ROANOKE TIMES
Copyright (c) 1997, Roanoke Times
DATE: Monday, March 24, 1997 TAG: 9703250043
SECTION: MONEY PAGE: 6 EDITION: METRO
COLUMN: MONEY MATTERS
SOURCE: MAG POFF
Q: Where can I find insurance at a reasonable rate for a used sports car I plan to buy? I will soon be 25 years old and have a clean driving record. I am aware that insurance for sports cars is more expensive than for a standard car.
A: Buying auto insurance is like buying any other product - you have to shop around. You should start calling local agents who advertise automobile policies to determine rates.
Insurance on sports cars is more expensive than for standard autos, but this pertains to collision coverage. That is less an issue in buying insurance than is liability coverage. Your good driving record will help you, as will the fact that you soon will be 25.
If you are dealing with auto insurance for the first time, you might want to send for a booklet on auto insurance published by the Virginia Corporation Commission. It explains the various elements of a policy and outlines the types of coverage to help you decide what you need. You will want to emphasize higher-than-usual coverage for liability if you can possibly afford it.
This guide also lists some sample premium rates filed with the commission by insurance companies licensed to do business in Virginia. The list is not all-inclusive, but it will give you some means of comparison shopping.
You can write to the State Corporation Commission at Box 1157, Richmond 23209. Ask for a copy of the consumer's guide to auto insurance.
Dividing savings unnecessary
Q: My husband has Alzheimer's disease, and I have been unable to find an attorney who will take my case to divide our savings. I have talked to some attorneys and am told they have never done this. I have been referred to another attorney and got the same reply. Do you know of one who does?
A: What you are trying to do is completely unnecessary.
The spouse of a person who receives Medicaid assistance for nursing home care is entitled to keep half of the couple's assets within certain limits. You would not do this in advance, however.
If your husband enters a nursing home and is approved for Medicaid assistance, the Social Services department in your community will set aside your share of the assets. This is for your support. This work is done on paper, and there is no need to make a physical separation of the assets.
If, and when, your husband enters a nursing home, you should seek help from the Social Services department. You do not have to do this in advance.
Meanwhile, if you have any questions about the facts in your particular situation, call the Social Services department.
Paying off mortgage
Q: Does it make any sense to pay off my house mortgage with a loan from my 401(k) plan? I understand that, as I pay the loan back, I get the interest.
A: Donald Potter of PR Taylor Benefit Strategies in Roanoke said the question you ask is complex.
It's true that, as you repay the loan, you would be paying the interest to yourself through your retirement account. This can be a benefit.
But, he pointed out, you have to weigh the question of opportunity cost. You might, for instance, pay yourself 8 percent or so on a mortgage loan, but you might earn 10 or 11 percent on the funds in your 401(k) plan by investing more aggressively. You have to consider the difference between the rate you are willing (and able) to pay on the money compared to what you can otherwise earn. The government will require you to pay market interest.
Don't forget that the government is subsidizing the interest you are paying on the house, so the rate is really lower than it might appear. You would be giving up that deduction if you paid off the mortgage.
And then you can't roll over the loan to the 401(k) plan of another employer, Potter said. Suppose you lose your job, willingly or unwillingly: If that should happen - and employment can be tenuous today - you would be required to repay the entire loan immediately.
If you fail to repay the loan for any reason at all, whether or not that failure is deliberate, the government will make you pay a 10 percent penalty in addition to taxes on the entire amount you have borrowed.
You might want to consult a financial planner before you take such a step.
LENGTH: Medium: 78 linesby CNB