Can an Inherited IRA Be Rolled Over?

IRA documents

If you inherit an individual retirement account (IRA) from a spouse, you can treat it like your own IRA or roll it over into a traditional IRA you already have. If you are the beneficiary of an IRA inherited from someone other than your spouse, the options are different. You can’t roll it over into an existing IRA. However, you can transfer it into a new IRA, if you satisfy certain requirements. In either case, failing to follow the rules can result in the IRA being treated as a taxable distribution. A financial advisor can guide you as you deal with an inherited IRA so that you don’t needlessly incur any tax liabilities.

Inheriting an IRA From a Spouse

The owner of an IRA can designate anyone to be the beneficiary of an IRA or other account after the owner’s death. Often, the beneficiary is the surviving spouse. Then the beneficiary has some choices.

First, the surviving spouse can name himself or herself as the owner of the inherited account. In this event, it will be as if the surviving spouse had always owned the account. The same distribution rules will apply.

Second, the new owner can roll it over into an existing IRA. This can be a traditional IRA or, after conversion, a Roth IRA. Any taxable distributions can be rolled over into another plan, such as a qualified employer retirement plan, a 401(a) or 403(b) annuity plan or a state or local government’s 457(b) deferred compensation plan.

If the rollover route is selected, it can be accomplished by a direct trustee-to-trustee transaction.

Or it can be done by taking the funds from the account as a distribution and then depositing the funds into another IRA within 60 days. Waiting longer than 60 days to re-deposit the funds into an IRA risks having the distribution taxed like income.

The most desirable way is to use the direct trustee-to-trustee transaction. This can be set up in advance if the wishes of the original owner regarding the inheritance are known.

The age of the beneficiary determines how the inherited IRA will be taxed. That means, for instance, any distributions before age 59 ½ will get charged a 10% penalty in addition to being subject income taxes. And starting at age 72, the beneficiary will have to start taking the annual required minimum distributions (RMDs.) If a beneficiary was 70.5 or older on Dec. 31, 2019, he or she has to start taking RMDs immediately.

Inheriting From a Non-Spouse

Man working on household finances

If you inherit an IRA from someone other than your spouse, you can’t just roll it over. In this case, the usual approach is to open a new IRA called an inherited IRA. This IRA will stay in the name of the deceased person and the person who inherited it will be named as beneficiary. The inheritor can’t make any contributions to the inherited IRA or roll any funds into or out of it.

The funds can’t just stay in the inherited IRA forever, or even until the new beneficiary reaches the age at which they’d have to start being withdrawn. In most cases, all the funds have to be distributed within 10 years of the original owner’s death. If it’s a Roth IRA, all the interest usually has to be distributed within five years of the owner’s death.

Rather than opening an inherited IRA, the person who inherited the IRA can take a lump sump distribution. Even if the person is younger than 59 ½, the distribution won’t be subject to the usual 10% penalty for an early withdrawal. However, the distributed funds will be subject to income taxes.

Bottom Line

Retired couple on a beachInheriting an IRA from a spouse means the beneficiary can simply name himself or herself as new owner of the account and treat it as if it had been theirs all along. Or the bereaved spouse can roll the funds into a new account. If the inheritor is someone other than a spouse, the usual approach is to set up an inherited IRA, keeping the original owner’s name on the account and naming the inheritor as the beneficiary. But sometimes it makes more sense to disclaim an inherited IRA if, for example, the inherited funds would mean the beneficiary’s estate would be so large it would incur the federal estate tax. In the event an IRA is disclaimed, the funds would go to other beneficiaries named on the account.

Tips for Handling IRAs

  • If you inherit an IRA or expect to – especially if your benefactor is someone other than your spouse – consider discussing the best way to handle it with an experienced financial advisor. Finding one doesn’t have to be hard. SmartAsset’s free tool matches you with financial advisors in your area in five minutes. If you’re ready to be matched with local advisors who will help you achieve your financial goals, get started now.
  • One factor in deciding whether to claim and how to claim an inherited IRA is how much you will get from Social Security. That’s where a free, easy-to-use retirement calculator comes in very handy.

