Monday’s need-to-know money news

NannyHow your weekend Netflix binges could help you get a mortgage, the dangers lurking inside “flipped” homes, and what to expect when Mom or Dad rejoin the workforce.

Can Your Netflix Account Help You Get a Mortgage?
Orange is the New Mortgage.

4 Family Money Lessons From Top Companies
Financial education for the entire family.

Why Your Boss is Dumping Your Wife
It’s not why you’re thinking.

Buying a “flipped home”? Be careful.
Why it’s important to look beyond cosmetic repairs.

What stay-at-home parents need to know before rejoining the work force.
Preparing for the transition back to the work.

Friday’s need-to-know money news

House With Tree DamageHow to prepare for a disaster, avoid the financial pitfalls that come with a speeding ticket and how to get the latest iDevice without destroying your family budget.

How to Plan for Any Disaster
Preparing for the unexpected.

Do Employer Credit Checks Damage Credit Scores?
Understanding employer’s right to access your credit information.

5 Tickets That Will Ruin Your Insurance
Slow down to avoid paying extra.

5 Frugal Summer Activities to Beat the Heat

Staying cool doesn’t have to melt your wallet.

Don’t Let Gadgets Devour the Family Budget
Sometimes the latest isn’t the greatest.

Tuesday’s need-to-know money news

creditImproving your credit score, making the economy work for you, and how that video you just posted on Facebook could come back to haunt you.

How Can I Build My Credit Score?
Ten steps to better credit.

Buying a House? Don’t Make These Mistakes
Don’t be sidetracked by fixable mistakes.

7 Smart Money Moves in an Improving Economy
How to make the improving economy work for your money.

Don’t Let Your Social Media Footprint Kill Your Job Prospects
What you post on Facebook today could keep you unemployed tomorrow.

The Pros & Cons Of Cell Phone Insurance
Having insurance on a fragile smartphone sounds like a good idea. But does it make financial sense?

Friday’s need-to-know money news

House With Tree DamageThe inconvenient costs of convenience checks, the effects of the sequester on the unemployed, how to save money by purchasing an energy efficient home, how to save your financial sanity when your kids move back home and why hurricane season means it’s time to check your auto insurance coverage.

The True Costs of Credit Card Convenience Checks

The checks sent by your credit card company under the guise of convenience could lead to some very inconvenient fees.

Why the Unemployed Are Seeing Smaller Checks

The effects of sequestration mean 11% to 22% cuts for unemployment checks.

Bill Would Sweeten Loans for Energy-Efficient Homes

Purchasing an energy-efficient home could land you a larger mortgage and a lower interest rate under a Senate bill introduced with broad real estate industry support.

How to Set Money Ground Rules For A Boomerang Kid

With over 13% of parents having a grown child living at home, it’s important to set financial ground rules in order to keep the peace.

Hurricane season: Make sure your car is covered

Hurricanes damage hundreds of thousands of cars, but insurer rules prevent last-minute buying of coverage. Now is the time to review your policy.

 

Is your dog blacklisted by insurers?

Dog teethMy column today, “10 dog breeds that rile insurers up,” discusses how your pet’s breed could cause some companies to deny coverage or charge you more.

The breeds include various types of terriers commonly called “pit bulls,” as well as Dobermans, Rottweilers, German Shepherds, Huskies, Cane Corso and Mastiffs.

These so-called “breed lists” aren’t used by all insurers and tend to change as the types of dogs involved in attacks change (something that’s often related to breed popularity). There’s a reason that “nippy” dogs such as Chihuahuas and dachshunds aren’t on these lists: although they may be more likely to bite, they can’t do the damage that a bigger breed can. The average insurance claim for a dog bite is nearly $30,000, which implies a whole lot of pain.

If you own a dog that’s on an insurer’s breed list, or if you simply want to avoid expensive lawsuits and the possibility of harming others, there are plenty of ways to reduce your liability to dog bite claims. Among them:

Shop around. Every insurer has different criteria, so getting quotes from a number of different companies can help dog owners find coverage. An insurance broker who is knowledgeable about various insurers’ policies can help with the search. Larger insurers may be more accommodating than smaller ones. For example: State Farm, the largest homeowners insurance company, says it does not discriminate by breed but does require dog owners to answer questions about their animals’ history and behavior.

