Personal Finance

An Overview of Homeowners Insurance

Published on March 1, 2016March 18, 2016 in Insurance, Personal Finance by RyanLaw

homeowners-insurance One of the easiest ways to save some money is to do an occasional review of auto and homeowners insurance. Last week I wrote about auto insurance (http://blog.ryanhlaw.com/an-overview-of-auto-insurance/) and today I will discuss homeowners insurance in more detail.

The majority of homeowners insurance policies will pay for most losses unless the loss is caused by something excluded. Things that usually aren’t covered by any insurance includes routine maintenance, damage from flooding[1] or landslides, damage from earthquakes, sewer backup and acts of terrorism.

PROPERTY PROTECTION

Four specific things are covered by the property protection portion of your insurance:

Part A: Dwelling and attached structures

This covers damage to your home and any attached structures (an attached garage, for example). For example, if your roof is damaged in a hail storm and you need a new roof Part A would pay for a new roof. If your stove catches on fire and your kitchen is destroyed, Part A will pay to repair the damage.

Part B: Detached structures

This covers any structures that aren’t attached to your main home – a detached garage, a storage shed, etc. Coverage is usually 10% of Part A. If, for example, you have $200,000 worth of insurance in Part A you would have $20,000 worth of insurance on Part B.

Part C: Personal property

This includes all the property in your home – your TV, computer, clothing, etc. It is important that you have a record of what you have in your home so you could prove what you owned if it was stolen or destroyed.

Coverage is limited for many items, so you may need a rider if you have a collection or expensive pieces of jewelry, furs, stamps, firearms, antiques, tools, memorabilia or other similar items.

You will have a deductible for the property protection portions of your insurance – standard is $1,000, but if you have the cash you can raise your deductible which will lower your premium.

You want to look carefully to see if you have replacement cost or actual cash value. Replacement cost will pay for a replacement (i.e. if you have a 25-inch flatscreen TV that is stolen you will get a new 25-inch flatscreen TV). With actual cash value depreciation is taken into account. If your 25-inch flatscreeen is 5 years old and the insurance company figures that TVs last for 10 years you will only get about half the cost of a new TV.

Part D: Living Expenses

If you can’t live in your home while repairs are being made or while it is rebuilt this portion will help pay for similar living expenses.

LIABILITY COVERAGE

The other part of homeowners insurance is liability coverage – which provides coverage for personal injuries or property damage that you or others living in your home may be responsible for.

This portion covers the cost of your defense regardless of whether or not you are found liable. If you are found liable your insurer will cover damages up to the total of your liability coverage.This can be on or off your property and it does not cover intentional acts.

Included as part of liability insurance is medical payments to others that will help pay the doctor’s bills for people injured by you, a family member or your pets.

Other standard coverage includes:

Fire Department Service Charge, which will pay the cost of a fire department run
Debris Removal coverage, which pays for the cost of removing damaged property

As a reminder, for those that live in Utah, I am happy to review your homeowner’s insurance coverage and run a quote against a number of the nation’s highest rated companies to see if I can save you some money.

[1] Flood Insurance is provided by the federal government – you can access that at www.floodsmart.gov

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An Overview of Auto Insurance

Published on February 22, 2016 in Insurance, Personal Finance by RyanLaw

auto accident Auto insurance is one item that we buy hoping that we will never have to use it. While I don’t know anyone who enjoys paying for it each month, we understand it is important (and it is required by law if you own a vehicle!) so we go ahead and keep paying for it.

However, just because you have to pay for it doesn’t mean you should be overpaying for it. When was the last time you reviewed your coverage? While this may not be the most fun you will have in an afternoon, if you haven’t reviewed your insurance documents recently, you may be missing out on some cash that you can apply to some of your other financial goals.

Today I am going to briefly review auto insurance and give you a few tips for how you may be able to save some money on it.

Your auto insurance has several different types of coverages:

Bodily Injury Liability per person
Bodily Injury Liability per occurrence
Property Damage
Uninsured/underinsured coverage
Comprehensive
Collision

Bodily Injury Liability per person

If you cause an accident, this coverage covers people outside of your vehicle who sustain injuries. Whatever the amount is in this section (i.e. $30,000) is the maximum your insurance will pay for each person who is injured.

Bodily Injury Liability per occurrence

This is the same as the bodily injury per person, but it is the maximum your insurance will pay per occurrence. For example, if you have $30,000 in coverage per person, and $60,000 per occurrence and two people are injured by you and have bills of $35,000 each, your insurance will only pay $30,000 for each one because they reach both the limit per person and maximum per occurrence.

Imagine that there were four people injured and each had $30,000 worth of medical bills. How much does each person get then? $15,000 (maximum of $60,000 per accident – $60,000 divided by four people gives you $15,000).

Property Damage

If you cause an accident this covers property that is damaged – whether it is a mailbox or other vehicles.

For bodily injury and property damage state minimums are usually fairly low. For example, in Missouri it is $25,000 per person, $50,000 per occurrence and $10,000 in property damage. In Utah it is $25,000 per person, $60,000 per occurrence and $15,00 in property damage. Hopefully you can see how quickly you can surpass these limits. You can cause more than $10,000-$15,000 in damage in even a fairly minor accident.

I strongly suggest you purchase the highest Liability (Bodily Injury and Property Damage) that you can afford. Increasing these will give you peace of mind that if you cause an accident you won’t personally be liable for medical bills and property damage up to a high limit. I actually don’t sell any policies that are less than $100,000 per person, $300,000 per occurrence and $100,000 in property damage (or 100/300/100).