Photo credit: ©iStock.com/designer491, ©iStock.com/shapecharge, ©iStock.com/dmbaker

The post Can an Inherited IRA Be Rolled Over? appeared first on SmartAsset Blog.

Source: smartasset.com

How To Fight an Eviction During the Coronavirus Pandemic

EvictionPeter Dazeley / Getty Images

Eviction may soon become a reality for millions of American renters.

In March, the Coronavirus Aid, Relief, and Economic Security (CARES) Act prohibited landlords from evicting tenants for nonpayment of rent in homes with federally backed mortgages. But this program ended on July 24.

As a result, an estimated 20% of the 110 million Americans who rent their homes are at risk for eviction by Sept. 30, according to a report by the COVID-19 Eviction Defense Project, a group of economic researchers and legal experts working to better understand the housing, homeless, and community recovery during the pandemic.

“We anticipate a flood of evictions because many tenants won’t be able to pay the back rent, and it will be due,” says Deborah Thrope, deputy director at the National Housing Law Project, a housing and legal advocacy nonprofit.

“The eviction moratorium is simply a pause. It’s not rent cancelation,” Thrope says.

But even if you’re struggling to pay rent, this doesn’t mean an eviction is your only choice. Here’s an overview of some of the steps you can take to fight an eviction.

Talk to your landlord ASAP

“The best advice I can give tenants when their financial situation starts to deteriorate is to communicate with your landlord,” says Marina Vaamonde, a real estate investor in Houston and founder of HouseCashin. “Their willingness to have a discussion is the only way tenants can come to a resolution without going to court.”

According to a recent survey of landlords by the American Apartment Owners Association, 67% said they would be willing to offer tenants a rent deferment if they needed it.

So if you know you can’t make your next rent payment, reach out to your landlord as soon as possible. Waiting until after you get an eviction notice may be too late, and your landlord may be less likely to work with you. Your landlord could also already be in the process of filing the eviction with the court, and have paid fees to do so, which may make him more likely to follow through.

“There are a number of things you can negotiate with your landlord,” Thrope says. Some options to consider include a rent repayment agreement, shortening the terms of your lease, or possibly getting out of your lease altogether.

Learn how COVID-19 moratoriums apply to you

Eviction laws vary drastically across the country at the state and even city level, and the COVID-19 pandemic has made it all even more complicated. Along with the CARES Act eviction moratorium, states and municipalities issued their own mandates to pause evictions. So make sure to read up on the eviction laws in your area specifically to better understand what your landlord is legally allowed and not allowed to do.

“Once you understand your legal rights, you’ll know your options,” Thrope says. “We have this patchwork of policy all across the country right now, so it’s important to know the local law and tenant protections.”

One resource for finding out the statutes of local eviction laws is the Eviction Lab at Princeton University, which created a nationwide database. The group has also developed a state-by-state COVID-19 Housing Policy Scorecard, tracking states’ responses to evictions and during the pandemic.

NHLP also has local and national online resources for renters and homeowners during the pandemic.

Make sure your landlord gives you adequate notice

Landlords usually have the legal right to evict tenants for not paying rent, violating a lease, causing damage to the property, or engaging in illegal activity at the home.

Most states require landlords to give an adequate notice of eviction with a deadline to pay rent or move out and the amount owed. If you don’t meet the deadline, the landlord can file a lawsuit to evict you.

But if landlords don’t provide adequate notice of eviction, Vaamonde says a judge will often throw out the case.

In Texas, for example, landlords must provide an official three-day notice to vacate the property with the reason for the eviction, and can file an eviction hearing with the court if the tenant doesn’t respond or move out.

Landlords are also prohibited from taking extreme actions during the eviction process, like changing the locks or cutting off utilities.

Attend your eviction hearing

After being closed because of the pandemic, eviction courts are beginning to reopen across the country, and are moving cases through quickly to clear up the backlog of evictions.

If your landlord files for an eviction in court, you will receive a notice to appear for the hearing. It’s important to show up, especially if you hope to fight the case. You have the right to examine and present evidence and bring witnesses, Thrope says.

