Monthly Archives: August 2016

Homeowners and renters that you should know

download-31Peak hurricane season runs from mid-August to late October, according to the National Oceanic and Atmospheric Administration. As a homeowner or renter, you may wonder, “Do I have enough insurance protection to withstand a potential hurricane?”

Unfortunately, you might not want to hear the answer.

Like any responsible homeowner, you’ve got a standard homeowners insurance policy. And even though most policies offer a wide range of protections, hurricanes may only be partially covered.

When purchasing a home insurance policy, you want enough dwelling coverage to completely rebuild your home if it is destroyed by a covered peril. Remember, this is the cost to rebuild your home, which isn’t the same as what you originally paid to purchase it.

Not sure if you have enough dwelling coverage? Use a home insurance calculator to help estimate your home’s replacement value and then compare it to the amount of coverage on your policy.

If you live in an apartment, your building is likely covered by your landlord’s policy. It’s up to you, however, to purchase protection for the items in your apartment.

The perils covered by your policy depend on your specific policy and provider. Generally, wind, lightning and hail damage — all common during hurricanes — are included as covered perils. Water damage, however, can be a different story.

Flood insurance is extra

When it comes to water damage, matters can get a little complicated in regards to home and renters insurance. Standard home insurance policies often include some coverage for water damage — if a pipe breaks, for example. But if your home is damaged by flooding, you’ll be in trouble without a flood insurance policy.

With hurricanes bringing powerful storm surges and excessive rain, flooding is common — thinkSuperstorm Sandy from late October 2012. If a flood damages your house, you could be out a lot of money.

According to the National Flood Insurance Program, just a few inches of flood water can cause tens of thousands of dollars in damage. The program’s website, FloodSmart.gov, lists hurricanes as a common but often overlooked cause of flooding. If you weren’t already required by your mortgage lender to purchase a flood policy, you can do so through the NFIP.

RELATED:Hurricane season could bring 10 to 16 named storms this year

Suppose a hurricane hits your house, causing wind damage. Now you’ve got to file a claim, but you might find out your policy treats hurricanes differently than other perils. In fact, it might even have aspecial deductible for them.

A deductible is the amount you agree to pay out-of-pocket toward a claim. Common deductibles are $500 or $1,000. The deductible has an inverse relationship with your premium — all other things being equal, higher deductibles generally result in lower premiums. However, be sure you can afford your deductible if you need to pay it.

Many home insurance policies on the East Coast have hurricane or wind deductibles. Unlike traditional deductibles, hurricane and wind deductibles are set at a percentage of the home’s value. For example, if your home’s insured value is $300,000 and the hurricane deductible on your policy is set at 3 percent, you would pay $9,000 out-of-pocket before your insurer would step in.

Hurricane and wind deductible details and percentages vary depending on your provider and the state you live in. If you aren’t sure whether you have a hurricane deductible, call your insurer to check the details of your policy.

RELATED: Prepare your pet for disaster with a stylish emergency pack

Besides flooding, there may be other coverage gaps lurking in your home insurance policy. For example, you may not have enough protection for your personal items. Contents coverage is what protects the items in your home, but it has limits — usually 50 to 70 percent of the insured value of the house.

The best way to make sure the value of your possessions doesn’t exceed your coverage limits is to compile a home inventory — a listing, complete with photos and any receipts you might have, of your possessions. In addition to helping you determine the value of your possessions and whether you need more contents coverage, a home inventory can help speed the claims process.

However, there’s another potential problem. Some policies limit payouts for certain high-value items such as jewelry or artwork. Talk to your provider about scheduling endorsements to fully cover such items.

Don’t wait until a storm is in the forecast to think about insurance. Call your insurance provider now and get to know the details and limits of your policy.

Throughout hurricane season and beyond, you want to have peace of mind that your investment is fully protected.

Is a Fed Rate Hike Hit Your Wallet

Wall Street may find the need to freak out over whether the Fed is going to raise rates, but for Main Street, the concern is more remote.

That’s because most consumers will feel little impact should the U.S. central bank decide to enact a quarter-point hike. In fact, for 9 out of 10 people holding variable-rate loan or credit card debt, the typical impact will be a few dollars a month, according to a study that credit information service TransUnion released Monday.

“There’s a lot of anticipation about what the impact will be (and) who is really exposed” if the Fed hikes rates, Nidhi Verma, senior director of financial services research and industry insights, said in an interview. “The good news is that the impact will be one that most consumers can absorb.”

