceptive or abusive practices.
• Imposes “duties of care” that will have to be followed by financial intermediaries, such as stock brokers and financial advisers.
• Regulates overdraft protection plans, treating them more like credit credit-card cash advances.
• Promotes access to credit in line with community investment objectives.
• Strengthens SEC’s framework for investor protection by expanding the agency’s powers to beef up disclosures to investors, establish a fiduciary duty for broker-dealers who offer advice and expand protection for whistleblowers, including a fund that would pay for certain information.
• Requires non-binding shareholder votes on executive compensation packages.
• Requires certain employers to offer an “automatic IRA plan” for employee retirement, with investment choices prescribed by regulation or statute.
• Urges exploration of ways to improve participation in 401(k) retirement plans

While it remains to be seen whether this agency will actually see the light of day, every one of its proposed activities is designed to benefit consumers and individual investors, for whom fine-print disclosure statements and current state and federal safety nets have been insufficient. For an example of the ways lenders, credit card companies and other peddlers of financial services and products take advantage of consumers, check our recent article, "Financial Traps are Flourishing."