3 Things to Know About Long-Term Care Insurance

Long-term care insurance is designed to save you money later in life if you need medical care, such as hospice or round-the-clock assistance from nurses.

But some long-term care insurance policyholders are feeling the financial crunch because of a rise in premiums.

An estimated 7.2 million Americans held long-term care insurance policies in 2014, according to The State of Long-Term Care Insurance 2016, a report by the National Association of Insurance Commissioners and the Center for Insurance Policy and Research. An estimated 15 million Americans will need long-term care by 2050, the report notes.

Here are three things to consider about purchasing long-term care insurance.

Long-term care insurance is only getting more expensive

In 2016, insurance companies raised premiums, outraging policyholders. Customers in Pennsylvania saw a 130% increase in their premiums, and New Yorkers under Genworth’s policy faced a 60% premium increase. Federal government employees, insured by John Hancock Life and Health Insurance Co., saw their premiums rise by an average of 83%.

“The rising costs for long-term care insurance are directly linked to the rising costs of long-term care,” says James Carson, Daniel P. Amos Distinguished Professor of Insurance at the University of Georgia. “Insurers vastly underestimated costs associated with long-term care, and subsequently revised upwards their insurance premium structures, even on existing policies.”

While the increases in premiums were legal and authorized by the state, this left many policyholders unhappy, Carson says.

Since its emergence in the 1970s, expenditures in the long-term care market have grown. Less than $20 billion was spent on long-term care when it appeared in the marketplace. By 1980, these expenditures had grown to $30 billion.

Now more than $225 billion is spent on long-term care, according to The State of Long-Term Care Insurance 2016. As more long-term care is demanded, these expenses are pushed onto the insurance companies, resulting in rising incurred claims costs.

Meanwhile, Americans are living longer and spending more on health care. Americans aged 55 and up accounted for 55% of all health spending in 2014, even though they represent only 28% of the U.S. population, according to the Kaiser Family Foundation.

“Millennials should start paying attention to the looming costs associated with long-term care, and possibly also long-term care insurance, because they are going to live a really long time,” Carson says. “Health costs tend to get much larger when we get older.”

Once in retirement, the average American is expected to spend as much as $250,000 on medical expenses, says Tony Steuer, founder of the Insurance Literacy Institute, based in California.

Like any insurance, the trade-off with long-term care insurance is the leverage provided. If you can’t afford the premium and it doesn’t provide good leverage, investing in long-term care insurance might be unwise, says Steuer, also a member of the National Financial Educators Council Curriculum Advisory Board.

Timing is everything

Unlike traditional health insurance, long-term care insurance covers health services in late stages of life, alongside Medicare. Medicare may not cover all the services you need after it kicks in once you turn 65, especially if you are battling illnesses such as dementia or cancer.

For example, the U.S. Department of Health and Human Services projects that an American who turned 65 in 2016 will incur $138,000 in future long-term care expenses. About half of those costs will be paid for out of pocket, and the other half will come from private insurance and government assistance programs, such as Medicaid.

Purchasing long-term care insurance now can protect you from paying so much out of pocket at a time when medical needs are greater and often more expensive.

Long-term care insurance is most beneficial for those who can’t perform two out of six daily activities of living, such as eating, bathing, dressing, and walking. The insurance reimburses policyholders up to a preselected limit daily, so customers receive the services that get them through activities of daily living.

Services covered by long-term care insurance become more necessary as life expectancy increases and retirement funds drain.

Typically, long-term care insurance is purchased by those over the age of 50, says R. Vincent Pohl, assistant professor of economics at the University of Georgia, whose research interests include health economics.

“For a monthly premium that may depend on age and health, insured individuals get nursing home stays and other forms of [long-term care] paid for by the insurance,” Pohl says. “Long-term care insurance can only be bought before someone enters a nursing home for the first time.”

Steuer advises those who expect a need to purchase a long-term care policy after the age of 40. But purchasing long-term care insurance in your 40s also could save you hundreds of dollars in premium costs, compared to doing so in your 50s.

One way to consider your need for long-term care insurance is to look at your family’s medical history. For example, if a parent or grandparent has Alzheimer’s or Parkinson’s disease, long-term care insurance is something to consider. Once a debilitating condition develops, you may not qualify, or it may be more difficult to find a provider.

Long-term care insurance helps you pay now for options later

In these cases, knowing about long-term care insurance and having invested in it before your health started to decline can prove to be beneficial.

Joanne Westwood, who lives in Ohio, learned the value of long-term care insurance when her father developed Alzheimer’s disease, and her stepmother, the primary caregiver, became ill.

“We needed to get [my father] in a place with consistent caregiving, and we needed to take it off of [my stepmother] because she was killing herself trying to be his caregiver,” Westwood says. “If he didn’t buy long-term care health insurance 20 years ago, we’d all be in a heap of trouble right now.”

Westwood’s father, now in his mid-80s, qualifies for Medicare, but Westwood says it isn’t enough. Medicare offered the bare minimum, not enough for him to stay in a facility without paying out of pocket.

Long-term care insurance gave the family options.

“It’s a lot of peace of mind and comfort,” Westwood says.

Westwood, 57, is now trying to purchase long-term care insurance for herself. After doing the research, she expects to pay much higher premiums than her father did 20 years ago, since she’s getting started in her late 50s and because of rising costs.

She says she wishes she had purchased long-term care insurance at a younger age. Even though you’re paying for a longer time, the premiums are much lower, she adds.

Pros & Cons of Long-Term Care Insurance

The Pros:

  • Future medical costs will be lower. Long-term care insurance can help you pay for the health care expenses not covered by Medicare or Medicaid. One in six individuals, or 17%, will pay at least $100,000 out of pocket for future long-term care services and support, according to the U.S. Department of Health and Human Services.
  • You could buy a bit of peace of mind. If you’re investing in retirement accounts, a long-term care insurance policy provides another layer of confidence that if significant medical costs arise, it won’t eat into your nest egg.

“Living longer means an increased chance of needing long-term care,” says Kerstin Osterberg, a spokeswoman for Northwestern Mutual. “It’s critically important that individuals have a financial plan in place to protect their assets and cash flow if they should need long-term care.”

  • Buying a policy in your high earning years could cut the costs later on. Peak earning years for most people are in their late 30s to early 50s. You’ll pay more if you wait until your 50s, 60s, or 70s to sign up for long-term care insurance, and even risk not finding an insurer willing to give you coverage.

Because long-term care insurance premiums are based on several factors, such as age, sex, policy, and location, costs vary from person to person. Even if two people purchase insurance at the same age in the same state, they’re likely to pay different rates.