Spay and neuter. Sexually intact dogs are more likely to bite than spayed or neutered animals, according to the Centers for Disease Control and Prevention.

Mind your kids. Don’t leave infants or young children alone with any dog, the CDC advises. Teach children not to approach unfamiliar dogs and to remain still if approached by dogs they don’t know, or to roll up into a ball and stay motionless if knocked down by a dog. (If an unfamiliar dog is leashed and with its owner, make sure your child asks the owner first if the dog is friendly and if it’s okay to approach. Your child should know to let the dog sniff first before petting.) Kids should be taught not to disturb dogs that are eating, sleeping or tending puppies. Most dog bites occur “during everyday activities and while interacting with familiar dogs,” according to the American Veterinary Medical Association, so be vigilant about how your child behaves with dogs. Don’t let a child or anyone else tease or threaten a dog.

Don’t encourage aggression. Wrestling or even tug-of-war can trigger aggressive behavior in your pet. Dogs that have already demonstrated such behavior (lunging, biting)  “are inappropriate in households with children,” the CDC notes. Yes, such dogs can be trained, but the risk to your kids is too high.

Socialize and train your dog. The CDC recommends teaching all dogs “submissive behaviors,” such as rolling over to expose their belly and giving up food without growling. Training can help with these behaviors and others that can make dog ownership easier. Shelters and pet stores are two places to look for low-cost training. Use a leash in public so you can control your dog, the AVMA advises.

Dog bites are no joke. They send some 800,000 Americans every year to emergency rooms and other medical providers for treatment, according to the AVMA. Half of those victims are children, since kids are much more likely to be seriously injured if bit. (I was going to include a photo of what a dog bite did to a young girl’s arm, but decided it was just too graphic.) Senior citizens are the next most common victims.

So do the right thing. Your dog–and your neighbors–are counting on you to be a responsible owner.

 

 

 

“Cheap” insurance could cost more in the long run

Dear Liz: My homeowners insurance just went up 25%. I’ve made no claims and made no changes. I want to get quotes from other providers, but I’m afraid I’m going to get some type of “teaser” rate. I tried changing companies a few years ago and the rate was good, but when it came time for the renewal, they doubled the price! Again, I made no changes nor had any claims. So, now I want to change, but I’m afraid of falling into the same trap. Any suggestions?

Answer: You can’t assume you’re locking in a low rate for life when you buy homeowners insurance. Companies that want to expand their market share may lower their prices awhile to lure customers away from their competitors, then raise premiums when their claims costs go up or they simply want to cut their risk.

The company’s reputation for customer service should be at least as important a factor as price in your decision-making. Check the complaint surveys that many state insurance departments maintain on their websites to see which companies have the best (and worst) reputations.

One way to reduce your homeowner premium is to increase your deductible. Raising the amount you pay out of pocket from $250 to $1,000 can lower your premiums 25%. You should be paying small damages out of pocket anyway, since filing small claims can cause your rates to rise.

You also should shop around every few years, even if a company doesn’t dramatically raise your rates, to make sure you’re getting a decent deal. But again, chasing the lowest-cost insurance could be only a short-term win — an insurer that charges slightly more could be the more stable, and consumer-friendly, choice.

Advice not to fund 401(k) is a red flag

Dear Liz: You recently suggested an insurance salesman be reported to state regulators because he suggested a reader stop funding a 401(k) and instead fund an insurance contract with after-tax dollars. You were way out of line. It’s very likely tax rates will be going up, so it may make sense to trade a tax benefit now for a better one in the future.

Answer: You might have a valid point if the reader were wealthy enough to be funding a life insurance policy or annuity in addition to his 401(k) contributions. Wealthier people are already facing higher tax rates, and they are more likely to be in the same bracket, or perhaps even a higher one, when they retire.

The fact that the insurance salesman suggested the reader redirect his retirement contributions to the insurance contract indicates the reader didn’t have the cash flow to do both. So it’s still quite likely that the reader will drop into a lower tax bracket in retirement, in which case he’s given up a valuable tax break now for a less valuable one in the future.

A red flag should go up anytime an insurance salesperson recommends you stop funding a tax-deductible retirement plan or that you tap home equity to buy whatever he or she is selling. That indicates the product was designed for someone wealthier than you. At the very least, you should run the purchase past a fee-only financial planner — someone who doesn’t earn commissions on product sales — to make sure you’re getting the whole story.

Are you paying too much for car insurance?

