Advanced Personal Finance

Natural disasters can occur anywhere.  Just ask the people in California running from the fires raging there.  The pain is just beginning for some of them, though.

After all is said and done, people who lost their homes might be in for a big shock.  It’s very likely some of them won’t be able to rebuild their homes, not because they don’t have insurance, but because they don’t have enough insurance.  And it can happen to any of us.

When you buy your home, you obviously insure it.  Thing is, the policy is based on your home’s value right then.  After the recent run-up in home prices, especially in places like California, your insurance may not have kept pace.

Adjusting your homeowners insurance according to the cost of rebuilding your house is a critical step.  It’s easy to do - I did it recently.  Just call up your insurer and ask what your coverage is.  If it’s inadequate based on the selling price of comparable homes in your area, just have them adjust it upward.  (Make sure your not insuring your land, though.) Sure it will cost a little bit more, but you’ll know that your house can actually be replaced after a total loss.

As some people in California are about to find out, after a disaster is a really bad time to find out your under insured.

[Image courtesy Meyer Media]

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You can definitely break down personal finance concerns by age. Things that are important when you’re 22 become trivial at 55. Your key concern at 65 isn’t the same one you had at 45.

As another birthday passed, I started thinking about how those things break down. Obviously, not everyone will have all of these things happen during the time-frame I show (or at all, for that matter).

20 to 30

• Graduate from college and start repaying loans

• Get first ‘real’ job

• Buy first car and insurance

• Rent an apartment

• Get first credit cards and learn how to deal with them (or not)

• Marry? Have a baby? Buy a house? Maybe you even manage to save something

31 to 45

• Have kids and watch them grow up too fast

• Get a will

• Learn about and buy life insurance

• Buy a house

• Start saving for college

• Try to fund an IRA and 401(k) in between orthodontist bills and piano lessons

46 to 55

• Holy crap! College tuition is just around the corner (or here already)

• The thought of retirement gains in importance and you try to ramp up saving

56-65

• The kids are out of the house

• The mortgage is paid off

• These are prime earning years, and you’re able to save serious money for retirement

• Look into long term care insurance

65+

• Come up with a retirement fund withdrawal strategy

• Settle in to retirement

• Begin to think about estate planning

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I’ve found getting discounts on auto insurance is just a matter of asking. The insurance company’s not going to go through a list of possible discounts with you to see which apply. But ask and, often, ye shall receive.

Here is a list of auto insurance discounts I’ve found common among the couple of carriers I’ve had.

• Supplemental Restraint Systems. Airbags are ubiquitous now, even among used cars, so this will often be a given, but check to make sure it’s applied to your quote.

• Daytime running lights. I find it hard to believe, but the insurance industry believes these reduce accidents. Whatever. If you have them, make sure the insurer knows.

• Security system. Know the specifics of your system when you ask for the discount. There are systems that just make noise and then there are ones that completely disable the car. If you have a Lo-Jack, that’ll help, too.

• Multiple cars. Having several cars under one policy will get you a discount.

• Student ‘good grades’ discount. Plenty of insurers offer a discount to students who have a good grade point average. I’m not sure what documentation they require, though, since this never applied to me.

• Low mileage. If you’re like me and put very few miles on your car, you get a break on coverage.

• Defensive driving course. If you take an approved defensive driving course, you get a nice break on insurance.

• Multiple insurance products. I can’t personally attest to this, but I understand you get a small discount if you have several insurance policies with a single insurer.

Anybody have any I missed?

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Without boring you with the details, I had reason to inquire about insurance on stuff stored in those storage facilities you see everywhere. The short answer is that homeowners or renters insurance covers storage facilities.

Your homeowners insurance (I’m using homeowners generically, but everything here applies to renters insurance, too) covers your possessions no matter where they are. So while your stuff is in storage, it’s covered there. That means if you have homeowners insurance, you can turn down that insurance that’s offered when you sign up for the storage unit. It’s very much analogous to declining insurance when you rent a car. Of course, I’m not an insurance expert and you should check your policy blah, blah, blah.

Just as an aside, is it just me or are these freakin’ storage places popping up, like, everywhere? I think they multiply in the middle of the night. Put in a new stretch of road anywhere in the country and I guarantee there’s going to be a storage facility beside it inside of 4 months.

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Looking over my homeowners insurance policy isn’t something I relish. It’s not that it’s hard, it’s just that it’s one of those checklist kind of tasks you should probably do regularly but hardly ever do. But after reading a Wall Street Journal article this morning about how some insurance companies are switching customers from a standard dollar amount deductible to a percentage of home value, I thought I’d better check mine.

Without rehashing the entire article, the issue was born of the recent hurricanes in the southern U.S. and wind damage in the Northeast. Usually, the deductible on your home insurance is a flat amount, say $1,000. With these changes (and not all insurers are doing this), the deductible is a percentage of the insured home value. Of course, this change is disclosed but buried in the packet people receive each year from the insurer. JLP over at AllFinancialMatters actually read his, though, and caught the fact that he has one of these for wind damage.

So without further ado, here is the list of 5 things to check in your homeowners insurance.

1. Check your deductibles. Make sure you know what the deductibles are for the various coverages you have. The higher the deductible, the lower your yearly premium. And understand what it means to have a percentage listed instead of a dollar amount.
2. Make sure you have adequate coverage for the dwelling. It’s important that your coverage increase through the years along with the value of your house. Some insurers (like mine, USAA) do this automatically each years; others do not. Make sure you’d be able to rebuild your home with the amount of coverage you have. I’m not saying you have to be a contractor, but make an educated estimate based on recent new home sales in your area. Also make sure you’re not over-insured. You don’t need insurance on the full price that you’d get if you sold your home. That price includes land, which obviously won’t burn down (unless you live in Centralia, PA).
3. Check your personal possessions coverage. Is this number enough to replace your stuff? Do you have replacement coverage or actual cash value coverage. The first will fully pay to replace your TV, even if it’s 10 years old. The latter will only give you the $25 it’s worth.
4. Do you have ‘loss of occupancy’ or similar coverage? In the event you can’t live in the house, will insurance pay to put you up somewhere? For how long? Is there a dollar cap?
5. Ensure you have appropriate riders. Homeowners insurance covers very little in the way of jewelry and electronics. So it’s likely only a small portion of your engagement ring would be covered, for example.

Do a quick audit of your homeowners insurance. It took me all of five minutes online for ours. And it gave me piece of mind that I’m not one of the people who has a percentage of value deductible.

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