A 55-year-old male in Georgia will pay an annual premium of $2,645 to receive $200 of coverage a day over four years, according to Genworth’s long-term care insurance calculator. In comparison, a 40-year-old male in Georgia will pay $2,272.40 annually for the same policy. The Genworth calculator assumed a 90-day elimination period.

“In the world of insurance, you can almost always find someone willing to insure you. The problem then arises — is the coverage enough to support you?” says Jeremy Pierce, who has worked as a financial planner in Georgia. “In many cases, when you wait too long, that cost simply isn’t affordable.”

The Cons:

  • You may not need to use it. Long-term care insurance requires that you pay now to have coverage when you are older. If you don’t need medical care when you are a senior, you paid for something you won’t use.
  • You may not be able to meet the requirements. To use the benefit, you have to be unable to perform two of six activities, such as bathing or feeding yourself. Your health may not be poor enough to use it as a result. “It is likely that a claim won’t be made until someone reaches their 70s,” Steuer says.
  • You may not be able to afford it right now. If you have student loans and other expenses that have placed you in debt, paying for a long-term care insurance premium simply may not be possible. Steuer advises those who expect a need to purchase a long-term care policy after the age of 40 and if you have assets between $1 million and $5 million. “Someone who either has less than $1 million or more than $5 million should not consider it,” he says.

The post 3 Things to Know About Long-Term Care Insurance appeared first on MagnifyMoney.

Mortgage Insurance Explained: What It Is and Why You Should Have It


There’s a lot to consider when purchasing a home. Location, size, and cost spring to mind as three of the most important factors. Perhaps you’ve budgeted and figured out how much you can afford for a down payment, but have you also considered your total monthly mortgage payments?

If you’re applying for a mortgage and can’t afford to put at least 20% down, you may have to pay for mortgage insurance.

What is mortgage insurance?

Mortgage insurance helps protect the lender’s investment, not the homeowner.

A homeowner’s insurance policy may reimburse you for a variety of expenses, including vandalism, thefts, and environmental damage to your home. Mortgage insurance is a bit different. Although you are responsible for mortgage insurance premiums, the policy protects the lender.

Casey Fleming, mortgage adviser and author of “The Loan Guide: How to Get the Best Possible Mortgage,” explains mortgage insurance “insures the lender against principal loss in the event you default, they foreclose, and the foreclosure sale doesn’t bring in enough money to cover what they’ve lent you.” In short, if you don’t pay your bills, the insurance company will help make the lender whole.

The 20% down payment rule

Mortgage insurance isn’t required for all homebuyers. “Typically, homebuyers looking to get a conventional mortgage must pay PMI if they are making a down payment of less than 20%,” says Josh Brown of the Ark Law Group in Bellevue, Wash., which specializes in bankruptcy and foreclosures. Brown points out PMI serves a valuable function by allowing otherwise qualified homebuyers (with an acceptable debt-to-income ratio and credit score) to be approved for a conventional loan without the need for a large down payment.

How to find mortgage insurance

Mortgage lenders will often find a PMI policy for you and package it with your mortgage. You will have a chance to review your PMI premiums on your Loan Estimate and Closing Disclosure forms before signing paperwork and agreeing to the mortgage.

Types of mortgage insurance

There are two main types of mortgage insurance: Private mortgage insurance (PMI) and mortgage insurance premium (MIP).

PMI helps protect lenders that issue conventional, Fannie Mae and Freddie Mac-backed, mortgages. You’ll often be required to make monthly PMI payments, a large upfront payment at closing, or a combination of the two. These payments are made to a private insurance company and are required unless you have at least 20% equity in your home. You may request to cancel your PMI once you have paid down the principal balance of your home to below 80% of the original value.

Mortgages issued through the Federal Housing Administration (FHA) loan program also require mortgage insurance in the form of a mortgage insurance premium (MIP). You will be required to pay an upfront fee at closing and an MIP every month as part of your monthly mortgage payment. Your MIPs depend on when your mortgage was finalized and your total down payment.

How much mortgage insurance will cost you

Protect Your House

PMI premiums can vary depending on the insurer, your loan terms, your credit score, and your down payment. The premiums often range from $30 to $70 per month for every $100,000 you have borrowed, according to Zillow.

Many homeowners’ monthly mortgage payments include their PMI premium. Alternatively, you might be able to make a one-time upfront PMI payment. Or, you could make a smaller upfront payment and monthly payments.

As we mentioned earlier, for an FHA loan, you will have to pay upfront mortgage insurance premium (UFMIP) which is generally 1.75% of your loan’s value. You may have the option of rolling this premium payment into your mortgage and pay it off over time. Your MIP depends on your down payment, the base loan amount, and the term of the mortgage and can range from .45% to 1.05% of the loan’s value. The MIPs must be paid monthly.

Mortgage insurance doesn’t have to be forever

There are a few situations when you may be able to stop making mortgage insurance premium payments.

There are two eligibility requirements for conventional mortgages closed after July 29, 1999. As long as you’re current on your payments, PMI will be terminated:

  • On the date when your loan-to-value is scheduled to fall below 78% of the home’s original value.
  • When you’re halfway through your loan’s amortization schedule; 15 years into a 30-year mortgage, for example.

Your home’s original value is often the lower of the purchase price or appraised value. The current value of your home and your current loan-to-value aren’t figured into the above criteria.

You can also submit a written request asking your lender to cancel your PMI:

  • On the date your loan-to-value is scheduled to fall below 80% of the home’s original value.
  • If your current loan-to-value ratio is lower than 80%, perhaps due to rising home prices in your area or renovations you’ve done.
  • After refinancing your mortgage once you have at least 20% equity in the home.

Unlike PMI, if you have an FHA loan, your MIP may not ever be removed. The date your mortgage was finalized and the amount you put down determines your eligibility:

  • The MIP stays for the life of the loan for mortgages closed between July 1991 and December 2000.
  • The MIP will be canceled once your loan-to-value is 78%, if you applied for the mortgage between January 2001 and June 2013, and you’ve owned the home for five or more years.
  • If you applied after June 2013 and put at least 10% down, the MIP will be canceled after 11 years. If you put less than 10% down, the MIP stays for the life of the loan.

Refinancing an FHA loan to a conventional mortgage may provide you with additional options.

The pros and cons

There are a variety of pros and cons to consider when weighing the options of waiting to save a 20% down payment versus paying mortgage insurance.

Melanie Russell, a mortgage loan officer in Henderson, Nev., points out buying now can make sense if you expect home prices to increase or interest rates to climb.