Uninsured/Under-insured motorist coverage

If someone who is uninsured or under-insured hits you and you are hurt, this clause of your insurance will help pay your medical bills. Some states require you to have some uninsured motorist coverage.

Comprehensive

This coverage pays out when your vehicle has been damaged in some way (except in a collision). For example, if your vehicle sustains storm damage or a vandal keys your car this coverage will help pay to fix the damage.

Collision

If you hit something (car, tree, pole, etc.) this coverage will help pay to fix the damage.

Both comprehensive and collision have a deductible that you will have to pay before the insurance company kicks in any money.

Money Saving Tips

My first tip to help save you money is to review your deductible for comprehensive and collision. If you can afford to increase your deductible I would encourage you to consider it. You would be responsible for meeting the full deductible before any damage is paid out, so you would need cash set aside in your emergency fund to help pay this, but increasing your deductible will save you money on your monthly bill.

If you drive a very old, essentially worthless car that is paid for consider whether it is worth keeping comprehensive and collision. If your car was totaled and the insurance company would only pay you $200 because that is all it’s worth then you are probably better off dropping this coverage. Keep in mind that if your car is damaged (other than in an accident that someone else causes) you would then be liable, in full, for any damages to your vehicle.

Finally – shop around for quotes occasionally. Have you been with the same insurance company for ten years because you saw an ad that said they can save you 10% on your car insurance? It never hurts to check around to see if you can get the same or better coverage for less money. You can usually get a few quotes online fairly easily. You can also check with an independent insurance agent who can shop a number of different companies and find you the best deal.

For those in Utah, I sell auto and home insurance and actually take care of the shopping part for you. My company rate-shops 10-15 companies to find you the best deal. Contact me if you would like more details.

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Know Your Score

Published on February 15, 2016March 18, 2016 in Credit, Credit Scores, Personal Finance by RyanLaw

by Ryan H. Law

If you want to achieve any goal you need to where you are now, what your desired result is and the steps you need to take to get you there. For example, if a person wants to lose weight they would need to weigh themselves, set a target goal for what they want to weigh, and set up steps to get there (exercise, diet, etc.).

Knowing your numbers is important – the only way we can improve is knowing where we are today! Many of us get annual health screenings – you check your cholesterol level, blood pressure, and other health measures. If you play a sport regularly you know your speed, handicap or other important stats.

There is another number that you may not have thought a lot about but it plays a major role in your life. Here are some benefits of having a high score:

You pay less for your car insurance
You may get that coveted job
You will be able to get in to the apartment you want to live in
You will pay less (sometimes substantially less) for loans (including your mortgage, auto loans, personal loans and others)

If you haven’t figured it out already – I’m talking about your credit score. In this post I would like to discuss your credit score and why it is important for you to understand this number and how to improve it.

If you have loans of any kind in your name (personal loans, student loans, car loans, credit cards, etc.) then you have a credit file with one or more of the major credit bureaus – TransUnion, Equifax and Experian.

This file contains information about how you have repaid your loans. For each loan they show if you paid on-time or if you paid late each month (30, 60 or 90+ days late). It also shows how much of each trade line you are using (i.e. you have a credit card with a $1000 limit and you are carrying a balance of $400). If you have had more serious money problems it shows that as well – bankruptcy, accounts that have gone to collections, and unpaid liens. Finally it shows how many times you have authorized financial institutions to access your credit report (also called inquiries).

Your credit score is based off information in your credit report. Your score ranges from 300-850 (higher is better). The following graph shows how your credit score is determined:

FICO score

Payment History (35%): Because this is the biggest piece of your credit score you should definitely pay attention to it. If you pay late, declare bankruptcy or have a bill go to collections you are going to see your score drop. Paying your bills on time (even if you have had problems in the past) will increase your score.

Amounts Owed (30%): This category is sometimes called your capacity – or how much open credit you have on your revolving credit lines (typically credit cards). If you have three credit cards with a total credit limit of $2500, and you carry a monthly balance of $1000, you are using 40% of your available credit. The lower that percentage, the better.

Length of Credit History (15%): This category takes into account both your oldest reporting trade line and the average age of all your accounts. Only time can improve this section, but closing old credit cards can harm your score in this section, so unless you are paying an annual fee on a card you aren’t using anymore, keep those old accounts open.

New Credit (10%): The biggest part of this is inquiries. If you are credit active (apply for a lot of credit) you are going to see a drop in your score.

Types of Credit Used (10%): Lenders like to see that you can handle a variety of loans – credit cards, student loans, car payments, a mortgage, etc.

This short video will review all five areas:

Tips for Increasing Your Credit Score

Pay your bills on time
If you need to be late, don’t hit the 30 day late mark
Decrease the balance carried on credit cards and/or increase your credit limit
Don’t close old credit accounts
If you are rate-shopping (which is a good idea), rate shop in a 45-day window. As long as you are applying for the same time of loan at each place (i.e. a car loan) it will only count as one inquiry
Check your credit report regularly (annualcreditreport.com) and fix any errors
Build credit in your own name

How to Find out Your Credit Score

Unfortunately you can’t get your credit score for free through the credit bureaus. However, if you plan to apply for a loan or are applying for jobs or an apartment, it is worthwhile to pay to find out your score ahead of time.

Your banker will often pull your report for you (it will count as an inquiry on your report) but you can also purchase it directly from www.MyFico.com. There are other places (www.CreditKarma.com and www.CreditSesame.com, for example) that offer you free credit score monitoring services and are supported by ads.

In conclusion – you know your blood pressure, your golf handicap and other important numbers, but if you aren’t familiar with your credit score yet it’s time to get to know that number.

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