Shopping for auto insurance is still a pain in the butt.

I’d hoped it would be better by now. I’d hoped that the Internet would make the whole process more transparent. But you still have to check several Web sites and pick up the phone to call a few agents to get a truly comprehensive picture of what various insurers are charging. Some of the big companies don’t participate with online comparison services (which is why you have to visit their sites and, often, talk to an agent to get a quote).

Why would you go through the hassle? Because the differences in premiums can be huge–not just hundreds of dollars a year, but thousands.

That’s because insurers are all different. They have different policies and ideas about what poses a risk and how much of that risk they want to take. If they don’t want teen drivers, for example, they will make it extremely painfully expensive to add one. Other insurers will just make it painfully expensive.

Insurers also adjust their pricing to add or shed customers. If they want to get bigger in a certain market, they’ll chop their prices to attract more drivers. If they decide they’ve gone overboard, they will jack their premiums above their competitors to slow new applications. If you’re a long-time customer who doesn’t know any better, you could find yourself paying a lot more for the same basic coverage than you’d pay with one of those competitors.

If you want some incentive to start getting quotes, check out CarInsurance.com’s Rate Comparison Chart and then read Des Toups’ accompanying post, “The most and least expensive cities for car insurance.” The average premiums cited conceal a lot of variation, Des noted.

For example, the average rate from six major insurance carriers for ZIP code 48101 in Dearborn, Mich., was $2,522 — but that included rates as low as $1,776 and as high as $4,374.

Des ran the numbers for a ZIP Code closer to me–90025, or West Los Angeles. There the average was $1,915, but the range was from $1,106 to $3,136.

Price isn’t the only thing to consider, of course. How fast and how well the company handles claims matters a lot, too. Your state insurance commissioner may have complaint data that will help you figure out which companies to avoid, like this one at California’s Department of Insurance. The number to pay attention to is the “justified complaint ratio” which divides legitimate complaints by the number of policies the insurer has in the state. Just as there are big difference in price, there are also big differences in complaints.

In any case, you shouldn’t assume you’re getting the best deal. Every year or two, check around to make sure.

Term or whole life? What you need to know

Dear Liz: My mother and her insurance agent swear by whole-life insurance policies. I am 45 and have heard from everyone else to only have term life, which is what my husband and I both have. We have a 15-year-old daughter. Can you please put in layman’s terms what a whole-life policy is and what the benefits are?

Answer: Term insurance provides a death benefit if you die during the “term” of the policy. Term insurance provides coverage for a limited time, such as 10, 20 or 30 years. It has no cash value otherwise and you can’t borrow money against it.

Whole-life policies combine a death benefit with an investment component. The investment component is designed to accumulate value over time that the insured person can withdraw or borrow against. Whole-life policies are often called a type of “permanent” life insurance, since they’re designed to cover you for life rather than just a designated period.

If you need life insurance — and with a daughter who is still a minor, you certainly do — the most important thing is to make sure you buy a big enough policy to cover the financial needs of your dependents. This is where whole-life policies can be problematic, since the same amount of coverage can cost up to 10 times what a term policy would cost. Many people find they can’t afford sufficient coverage if they buy permanent insurance. Also, many people don’t have a need for lifetime insurance coverage. Once your kids are grown and the mortgage is paid off, your survivors may not need the coverage a permanent policy would provide.

If you are interested in a whole-life policy, make sure to run it by a fee-only financial planner who can objectively evaluate the coverage to make sure it’s a good fit for your circumstances.

Insurance scores aren’t the same as credit scores

Dear Liz: I have very high credit scores, but recently got a notice from my homeowners insurance company saying that my rates were rising because there had been a number of inquiries on my credit report. The inquiries were as a result of my looking for the best deal on a mortgage refinance, and we applied for a retail card to save the 5% on our purchases. Do many insurers use FICO scores as a rate determiner?

Answer: Insurance companies don’t use FICO scores to set rates, but they do use somewhat similar formulas that incorporate credit report information in a process called “insurance scoring” to set premiums. Insurers, and some independent researchers, have found a strong correlation between negative credit and a person’s likelihood of filing claims. (California and Massachusetts are among the few states that prohibit the practice.)

The formulas insurers use sometimes punish behavior that has only a minor effect on your FICO scores. Since insurers use different insurance scoring formulas, however, you may well find a better deal by shopping around.