What about waiting? In addition to avoiding mortgage insurance, putting more money down could lead to lower closing costs and a lower interest rate on your mortgage. Also, if you expect prices to drop, you’re saving on all the costs that could come with ownership, including taxes, mortgage, insurance, maintenance, and potential homeowners’ association fees.

In the end, it’s often a situational and personal choice. While Russell shared a few positives to buying early and paying for PMI, she also notes, “Only you can answer this question for yourself.”

When you don’t need mortgage insurance

There are also a few options that don’t require mortgage insurance, even if you can’t afford a 20% down payment.

For example, Veterans Affairs (VA) loans, offered to qualified veterans, don’t require mortgage insurance. You might not have to put any money down either, but these loans usually require an upfront payment at closing.

The Affordable Loan Solution program offered through a partnership between Bank of America, Freddie Mac, and the Self-Help Ventures Fund allows borrowers to put as little as 3% down without taking on PMI. Maximum income and loan amount limit requirements may apply.

You may also find some lenders willing to offer lender-paid mortgage insurance. You’ll pay a higher interest rate on the loan, but in exchange, the lender will make the insurance payments for you. “The math works differently every time,” says Fleming. “If a borrower thinks they won’t be in the property very long, [lender-paid mortgage insurance] might be a good choice, as sometimes the additional amount you pay is lower this way.”

However, if you’re in the home and paying off the mortgage for a long time, it could be more expensive than taking out a conventional loan with PMI. Because the premiums are built into your mortgage, you won’t be able to get rid of the extra payments after building equity in the home.

Another option could be to take out a second loan, called a piggyback mortgage. Although there are potential downsides to this route, you can use the money from the second loan to afford a 20% down payment and avoid PMI. Some people also borrow money from friends or family to afford a 20% down payment, but that could put your relationship in jeopardy if you run into financial trouble.

Finally, you might also discover lenders offering no-mortgage-insurance loans with a 10% to 15% down payment. As with the lender-paid mortgages, it’s important to review the fine print and the potential pros and cons of the arrangement.

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4 Credit Cards That Will Make It Right If You Get Ripped Off

credit-card-purchase-protection

If your credit card has been stolen or used without your consent to make purchases, you’re usually protected. Under federal law, consumers who report credit card fraud or theft cannot be held liable for more than $50 (and often aren’t even faced with paying that penalty, depending on the circumstances). If the credit card isn’t present at the point of sale of the purchase(s) in question, the cardholder cannot be held liable for any damages. When it comes to credit card theft or fraud, you should be covered in most cases as long as you catch the activity fairly quickly.

But what if you’ve been ripped off or incurred property loss in other ways?  What if your property was damaged or stolen, or a retailer sold you faulty goods or won’t honor a return? In short, what if you suffer losses after the point of an intentional purchase?

In these situations, purchase protection that comes with many credit cards may be able to help. Purchase protection plans can cover your purchases against accidental damage, theft or even price gouging.

Here are four of the best purchase protection cards on the market. (Note: These plans only apply when you use that card to make the purchase.)

1. Citi Prestige Card

The Citi Prestige card (which you can read our review of here) comes with a long list of benefits, and an advanced purchase protection policy is one of them. (Full Disclosure: Citibank, as well as American Express and Chase, advertise on Credit.com, but that results in no preferential editorial treatment.) It offers damage and theft protection for all purchases up to $10,000 per item, with total coverage at $50,000 per year. It even extends manufacturer warranties for 24 months on qualifying items. If you try to return an item within 90 days and the merchant won’t accept the return, you could even be reimbursed the purchase price.

Citi Prestige even offers a search feature that looks for lower online prices for certain registered items you buy. If they find the same item within 60 days of the purchase date, you could be reimbursed the difference. And, if you can’t attend a sports or entertainment event you purchased tickets to using your Citi Prestige credit card for a number of reasons — including your ticket being stolen or the event being cancelled with no refund — the plan could have you covered.

2. American Express Premier Rewards Gold Card 

With the American Express Premier Rewards Gold credit card (which you can read a review of here), you’ll be protected if any of your purchases are accidentally damaged or stolen for up to 90 days from when you bought them, for $10,000 per occurrence, up to $50,000 per year. Unlike the Citi card, American Express also covers jewelry. American Express has a few purchase protection policies, so if you have a different American Express card, you may want to consider looking at your terms and conditions to see if you have any purchase protection coverage.

3. Chase Sapphire Preferred Card

The Chase Sapphire Preferred credit card (which you can read a review of here) has excellent travel rewards and comes with purchase protection.

With this card, you may be able to receive a replacement (or be reimbursed) for lost or damaged items for up to 120 days, up to $500 per claim and $50,000 per account annually. They may also reimburse you if a product your purchased is advertised for less, in print or online, up to $500 per item and $2,500 total per year.

The Chase Sapphire Preferred card also extends eligible warranties by an additional year. If a merchant won’t accept a return within 90 days of purchase, Chase may reimburse you for the purchase, up to $500 per item and $1,000 per year.

4. United MileagePlus Explorer Card From Chase

The United MileagePlus Explorer Card (which you can read a full review of here) is another credit card option for travelers. You can be reimbursed for certain items if a retailer won’t accept returns, within 90 days of purchase, up to $500 per item and $1,000 per year. The card may also reimburse you for stolen or damaged purchases for 120 days, up to $10,000 per claim and $50,000 per year.

This card offers extended warranties for an additional year and offers price protection up to $500 per item and up to $2,500 per year.

Most of these credit cards have a long list of excluded items and scenarios covered by the purchase protection policy. If you ever do need to file a claim, most cards will require you provide specific paperwork, including original receipts, insurance claims and even police reports in the case of theft. You may want to carefully review the details of any purchase protection plan before you choose a credit card.

Applying for a New Credit Card

If you’re looking to add a new piece of plastic to your wallet, there’s a lot to consider, like what you want your card to offer you and if you can afford an annual fee. To start the process, you may want to get an idea of what types of cards you can qualify for. To do this, you can take a look at your credit scores, as many premier credit cards are only available to those with good or excellent credit. (You can see two of your credit scores for free, updated every 14 days, on Credit.com.) If, after you review your credit, you discover your scores aren’t quite where you’d like them to be, you may want to consider doing what you can to repair them. This includes things like paying down debts, disputing any errors you discover on your credit reports and limiting the number of inquiries on your credit until your score rebounds.

At publishing time, the Citi Prestige and American Express Premier Rewards Gold cards are offered through Credit.com product pages, and Credit.com is compensated if our users apply and ultimately sign up for these cards. However, this relationship does not result in any preferential editorial treatment.