“Showing up to the eviction hearing at the courthouse is the only way to receive some form of leniency,” Vaamonde says. “If the landlord wants you out of his property, the judge is the only one with the authority to defer your eviction.”

Since the pandemic has made showing up to court more difficult and dangerous, many proceedings are being held virtually, with tenants expected to appear by phone or videoconference. This may be easier for some tenants, but Thrope says in other cases, it can interfere with due process for some tenants who may not have access to the technology. It also makes it more difficult to look over evidence or converse with attorneys. Make sure you know when, where, and how you’re supposed to show up in court to make sure you do what you can to present your case.

“We hope that courts understand that this is a public health crisis, and that people sheltering in their homes is one of the remedies,” Thrope says. “To put people on the street right now is only going to exacerbate this crisis, so we hope courts will do the right thing.”

Consult an attorney

Fighting an eviction alone is overwhelming for many tenants since the process is so complex. Thrope urges tenants facing eviction to hire an attorney or contact local legal aid organizations.

“Reach out for legal assistance,” she says. “That’s really important because you need to understand what protections you can avail yourself locally.”

A lawyer can help explain whether you’re protected by the CARES Act or other local mandate, as well as how regular eviction laws apply in your situation and what exactly you need to do to fight an eviction.

A lawyer will also help you gather documentation to use as evidence, such as proof of past rent payments or that you lost your job, and any communication that you had with your landlord.

“Most tenants are not represented,” she says. “Some tenants may be savvy enough to [represent themselves], but it’s a legal process. We have the right to counsel, and it’s really critical here.”

The post How To Fight an Eviction During the Coronavirus Pandemic appeared first on Real Estate News & Insights | realtor.com®.

Source: realtor.com

Should You Schedule a Pest and Termite Inspection for the Home You’re Buying?

Whether you’re an aspiring first-time homebuyer and about to make your first offer or you have just purchased your second or third home, you’re probably excited to enjoy your new space. But wait, is that a little critter by the backdoor? Maybe it’s just an ant… nothing to worry about, right? Just to be sure there aren’t any other pests lurking about your new house, you might want to consider getting a pest and termite inspection. Here are five reasons you should schedule a termite and pest inspection before any unwanted visitors wreak havoc on your dream home.

house-pest-termite-inspection

Why should you get a pest and termite inspection?

As a new homeowner, it’s always a good idea to cover all your bases and have a pest and termite inspection performed. Homes in more humid climates – think homes in Miami, FL or houses in Houston, TX – are more susceptible to termite infestations due to the increased moisture in the surrounding environment. If you’ve seen any signs of a termite infestation, it might be a good idea to have a termite inspection. These signs can include buckling floorboards, creaky floors, or damaged wood.

For those still in the homebuying process, if you see signs of termite damage in the house, you should consider adding a termite contingency when making an offer on a home. A termite contingency may give you the option to back out of the sale if there’s been significant damage found. Otherwise, you can try to negotiate with the seller to pay for the repairs. 

What if you’re planning on just getting a regular home inspection? Your home inspector likely won’t look for specific types of pest or termite damage. However, if your home inspector does find damage, contacting a pest or termite inspector should be your next step. A pest or termite control specialist can help you determine what the best course of action is, likely scheduling an inspection to determine the extent of the damage.

Is a pest and termite inspection required before closing on a home?

If you’ve already purchased your home, then you didn’t miss out on any required inspections. For most homebuyers, termite and pest inspections are not required before closing on a home. However, certain types of loans such as FHA and VA loans may require you to pay for a pest inspection before your mortgage approval, so it’s best to check with your mortgage lender or real estate agent. Your real estate agent will also know if your particular state or county requires a pest inspection before purchasing a home.

patio-pest-inspection

5 benefits of having a termite or pest inspection

There are several benefits of having your home inspected for termites or pests.

1) Negotiating power. If the home you’re looking to buy ends up having damage from termites or pests, you’ll likely have better negotiating power. Your real estate agent can help you decide what negotiations to make. These negotiations may include asking the seller to reduce the price so you can pay for pest control services or asking the seller to pay for any repairs or fumigation services before you close on the home.

