4 Things to Know About Homeowners Insurance

Homeowners Insurance

A solid homeowners insurance policy can provide peace of mind about securing one of your most valuable assets. Unfortunately, many homeowners don’t fully grasp what exactly is covered under that policy, and most importantly, what isn’t.Homeowners insurance policies generally cover your home itself and other physical structures on the property. Your personal belongings also fall under most policies, along with property damage and bodily injury sustained by you or others on your property. You, your spouse and children, and any guests, tenants, or employees in your home can all be covered under this policy, just be sure to check when you purchase the policy.Sounds like they’ve got you covered, right? Not so fast; there are a number of possible perils that are often not covered under basic homeowners insurance. Knowing what falls into this category can save you a lot of time and trauma if you ever experience one of these situations in the future.

The two main exceptions are earthquake and flood damage. The impacts of these natural disasters would not be covered by your standard policy. Earthquake insurance and coverage for some types of water damage can often be purchased as an addendum, but flood insurance must be purchased on its own as a separate policy.

Further, standard policies don’t cover damages to your building as a result of your failure to perform regular maintenance on your property. Insect, bird, or rodent damage, rust, mold, and any kind of wear and tear on your property is typically not covered. Neither are hidden defects, mechanical breakdowns, or food spoilage in the event of a power outage. Though there is no current concern for this, damage caused by war or nuclear exposure is also not covered.

Some things have minimal coverage built into your standard policy, for which you can purchase additional coverage as an addendum. Valuable property, including firearms, jewelry, silverware, etc., is usually covered by a standard $1,000. Insurance for replacement value of lost or damaged property is usually determined on an itemized basis that takes depreciation into account. You can expand this coverage by paying to remove depreciation from consideration.  Liability coverage can be increased if desired as well.

These should serve as general guidelines for your homeowners insurance, but be sure to consider the details on your specific policy.  It’s important to consider exactly what you have covered in order to determine what additional types of insurance you may want to purchase.

Bankruptcy: Things You Need to Know

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BankruptcyWhen President George W. Bush signed the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), the laws governing the filing of bankruptcy changed drastically. One major change under BAPCPA requires all debtors filing bankruptcy to attend two credit counseling courses, one before filing and one while a case is pending.While some aspects of the U.S. Bankruptcy Code did not change at all when BAPCPA was enacted, some underwent minor tweaks while others were overhauled completely.   An example of a section of the bankruptcy laws that was amended revolves around the options available to a Chapter 7 debtor if their case includes secured debt. Financial obligations are secured if there is collateral a creditor can recover from a debtor if they don’t pay their bills on time. For example, if a debtor gets behind in their home mortgage payments, the bank or whoever lent them the money to buy the house can foreclose on it.

There are three options available to a Chapter 7 debtor whose bankruptcy includes secured debt. To reaffirm a debt is to sign a contract with the creditor indicating the debtor wants the debt to continue even after their bankruptcy is discharged. Surrendering occurs when the debtor returns the collateral to the creditor. The third alternative is redemption.When a debtor seeks to redeem secured property, it means they want to keep it. This is accomplished by submitting one lump sum payment to the creditor for the value of the collateral.While this may sound simple, there are a few limitations on a debtor’s ability to redeem secured property. First, the secured property has to be worth less than what the bankruptcy laws allow a debtor to own, and those limitations differ from state to state. Secondly, the bankruptcy court has to abandon its interest in the collateral, meaning it has no interest in taking it from the debtor to sell to repay some of the debts that debtor owed.

Another tricky aspect of redemption is also related to the jurisdiction where a bankruptcy case is filed. Since each state has its own rules, called exemptions, about how much a debtor is allowed to keep after filing bankruptcy, a redemption may not be possible, for a few reasons. For example, some states only allow a debtor to have $400 cash on hand when they file a Chapter 7 bankruptcy. If a debtor in that state wants to redeem collateral for $500, they have more cash than their state laws allow. While some states do also offer a ‘catch-all’ exemption so a debtor could potentially redeem the item in question, that option is not available everywhere, so it’s important to consult with an experienced bankruptcy attorney on that matter.

 

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Top 5 Overlooked Issues in Estate Planning

In planning your estate, you most likely have concerned yourself with “big picture” issues. Who inherits what? Do I need a living trust? However, there are numerous details that are often overlooked, and which can drastically impact the distribution of your estate to your intended beneficiaries. Listed below are some of the most common overlooked estate planning issues.

Liquid Cash: Is there enough available cash to cover the estate’s operating expenses until it is settled? The estate may have to pay attorneys’ fees, court costs, probate expenses, debts of the decedent, or living expenses for a surviving spouse or other dependents. Your estate plan should estimate the cash needs and ensure there are adequate cash resources to cover these expenses.

Tax Planning: Even if your estate is exempt from federal estate tax, there are other possible taxes that should be anticipated by your estate plan. There may be estate or death taxes at the state level. The estate may have to pay income taxes on investment income earned before the estate is settled. Income taxes can be paid out of the liquid assets held in the estate. Death taxes may be paid by the estate from the amount inherited by each beneficiary.

Executor’s Access to Documents: The executor or estate administrator must be able to access the decedent’s important papers in order to locate assets and close up the decedent’s affairs. Also, creditors must be identified and paid before an estate can be settled. It is important to leave a notebook or other instructions listing significant assets, where they are located, identifying information such as serial numbers, account numbers or passwords. If the executor is not left with this information, it may require unnecessary expenditures of time and money to locate all of the assets. This notebook should also include a comprehensive list of creditors, to help the executor verify or refute any creditor claims.

Beneficiary Designations: Many assets can be transferred outside of a will or trust, by simply designating a beneficiary to receive the asset upon your death. Life insurance policies, annuities, retirement accounts, and motor vehicles are some of the assets that can be transferred directly to a beneficiary. To make these arrangements, submit a beneficiary designation form to the financial institution, retirement plan or motor vehicle department. Be sure to keep the beneficiary designations current, and provide instructions to the executor listing which assets are to be transferred in this manner.

Fund the Living Trust: Unfortunately, many people establish living trusts, but fail to fully implement them, thereby reducing or eliminating the trust’s potential benefits. To be subject to the trust, as opposed to the probate court, an asset’s ownership must be legally transferred into the trust. If legal title to homes, vehicles or financial accounts is not transferred into the trust, the trust is of no effect and the assets must be probated.