Note: It’s important to remember that interest rates, fees and terms for credit cards, loans and other financial products frequently change. As a result, rates, fees and terms for credit cards, loans and other financial products cited in these articles may have changed since the date of publication. Please be sure to verify current rates, fees and terms with credit card issuers, banks or other financial institutions directly.

 

Image: Geber86

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How to File an Insurance Claim When Disaster Strikes

man grieving over house destroyed in flood.

Hurricane season is an old and familiar threat for many residents living along the southeastern coast of the U.S. Hurricane Matthew, which made landfall in the U.S. Oct. 8, left an estimated $6 billion worth of property damage in its wake across five states (Florida, Georgia, North Carolina, South Carolina, and Virginia).

Unfortunately, many insurance policies require homeowners to purchase supplemental policies for specific coverage for natural disasters like hurricanes and flooding. Homeowners in Matthew’s path will need to act quickly to file damage claims with their insurance companies.

Here are some tips to get started:

  1. Report any crimes to the police. If your home has been burglarized or vandalized, you should report that to the police first. File a police report and make sure to write down the names of all of the officers that you speak with. Your insurance company will ask for those police records.
  2. Contact your insurance agent. Next on your list should be contacting your insurance agent to get any damage and/or loss claims started. Contact the insurer as soon as possible. Insurance companies typically put limits on the time homeowners have to file claims, which vary by state. Ask the insurance agent if your coverage includes hurricane insurance. Disaster policies often have deductibles, so be sure to ask your agent if you will have to meet a deductible before your coverage kicks in. Lastly, ask for a timeline for your claim, so you know when to expect it to be completed.
  3. Gather all necessary paperwork. Take this time to ask your insurance company what documents you’ll need to report damage or loss. They may ask for repair estimates or evidence of structural damage.
  4. Make temporary repairs. Insurance claims can take weeks or even months to process. Don’t wait that long to make repairs to your home that could pose a safety risk to your family. Keep all of your receipts so that you can be potentially reimbursed down the road.
  5. Beware of contractor scams. Sadly, natural disasters can be a prime breeding ground for contractor scams. Be wary of anyone who charges a fee to help you complete disaster assistance forms like those offered by the Federal Emergency Management Agency. Those are provided for free from both FEMA and the American Red Cross. Also, don’t agree to a random inspection by someone posing as a federal emergency response agent. Check their credentials first and ask for a phone number to verify that they are with an authorized agency. Some scam artists have been known to charge unwitting homeowners fees to enter them into federal “grant programs” that purport to help hurricane victims. Legitimate grant programs do not require upfront fees.
  6. Relocating? Keep your receipts. If your home has been rendered uninhabitable, and you are forced to relocate, keep track of those moving expenses as well. Some insurance policies will cover you for the “loss of use” of your home.
  7. Take inventory of damaged or lost items. Make a list of damages, and check it twice. You’ll need it to prove any losses that you claim. Take pictures or video of the damage, and don’t throw anything away yet. Make note of all of the damages you’ll need the adjuster to see. If an item is not properly recorded, you could lose its value in the claim. While you’re at it, get your electrical system checked. It may cost you upfront, but it’s worth checking, and most insurance companies will reimburse you for the inspection. Pull together your inventory and bundle it with any copies of receipts you can find for your damaged items to give to the adjuster when they arrive. Turn it over with any repair estimates that you’ve gotten from licensed contractors, as it could help speed up the process.
  8. Make an appointment with the claims adjuster.
    More than likely, your insurance company will also send an adjuster to check out your home, verify your claims, and tell you how much the damage is worth. They should connect with you soon after you contact the insurance company to arrange a time to come to assess the damages. When they connect with you, make sure you have any necessary paperwork ready to go, and you will be all set to finish your claim.

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12 Ultimate Rides for Tailgate Parties

tailgate_party

Photo: Steve Debenport

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6 Speeding Ticket Myths Debunked

speeding-ticket-myths

Speeding tickets: the source of stress and financial setbacks (fines, points, insurance increases), occasional bragging rights (ever gotten out of a speeding ticket… as the passenger?) and enduring myths. Here, we suss out the truth around some common speeding ticket assertions.

1. You Can’t Successfully Fight a Speeding Ticket in Court

Verdict: False

We’re not advocating lying about your speed. If you’re driving unsafely and are caught, you’ll likely still have to pay the price. However, there are occasions when you might be on the right side of the law, and in those scenarios, you have to be prepared with a defense.

Starting your preparations during the traffic stop is a good idea. Note how the officer clocked your speed (with a radar or lidar gun, a stopwatch, or with his or her own speedometer, for instance) and write it down if you can. Sometimes the device will be written on your citation, but you may have to call the police department afterward to follow up, writes The Free Thought Project. Some possibilities for your defense: questioning the functionality and calibration of the device, the officer’s training with the device, and whether there could have been any errors with the device’s speed reading.

Attorneys we spoke to emphasized the importance of having an attorney with you when you fight a ticket.

“When it comes to taking a speeding ticket to court, you are often at a disadvantage if you represent yourself because you’re defending yourself against the prosecuting attorney who is a professional,” explains defense attorney Dennis Chassaniol of Chassaniol & Marty, LLC in St. Louis, Missouri.

“Most people lose because they think that they have an excuse or a reason that the judge should dismiss the case,” explains attorney Justin Elsner of Elsner Law Firm, PLLC in Washington state. “Unfortunately, the court will believe the officer’s statement over the driver’s statement most of the time since they think that the driver has a reason to lie but the officer doesn’t.”

For example, if the driver says the officer must have pulled over the wrong person because they never speed, they’re almost guaranteed to lose, says Elsner.

2. Your Ticket Will Be Dropped if You Contest It & the Ticketing Officer Doesn’t Show Up in Court

Verdict: It depends.

Each state legislates its own traffic laws. So while some jurisdictions require a ticketing officer to show up to court for hearings involving tickets they’ve written, other states don’t require the officer’s presence. And even in states which require the officer to be present, judges can reschedule any case they choose. So, if your officer doesn’t show, the judge can always just reschedule.

An example: “In Washington state, the court can review the officer’s written report. If you subpoena the officer to appear at the hearing and they don’t appear, then the court will dismiss the case. But in many jurisdictions the officers get paid overtime to show up on their days off,” says Elsner, and many do. But if the hearing is scheduled during the officer’s shift, he or she might not be able to make it, so it’s really a gamble.

If you truly believe you’ve been ticketed unfairly (or in error), successfully contesting your ticket could have a lot of benefits.