2) Peace of mind. These inspections will be able to tell you if there’s any structural damage from pests or termites. Your inspector will disclose any issues they find. Then you’ll have an idea of what kind of maintenance you might need as the home’s future owner. 

3) Save money. Moving into a new home can feel like the dream, but it’s always a good idea to know what you’re getting yourself into. Without a pest or termite inspection, you may be foregoing a critical type of home inspection that may end up costing you more money down the road if a problem is left untreated.

4) Prepare for future expenses. If your pest or termite inspector finds certain types of pests in the home you’ll have a better idea of what to look out for as a homeowner. That way, you will know if your new home or the area you’ve moved to is susceptible to specific pests. It will also help you to plan ahead for any costs associated with keeping these pests away.

5) Find a local pest control company. Say your home is more susceptible to termites because you’re buying a house in a more humid area, or that spiders or mice are more common in your county. The good news is you’ve found a local pest control company to help you schedule regular maintenance. You’ll know just who to call for help if any critters start appearing in your house.

What to expect during a pest inspection

The inspection will take roughly 30 minutes but can vary based on the size of the home and whether there’s a basement, crawl space, or any extra areas. The inspector will examine the interior and exterior of the home for any signs of damage, infestation, or specific areas that might be more susceptible to pests. They’ll check for any signs of moisture. Damaged wood or buckled paint indicate the presence of wood-destroying insects like termites. They are more likely to be found in these areas vulnerable areas.

The inspector will check for a variety of different bugs such as carpenter ants, fleas, mosquitos, and moths, among others. Where you are located may also play a role in the types of pests your inspector will look for. Some pests are more likely to be found in certain areas or are local to your region. If these types of local pests are found during the inspection, your pest inspector may recommend regular pest control to keep these critters at bay. 

The post Should You Schedule a Pest and Termite Inspection for the Home You’re Buying? appeared first on Redfin | Real Estate Tips for Home Buying, Selling & More.

Source: redfin.com

Remote-Work Boom During Covid-19 Pandemic Draws Real-Estate Startups

Park in San Francisco social distancingDavid Paul Morris/Bloomberg via Getty Images

A group of real-estate startups is aiming to cash in on the remote-work phenomenon.

With many corporate offices closed because of the pandemic, many young professionals have left cities like New York and San Francisco for warmer, cheaper places. A number still plan to return after their offices reopen, leaving them reluctant to buy homes or sign long-term apartment leases.

That situation is creating fresh demand for furnished housing on a short-term basis, a fast-growing niche that many property startups and their venture-capital backers are rushing to fill.

One of them is Landing, which runs a network of furnished apartments across the U.S. When it launched in 2019, the Birmingham, Ala., and San Francisco-based company initially planned to operate in about 30 cities last year. Instead, it expanded to 75, largely because demand grew much faster than expected, said Landing Chief Executive Bill Smith.

“Covid has taken a decade of change that I was thinking was going to happen between now and 2030 and kind of compressed it into a year,” he said.

Legions of remote workers also offer these firms a chance to make up for reduced tourist and corporate business. San Francisco-based Sonder, which rents out furnished apartments by the night, ramped up its marketing of extended stays during the pandemic, according to Chief Executive Francis Davidson. Stays of longer than 14 days now account for about 60% of the company’s business, up from less than a quarter before the pandemic, he said.

Kulveer Taggar, CEO of corporate-housing operator Zeus Living, said his firm experienced a steep drop in demand as companies hit the pause button on employee travel and relocations. But he was able to make up some ground by renting apartments to individuals. People working from home now account for about a quarter of the company’s business, Mr. Taggar said, up from virtually nothing before the pandemic.

Unlike Sonder and Zeus, remote workers were a key part of Landing’s business before the pandemic. Its customers pay an annual membership fee, which gives them the right to rent furnished apartments in any city. The minimum length of stay varies from 30 to 60 days, and the company asks for a month’s notice before a customer moves out.

The company is popular with college-educated young professionals who don’t want to be tied to a single location. Since the start of the pandemic, it has seen a growing number of customers leave New York and San Francisco and move to cities like St. Petersburg, Fla., and Denver, Mr. Smith said.