To be more precise, a rate hike would hit 92 million people holding various debt instruments with interest rates that depend on what the Fed does. The average impact: $6.45.

How does it work?

Adjustable-rate debt gets affected because it is tied to the prime rate, which immediately moves when the Fed acts. The current prime rate is 3.5 percent — 3 percent plus the top of the range the Fed targets for its overnight funds rate, which currently is 0.25 percent to 0.5 percent.

Potentially, the total number of affected consumers is closer to 137 million. But borrowers or cardholders who pay extremely high rates don’t feel the impact, because issuers usually are barred by law from increasing those rates further. However, others will see a quick impact.

Take action now

Verma advises people in debt to take an inventory of where they stand, even if chances of a Fed hike anytime soon seem at the moment to be remote.

“We’re just being proactive,” she said. “It’s important to be prepared and know who these consumers are that may be a risk. … Consumers need to identify and recognize what products in their credit wallet have adjustable rates.”

People who feel they can’t handle the hike should contact their lenders or creditors to try to make arrangements, Verma said.

“Start thinking about budget changes (like), ‘Do I have to spend $5 for my Starbucks coffee,'” she said. “Pick up the phone and talk to your lender. It’s much more profitable for a bank to do that than to let the card go into default.”

In all, TransUnion estimates that about 9.3 million borrowers won’t be able to handle a quarter-point increase. Should the Fed unexpectedly get aggressive in hiking, that number of at-risk consumers would swell to 11.8 million under a full percentage-point increase.

How likely is a rate hike?

The market is betting against an aggressive central bank. Traders at the CME are assigning just a 12 percent chance for a hike at this week’s Federal Open Market Committee meeting, which concludes Wednesday. There is a 55 percent chance of a quarter-point move before the end of the year, with only a minor chance of any more moves through July 2017.

Get a Handle on Your Rising Debt

Take a second and think about how much debt you have — total. Do you know the exact dollar amount? Maybe a ballpark figure? Or do you have no idea?

If the last question hits close to home, you’re not alone. Many Millennial and Gen Z women with debt don’t know how much they owe — on both their credit cards and student loans, according to a new survey from CreditCards.com and the 1,000 Dreams Fund, a national scholarship fund for young women.

That the vast majority of the women carrying this debt are worried about paying it back doesn’t surprise money expert Stefanie O’Connell. She says that coming out of college is so overwhelming that it “induces a kind of paralysis [when it comes to making] any proactive financial choices.” This is especially true for women who are already a little less financially confident — particularly those who are perfectionists. “[That can] lead to the worst decision of all, which is doing nothing.”

If you’re nodding your head because you recognize yourself in that description, here are three steps to take.

Strategize to face your financial fears

“You can’t fix a problem until you know what kind of problem you’re faced with.” says Sienna Kossman, an analyst with with CreditCards.com. To start overcoming your fears, sit down and make a list of your financial hurdles. Once you’ve gotten them pinned down, imagine them coming true and then — this is key — coming up with three to five courses of action for each scenario you’re worried about.

“What you’ll find is the worst case scenario probably isn’t as bad as you think it is,” she says. For example, if you fear not being able to afford the minimum payment on a credit card, three possible solutions could be calling the company to negotiate, researching balance transfer cards and trying to open up another income stream.

“Worry is paralyzing, but when you change worry to action, you take your financial fear and you flip it on its head,” she says.

Start the journey — now — to being financially independent

It’s easy to put off getting your financial life in order until some undetermined future point or a milestone that hasn’t happened yet — turning a certain age, for example, or getting a raise.

O’Connell says she thinks women sometimes fall into the trap of thinking they’ll plan their financial futures once they get married or have children, but she says to plan under the assumption that you’ll have to do it yourself.

“The best way to be prepared is to be your own champion and completely financially independent going in.”

Set it and forget it

One of the best ways to take control of your financial life is to automate it — especially when it comes to paying bills and saving. A number of apps can help with this, like Digit, which gauges how much you can afford to auto-save by tracking your spending habits. It then automatically moves a sum it can see you don’t need — usually between $5 and $50 every two to three days — and offers a no-overdraft guarantee.

Mint Bills, a spinoff of the app Mint, helps users keep track of payments on utilities, credit cards, rent and other bills. And, arguably most importantly, when it comes to retirement? Take full advantage of your workplace retirement plan if you have one, or open an IRA or Roth account of your own if you don’t. Automate your contributions so they come right out of either your paycheck (in the case of a workplace 401(k)) or checking (in the case of an IRA or Roth). Why? Because if you don’t see the money, you won’t spend it.