“Successfully fighting a speeding ticket will keep you from having to pay for the violation and also keep your insurance rate from increasing, ” explains Neil Richardson, The Zebra’s insurance expert and licensed agent. According to the State of Auto Insurance Report, a speeding ticket will raise the national average annual auto insurance premium 20 to 30% depending on how fast and where the driver was speeding.

But don’t just contest the ticket hoping the officer won’t show up — you’ll waste a lot of time and money.

3. Red Cars Get Pulled Over More Than Cars of Other Colors

Verdict: False

That red cars get more tickets because they catch the eye of police officers might be one of the most enduring car myths out there. While many studies have been done exploring which colors, makes and models are ticketed most often, there is no evidence that red cars are ticketed more often.

Even when it comes to insurance, red cars get a bad rap.

“There is also a myth that red cars are more expensive to insure and that’s definitely not true,” explains Richardson. “Car insurance companies will ask for your vehicle identification number (VIN) to get info on the make, model and trim level to better determine the value of your car, but this does not include the color of your car.”

4. If You Get a Ticket Outside of Your Home State, You Don’t Have to Pay It

Verdict: False

Even though states control traffic laws, they do still communicate with one another.

“Most states have their licensing systems connected now, so if you don’t pay a ticket in one state, it could result in your license getting suspended in your home state,” explains Elsner.

Further, Richardson adds, not paying a ticket could result in license suspension. “This could result in higher rates, additional fees if an SR-22 or other type of filing is required by the state, and even being ineligible for insurance coverage with some companies,” he said. “Also, the ticket itself is likely to make your rate even higher since it will show up on your motor vehicle report (MVR).”

5. Cops Give Out More Tickets at the End of the Month to Meet Their Quotas

Verdict: False (or Maybe)

A definitive answer about how police officers handle traffic citations that covers the entire United States isn’t simple to nail down. Each police department sets its own standards and requirements for officers, and police departments are funded very differently throughout the U.S., but on a whole the idea of “quotas” isn’t accurate.

“Most officers that I have asked about quotas say they don’t exist,” explains Elsner. “They are expected to be productive during their work shift, however.” So, if an officer is assigned to traffic duty and only writes one ticket the whole shift, he could get in trouble with his supervisors, giving some credence to the idea that officers on traffic duty are looking to net a certain amount of tickets.

The “however”: In some places, for some reasons (grants, for instance), officers might be encouraged to write more tickets. Also, some departments are funded by state and local taxes, while others are at least partially funded by revenue they bring in (i.e., traffic tickets), and might therefore tend to write more tickets than other places.

6. Purposeful Clerical Mistakes, Like not Signing the Ticket or Spelling Something Wrong, Will Get You Out of It

Verdict: False

Each ticket (speeding or otherwise) has a place for you to sign. Your signature isn’t an admission of guilt, it’s just confirmation that you received it, but your ticket will still be processed without your John Hancock.

Now, if the Department of Motor Vehicles makes a mistake (something which you obviously cannot control), you could get out of it on a technicality.

“If the ticket is written, then it will eventually go on your record unless there is an error when it is entered into the DMV database,” explains Richardson.

If the officer made a mistake, that’s a different story, and you might have a good case if you fight it in court.

“Defending your speeding ticket is about the technicalities,” explains Elsner. “If the officer doesn’t sign the ticket, then that could lead to a dismissal.”

Other issues that could result in a dismissal: a difference between the ticket number on the report and the actual ticket itself, the officer citing the wrong statute, or the officer filing the ticket in one county when the incident happened in a different county.

But minor mistakes don’t usually result in a dismissal. For example, if you have brown hair and the officer writes you have blonde hair, that won’t guarantee a dismissal.

We encourage you to avoid getting a speeding ticket in the first place (here’s some help!), not only because it’s the law (of course), or because you’ll save on auto insurance with fewer tickets (you will), but because it’s safer.

[Editor’s note: Remember, speeding tickets aren’t the only items that can affect your insurance rates. Many car insurance providers check your credit, so it can pay to brush your scores up before requesting a quote or policy. You can see where your credit currently stands by viewing your free credit report summary, updated every 14 days, on Credit.com.]

Image: BulentBARIS

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U.S. Travelers Struggle to Find Health Care Options on the Road

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In 2015, 27-year-old blogger Michelle Schroeder-Gardner and her husband, Wesley, sold their Kansas City, Mo., home and packed what they could fit into an RV. For the next few years, the couple plans on traveling across the U.S. while Michelle runs her business, the personal finance blog Making Sense of Cents, from the road.

“We love traveling,” Michelle says. “I couldn’t imagine living in a ‘normal’ home again.”

Some aspects of transitioning to a mobile lifestyle have been easier to adjust to than others. When it came time to figure out how they would take care of their health on the road, the couple began researching statewide insurance plans. They soon realized finding a plan that would cover them in any state at any time was easier said than done. Without a permanent address, they were denied again and again.

“We came across many problems and even used an RV health insurance broker,” Michelle says. “There was not a single health insurance plan that we qualified for.”

If you’re planning on spending extensive time on the road, either within the U.S. or overseas, managing health care can be a tricky — and oftentimes frustrating — undertaking. As it stands, just 36 states offer multistate health plans (although that will change in 2017, when all 50 states will be required to offer at least two multistate plans).

Finding plans that cover travelers across the nation, no matter where they are traveling, is an even tougher task. While some multistate plans include nationwide coverage, many only offer coverage in a handful of states. If you are traveling outside the bounds of your health plan’s coverage, there’s a good chance that you’ll need to look at other options.

To help you navigate your health care options while traveling in the U.S. or abroad, we’ve come up with a few tips:

Take a good look at your existing coverage.

If you already have a health care plan, look closely to see what is covered. Many major insurance plans offer regional coverage, which means you could be covered in a handful of states. If your current plan does not offer out-of-state coverage, you run the risk of having to pay for medical bills completely out of pocket, except in an emergency. In fact, in 2016 45% of silver-level PPO plans that were new to the health marketplace had no cap on out-of-network costs.

Research multistate plans.

As we mentioned, many multistate plans don’t offer nationwide coverage. The costs, limitations, and options may vary, so be sure to review the details of a plan carefully. Most important, read plan benefits closely to find out which providers are considered in-network versus out-of-network. Other out-of-pocket expenses like deductibles, co-pays, and the cost of services such as lab work and prescriptions can vary by state as well.

Consider traveler’s insurance.

If you’re traveling abroad, one thing you can consider is traveler’s insurance. Traveler’s insurance can cover trips to a clinic or hospital in the case of an illness or injury, plus trips to the emergency room. If your travels take you outside of the U.S., many U.S-based health plans won’t cover the cost of sending you back to the States in the case of a medical emergency.

