Question: My wife and I have just had our first child. We have been besieged by calls from insurance agents urging us to buy a policy for the baby -- but I have read that this isn't such a good idea. What do you think ?
Answer: I agree with what you have read; insurance on a young child doesn't make much economic sense.
Although many other reasons are often cited, the basic purpose of life insurance is the protection of survivors against financial loss resulting from the death of the person insured. This need doesn't normally exist in the case of a child.
Funeral expenses are not catastrophic in amount and can usually be handled by a family without serious problem. Most of the costs faced following the death of a child are usually associated with medical expenses -- so you should be sure that your medical/hospital insurance is adequate.
It makes more sense to spend the premium money on additional life insurance for the family breadwinners. If your wife is a homemaker and not employed outside the home, she should be covered with a good-sized policy. Unless you have family members who can take over the burden of looking after the child (and your needs as well) in the event of the death of your wife, you will be faced with substantial expenses for home and child care.
About the only good thing about juvenile insurance for most people is the opportunity to purchase a guaranteed insurability rider. (This can't be bought alone -- it is sold only as collateral coverage in conjunction with a life policy.)
This rider guarantees to the child the right to buy additional amounts of insurance at specified times in later life regardless of the state of his or her health at that time. This means that the child will be able to buy life insurance at standard rates even if a medical impairment develops. [Text omitted from source] ing insurance at standard rates
But surveys have shown that the vast majority of people in their 20s and 30s have no trouble buy-anyway -- so even this protection will usually prove to have been unnecessary.
Q: Is the IRS going to do anything about the increased cost of operating a car? I'm a salesman and put a lot of business mileage on my car; the present mileage rate of 17 cents a mile isn't very realistic .
A: Great timing -- your letter arrived the same day as a news release from the IRS announcing an increase in the basic rate.
The new rule (for 1979 tax returns) for business use of an auto allows 18.5 cents a mile for the first 15,000 miles. But the old rate of 10 cents for each mile in excess of 15,000 (or for a car that has been fully depreciated) remains unchanged.
For charitable, medical, and moving expense deductions the rate has been increased from the old seven cents to eight cents a mile.
These increases seem hardly adequate, considering the rise in the cost of gasoline over the past 12 months. Remember that you still have the option of deducting actual expenses instead of using the standard rate; but if you choose to go this route, you must maintain adequate records -- and the computations on your tax return will be more complex.
Whichever way you go, keep in mind that you can deduct parking fees and highway tolls in addition to either the standard rate or operating costs -- but again you have to keep a log of these expenses as they occur.
In a letter to the Post recently (Oct. 10) a reader complained that he couldn't understand the rationale for the difference between the business rate and the amount allowed for charitable work.
The difference is a logical extension of the kinds of deductions authorized in each case. Maintenance and depreciation on machinery and equipment including autos) used in business is an acknowledged deductible expense of the business. The 18.5 cents figure is intended to be equivalent to average per-mile costs including those elements.
When accounting for personal services rendered to charitable organization, a taxpayer is permitted to claim (as a charitable deduction) only out-of-pocket expenses. Thus the eight cents is equated with the actual cost of gas and oil for operating your car, and excludes any allowance for repairs, maintenance, and depreciation.