Depending on your location and mode of transport, medical evacuations can start at $25,000 and exceed $250,000.

An added perk is that most traveler’s insurance will cover theft or accidental loss of your belongings, whether that be your luggage, computer, or other valuable personal belongings. A few companies that offer traveler’s insurance include World Nomads and Travel Guard. Some credit cards even come with travel insurance benefits, so you can look into coverage your credit cards may offer. The cost of a policy depends on where you’re traveling to, the duration of the trip, and how many people will be covered, but typically starts at around $100 per month for international travel.

Think outside the box.

Because they were denied health insurance through traditional health care providers, Michelle and her husband decided to go an unconventional route: they signed up for a health plan through a health sharing ministry. Health sharing ministries are faith-based health organizations that offer health coverage. Members contribute a monthly share and agree to help others in the pool with their medical expenses. Health sharing ministries such as Liberty HealthShare and Samaritan Ministries offer different programs with varying levels of coverage, and the cost is based on your household size. Michelle and her husband pay $449 per month for their plan.

Only a handful of health care sharing ministries are exempt from rules under the Affordable Care Act. Without that exemption, people who rely on these organizations for health care will face a tax penalty.

Go for a hybrid approach.

If you plan to spend time traveling within the U.S. and overseas, you may have to piecemeal together some options. Livingston, Tex., couple Kate Gilbert, 47, and her husband, Lain, 51, travel in their Airstream travel trailer across the U.S. and take trips abroad for several months at a time.

“Our main issue when choosing a plan is the out-of-network costs we might be exposed to,” says Kate. “The risk of running up a large bill in an emergency is scary with the lack of nationwide plans.”

In 2015, Lain, who is retired, and Kate, who works part-time as a self-employed consultant, purchased a PPO through Blue Cross Blue Shield that cost $662.55 per month and offered sufficient out-of-state coverage.

However, in 2016 that plan no longer became available. As a result, the couple purchases short-term care insurance when they’re in the U.S., and traveler’s insurance when they’re traveling internationally. Short-term care is an option that can provide coverage up to one year. It usually comes with lower premiums and less strict requirements for eligibility. The downside is that it provides less comprehensive coverage.

But short-term insurance plans do not meet the minimum requirements under the Affordable Care Act, meaning they can’t be used as primary insurance. The Gilberts will be required to pay an Obamacare tax penalty when tax season rolls around. In 2016, the penalty is $695 per adult per household.

Refill prescriptions well ahead of time.

Having your prescriptions refilled in advance is a smart way to avoid headaches on the road. If you’ll be staying in another state for a set amount of time, transfer your prescriptions to a local pharmacy. Let your doctor know you’ll be traveling, and keep his or her number on speed dial. In case you run into any trouble, your doctor may be able to offer advice on the go.

If you have an HMO, you are most likely more limited as to where you can have your prescriptions refilled. On the other hand, a PPO will offer you more choices. You can use your insurance carrier’s pharmacy locator to map out where you can refill your prescriptions.

Have a game plan for dealing with medical emergencies.

Check where the in-network urgent care and ER centers are where you’ll be traveling. If you’re traveling overseas, find out what the 911 equivalent is for emergency phone numbers. You’ll also want to make sure you read up on the health care system of the places you’ll be visiting and the potential costs involved. In some countries, like Singapore, Switzerland, and Great Britain, you may be able to receive low-cost health care even without international insurance.

Prep beforehand.

For smooth sailing before you hit the road, make sure your records are up to date and have been transferred to a new primary care physician. Make sure you have any documents you’ll need during your travels, and create copies as backup.

Save extra for unexpected costs.

As it goes for traveling in general, make sure you have a buffer fund in case an illness or injury happens.

If you have a Health Savings Account (HSA), see what the limitations and rules are with your account. Across the board, the maximum amount you can contribute annually for 2016 is $3,350 for individuals, and $6,750 for families. To open an account, you need to have a high-deductible health plan, with a deductible of at least $1,300 for self-coverage, and $2,600 for families. If you pay for a medical expense that isn’t qualified under your account, you’ll have to pay a 20% tax penalty.

While handling health care on the road is a challenging endeavor, don’t despair. Doing your homework ahead of time will ensure you have sufficient coverage that works with your needs and budget.

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There’s Insurance for Insurance?

Statistics shows that everything is normal

More Americans are switching to high-deductible health plans to lower their monthly premium costs. But the lower sticker price can eventually come back to bite you. The average annual deductible for an employer-provided individual health plan is $1,478 and even higher for families.

To help deal with increasing out-of-pocket costs, more Americans may turn to “gap insurance” plans (also known as supplemental health plans). According to a report released this year by insurance company Aflac, 79% of workers said they saw a growing need for supplemental insurance plans to help cover expenses their primary insurance does not cover compared to 64% a year ago, and 60% of those said it was because of rising medical costs.

There has been buzz around gap plans for more than a decade, says Rhett Bray, president of BeaconPath, a Mission Viejo, Calif.-based employee benefit consulting firm. But interest really boomed around 2013, with the rollout of the federal health care marketplace and growing popularity of high-deductible plans.

In 2016, more than 90% of people who purchased health plans on the health care exchange chose plans with deductibles of $3,000 or higher. Plans with high out-of-pocket costs have grown increasingly popular with workers who receive benefits through their employer. Of those who receive employer-provided coverage, 29% chose a high-deductible health plan in 2016, a 5-point rise from a year earlier.

“It’s hard to cover an individual’s complete medical needs in an affordable way if you’re just bringing them through a major medical plan,” said Bray. He says that as costs increase, supplemental insurance policies will be “a big tool in the toolbox that most of us as brokers will continue to bring to the table.”

What Is Gap Insurance?

Medical gap insurance is a supplemental health plan that acts as a cushion for people and businesses who carry high-deductible health care plans. Simply put, it’s like insurance for your insurance.

Gap insurance policies are not major medical insurance, and they come with very limited benefits. In most cases, that means that no matter the severity of your situation, your gap insurer plan will only pay you a set amount. And because the plans do not meet the standards set by the Affordable Care Act, consumers can’t use gap insurance policies as a stand-alone insurance without facing a tax penalty.

The main purpose of medical gap insurance is to lower your overall out-of-pocket costs by providing funds to pay for a large deductible and other out-of pocket costs until your main insurance policy kicks in.

What Gap Insurance Costs

Premiums range from $30 to $40 per month for a gap insurance policy for an individual, according to Bray. Costs will vary because each company has its own formula for how much you’ll pay and which benefits are provided, Bray adds. Insurers will consider your age, gender, location, etc. You can get an accurate estimate of a premium by contacting insurers or an insurance broker directly.

Gap plans are provided by many large insurers such as AIG, Aetna, Transamerica, and others, and most can be used to supplement your employer-provided, government-provided, or individual health care plan. But first, try your employer. Ask your benefits department if they offer a limited benefit or supplemental medical insurance plan for individuals.

The big catch: because gap plans aren’t regulated by the health care law like major medical insurance plans, providers can deny consumers coverage based on pre-existing conditions.

The policy level that you choose will also factor greatly into the cost of your monthly premium. The more coverage you need, the higher the monthly premium will be.

Is Gap Insurance Worth It?

Now you might be wondering: “Is getting gap insurance worth it if I’m on a high-deductible health plan?” The answer is maybe.

Carolyn Taylor, director of compliance at benefits consulting firm D&S Agency, recommends referencing the benefits you get through your main medical plan before you shop around for gap insurance to ensure that you aren’t paying for something you don’t need. It will require a little math.

She also said to “do the math” before purchasing. Add up all of the payments you’d make in a year toward your gap insurance policy to see if it would cost less than paying the total annual deductible for your major medical plan. That way you’ll know if the policy is really saving you anything in the first place.

Gap insurance could be worth it if …

You are expecting to be in the hospital for a few days this year.

If you are planning on having a baby or expecting to get surgery sometime this year, “you may want to have a gap if it will help with your inpatient day costs,” says Taylor.

That’s because your gap policy could cover the costs of your deductible and other out-of-pocket expenses for frequent doctor’s visits and hospitalization.

You have an expensive prescription.

Prescription drug prices have never been higher. If you have a policy with a deductible, you may have to shell out more money for a prescription. Selecting a gap insurance policy that includes prescriptions may help you cover the cost. Just do the math to be sure what you are saving on prescription costs is worth the additional cost of a gap insurance premium.

You are older than 65.

Taylor said those 65 and older should absolutely get gap medical insurance because that segment is more likely to frequent the doctor. Many medical gap policies are restricted to those 64 years old and younger; however, those on Medicare can get Medigap insurance. It’s a supplemental insurance plan that acts similarly to gap insurance but is more regulated and broken into government-specified benefit tiers. Read up on the plan specifics here.

The Bottom Line

Ultimately, adding gap insurance to your coverage is a decision you will have to make based on your perceived risk of illness and financial status. Make sure to do your research when considering a gap plan as the benefits and costs vary widely.

 

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5 Ways Being an Airbnb Host Can Cost You Money

should-i-host-on-airbnb

If you’ve ever wanted to make a little extra money on the side by listing your sofa, spare bedroom, guest house or even whole house on a service like Airbnb, you’ve probably wondered just how much money you could make.

After all, there are all those stories of people paying their monthly mortgage payments or annual tax bills through their rental income. What a great way to put an asset you already have to good use, right?

Yes, if your situation is right for the opportunity. When managed properly, these rentals can end up bringing in more than a traditional monthly rent can, though it does require significantly more work due to the constant turnover of renters.

As with any business, though, there are risks that could end up undermining any money-making opportunity your spare sleeping spot might afford. That’s why it’s a good idea to exercise caution and do your due diligence before jumping in.

Here are five things that could end up costing you money as an Airbnb host.

1. Higher Insurance Premiums

Yes, it’s true that Airbnb provides Host Protection Insurance, providing primary liability coverage for up to $1 million per occurrence in the event of a third-party claim of bodily injury or property damage related to an Airbnb stay. But that doesn’t mean you’re not going to need to alert your homeowners insurer that you’re operating as a rental property, even on a part-time basis.

For example, I have a guest house that I considered making available on Airbnb and I talked to my insurer about how that would impact my coverage. In a nutshell, my premiums would have doubled, significantly impacting any income I would’ve made from listing on Airbnb. I decided it wasn’t worth the hassle. Now, sure, I could’ve chosen not to tell my insurer about the rentals and just contact Airbnb with any claims, but that left me feeling very exposed when it came to, well, a lot of things.

As Galen Hayesis, president of El Sobrante, California-based Hayes Insurance, recently wrote for PropertyCasualty360.com, the coverage leaves a lot of gaps for homeowners:

  • Coverage is limited to $1 million per occurrence, $2 million per location. The policy aggregate is $10 million for all insured locations in the U.S. Shared limits are not your friend.

  • Coverage is in excess of any other available coverage. The host must submit the claim to his homeowners insurance and the claim must be denied by that company before Airbnb’s insurance will pay. Presumably, the homeowners insurance may also be cancelled for business use.

  • The summary document lists these other “key” exclusions: (1) intentional acts (of the host or any other insured party), (2) loss of earnings, (3) personal and advertising injury, (4) fungi or bacteria, (5) Chinese drywall, (6) communicable diseases (7) acts of terrorism, (8) product liability, (9) pollution, (10) asbestos, or lead or silica, and (11) insured vs. insured (i.e., host sues Airbnb or vice versa).

  • The coverage is limited to an actual stay, not a booking. No show — no coverage. Overstay or early arrival? No coverage.

“What if a guest breaks into the host’s gun safe, steals guns and goes on a crime spree? Is there coverage for the host from any ensuing lawsuits? Probably not,” Hayesis wrote. “Vacation rental websites like Airbnb are doing their best to protect themselves by offering what looks like insurance to their hosts. But hosts are shouldering a lot of risks with limited protection. So before you sign up or rent your home again, you may want to think twice. The bottom line appears more red than green.”

Airbnb did not respond to Credit.com’s request for comment, but does provide the following on the Airbnb website:

Here are some examples of what the Host Protection Insurance program should cover:

  • A guest breaks their wrist after slipping on the rug and brings a claim for the injury against the host.
  • A guest is working out on the treadmill in the gym of the apartment building.
  • The treadmill breaks and the guest is injured when they fall off. They bring a claim for the injury against the host and the landlord.
  • A guest accidentally drops their suitcase on a third party’s foot in the building lobby. The third party brings a claim for the injury against the host and the landlord of the host’s building.

Some examples of what the Host Protection Insurance program doesn’t cover:

  • Intentional acts where liability isn’t the result of an accident.
  • Accusations of slander or defamation of character.
  • Property issues (ex: mold, bed bugs, asbestos, pollution). Auto accidents (ex: vehicle collisions).

2. Turned Down for a Mortgage or Other Home Financing

Banks also are closely scrutinizing how properties are being used when it comes to writing new mortgages and even refinancing. The issue is primarily about how to classify loans for homeowners hosting through Airbnb and other services Are they a primary residence? An investment property? Both? Mortgages on investment properties have traditionally been viewed as riskier.

One example is Brad Severtson, a resident of Seattle whom the Wall Street Journal recently profiled. Severtson had reportedly earned about $30,000 in 2015 renting out a cottage in his backyard. The Journal reported that he thought the extra income would work in his favor when he wanted to refinance a home-equity line of credit.

“The bank turned him down, saying it didn’t allow home-equity lines of credit on properties in which the homeowner is operating a business, including Airbnb,” the Journal reported.

3. Higher Taxes

Yep, if you’re making rental income, you’re going to be expected to pay taxes on it. Airbnb says on its website “as a host, your earnings may be subject to U.S. income taxes. To assist with U.S. tax compliance, we may collect your taxpayer information. Even if you’re not a U.S. taxpayer, we may still require certain information from you.”

There are some exceptions to keep in mind, though.

According to the Internal Revenue Service, if you use your home or vacation property as a personal residence and rent it for fewer than 15 days in a calendar year, you do not have to claim that income on your personal taxes. In this case, do not report any of the rental income and do not deduct any expenses as rental expenses.

Likewise, if you rent your home or vacation property to others that you also use as a personal residence, limitations may apply to the rental expenses you can deduct, according to the IRS. You are considered to use a dwelling unit as a personal residence if you use it for personal purposes during the tax year for more than the greater of 14 days or 10% of the total days you rent it to others at a fair rental price.

It is possible that you will use more than one dwelling unit as a personal residence during the year. For example, if you live in your main home for 11 months, your home is a dwelling unit used as a personal residence. If you live in your vacation home for the other 30 days of the year, your vacation home is also a dwelling unit used as a personal residence, unless you rent your vacation home to others at a fair rental value for 300 or more days during the year.

4. Losing Your Lease

If you have a landlord and want to host on Airbnb, the very first thing you should do is talk to your landlord and get their permission to advertise your sofa, your spare bedroom or the whole property. And get it in writing.

There are literally hundreds of horror stories of folks not talking to their landlords, only to be sued or have their leases terminated as a result.

5. Being Cited for City Ordinance Violations

Many cities have restrictions about hosting on sites like Airbnb, whether you are a homeowner or a renter. That’s why it’s a good idea to first check on the Airbnb site about what regulations may apply and then follow up with your local government. The last thing you want is to be cited for being in violation of local ordinances.

As Airbnb states on its site, “When deciding whether to become an Airbnb host, it’s important for you to understand the laws in your city. As a platform and marketplace, we don’t provide legal advice, but we do want to give you some useful links that may help you better understand laws and regulations in your town, city, county, or state.”

Remember, making a little extra money from a side gig is a great way to boost your savings abilities or help pay off any debts you might owe (you can see how your debt is impacting your credit by getting your free credit report summary on Credit.com). But, as this list, shows, it’s wise to do your research first. What might seem like a great opportunity can end up costing you big time. So, do your homework before your foray into renting your space and make sure your home can actually work for you.

Image: kupicoo

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My Home Was Damaged in a Storm. How Long Will It Take for My Insurance to Pay?

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Q. What is the proper wait time to give the insurance to answer your rain damage to your home?
— Insured

A. It sounds as though water from a storm has entered and damaged your home and/or property.

We’re sorry to hear you’ve got a mess to clean up. The timing answer isn’t simple because it depends on what’s happened and where you already are in the process.

Determining if You’re Covered

The most frequent type of loss reported in the insurance industry is from water damage, said George Kiraly, a certified financial planner with LodeStar Advisory Group in Short Hills, New Jersey, via email.

“Whether the damage to your home will be covered depends on if the leak was caused by a ‘covered peril’ under your policy,” Kiraly said. “Most standard homeowners policies provide coverage if the cause is ‘sudden and accidental’ and will deny coverage if the cause is ‘maintenance-related.’”

If your particular loss is covered, the policy will reimburse you up to the maximum coverage, less your deductible, Kiraly said.

He offered this example: Let’s say that during a heavy rainstorm, water leaked through your roof. The roof is damaged, as are some fixtures in your home. Are you covered?

Yes and no, Kiraly said.

“You’re probably not going to be reimbursed for roof repairs because that’s a house ‘maintenance’ issue,” he said. “But the water damage to your home is covered.”

He said damage to your fixtures is also probably covered if you have a standard HO-3 home insurance policy — the most commonly purchased policy because it is the minimum coverage required by mortgage providers.

Figuring Out What to Do After Damage

Once a water loss has occurred, the single most important thing you need to do is mitigate the damage, Kiraly said.

“Do whatever you can safely do to prevent more water from entering the affected area and/or reduce ongoing damage,” he said. “For example, if you need to patch up or cover a section of damaged roof or have an area of your home pumped out, do so immediately and keep track of the cost so your insurer can reimburse you.”

Kiraly said if the damage is significant and you decide to file a claim, notify your insurance company as soon as possible. After you file the claim, you should hear from your insurance company within a day or two.

“The company should tell you about its claims process and any responsibilities you have,” he said. “Your insurance company will assign a claim adjuster to inspect the damages and determine coverage.”

He said you should cooperate with the adjuster and keep written notes about conversations regarding your claim.

The company should provide you with a copy of the damage estimate, he said.

If you need a contractor, your insurance company will probably be able to provide you with one who will do the work at the estimated price, Kiraly said.

“You are not required to use the company’s recommended contractor,” he said. “If all or part of the loss is not covered, the company must explain how coverage is excluded under your policy.”

You may only want to file a claim if the damage to your home is significant.

“There have been cases where some insurers have refused to renew the policies of homeowners who’ve made multiple water damage claims. These claims can mean high administrative costs for the insurance company,” he said. “Also, insurers worry that water damage can lead to mold problems, which can be very expensive to remedy.”

To avoid having your policy canceled for repetitive small claims, take the highest deductible on your policy that you can afford, Kiraly said. This will lower your premiums and also discourage you from filing small claims.

“Even if the damage is slightly above your deductible, it’s worth handling it yourself to avoid the possibility of it affecting your policy,” he said. “The question you should ask yourself when considering whether to report an event, would be, ‘Is the damage to my home and property significant?’ If not, don’t report it.”

[Editor’s note: In some states, insurers check homeowners’ credit standing when determining their premiums. Having a good credit standing can help you avoid paying a higher insurance premium, and you can keep track of where you stand by getting your free credit report summary every 14 days on Credit.com.]

Image: DragonImages

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