In November, Landing raised $45 million in venture funding from a group of investors led by Foundry Group and including Greycroft and Maveron, along with $55 million in debt. Mr. Smith said he hopes to expand to 25,000 apartments by the end of this year, up from around 10,000 today.

That growth carries risk if demand from remote workers were to disappear again after the pandemic is over. Still, Chris Moody, a partner at Foundry Group, said the number of furnished apartments available under flexible terms is still so small that he doesn’t worry about a lack of customers.

“Even at the end of 2021, we won’t really have scratched the surface,” he said.

The post Remote-Work Boom During Covid-19 Pandemic Draws Real-Estate Startups appeared first on Real Estate News & Insights | realtor.com®.

Source: realtor.com

The Commercial Space Post-COVID – With Cove CEO Adam Segal

A recent Q & A we had with Adam Segal, CEO + Founder of Washington D.C. based Cove offers a picture window into the future of business. What was intended to be a real estate technology informative, turned out to be a glimpse of what the post-COVID world of real estate may look like. Initially focused on creating a network of co-working spaces to foster efficiency and productivity in the digital age, Segal’s company’s ship may have just arrived in the form of a world cataclysm. 

Cove logo

The coronavirus pandemic is forcing a paradigm shift for every business and institution on Earth. The world is turned upsidedown, and the only sure thing people can cling to, for the moment, is uncertainty. The daily grind, the 9-5, in contrast to the homogenization of the digital and the physical world, is creating catastrophes and vast opportunities for the future. And Cove sits smack in the middle of what most experts think will be the transition of transitions not just in real estate, but for business in general. I exchanged emails with the Cove CEO this past week, since catching up with him via phone proved impossible. Here’s the brief interview, followed by some takeaway points. 

RealtyBiz: How do you see commercial property marketing shaping up in the post-COVID era?

Adam Segal: At Cove, we believe commercial real estate will still have a place in a post-COVID era. In fact, it will transform from a place for your dedicated desk into an absolute key business resource to define culture and engagement. Traditionally, there has been a strong emphasis on your everyday desk or office. Moving forward, companies will consider where and how people are most productive, thereby enabling employees greater flexibility to choose when and where they work. The office will morph into a place to come together as opposed to being the required 9-5, everyday solution. For employees, this is an incredibly exciting future — as soon as you are no longer tied to a single desk or office, you have the freedom to design your life without your employer’s office location and long commutes as the deciding factor. At Cove, we provide the technology and service to support that future world for companies, while empowering office building owners a partner to create modern experiences integral to the future of work.

RealtyBiz: Some experts see the negative pricing trend for commercial property continuing to spiral downward. What is your view on this trend, and how can owners/developers prepare?

Adam Segal: When there is an increase in demand, differentiation becomes the absolute key. For those assets that are able to capture the future of work and unlock a differentiated experience, there will not be a downward spiral — in fact, just the opposite.

RealtyBiz: How do you see your business at Cove changing to address this new landscape? 

Adam Segal: Cove implements a modern consumer approach to the future of work for companies and owners of office buildings. Our focus is on building an experience around the office by building robust tools to bring everything online — from scheduling and coordinating your team to reduce capacity, unlocking onsite services and delivery, real-time updates — really a gateway to a modern work experience. The post-pandemic office will look nothing like the office of yesterday. In the future, the office will no longer be a home for your desk. Instead, the office will be a resource to bring people together for meaningful engagement. As a result, every company will need more intentional and coordinated office days for collaboration. The future of work for any company will include a mix of working remotely, in office, on travel — but now a real focus on productivity as opposed to a default 9-5, Monday through Friday culture. 

The Takeaway

According to Crunchbase, Cove is funded by Early Light Ventures. My takeaway on their investment, given the current state of transformation in business, is that those investors are smiling great big about now. $8.4 million in total funding could well turn into 100 times that figure. Here’s why.

Whatever benefits the remote office had before COVID-19, those benefits have been multiplied by 10,000 now. Furthermore, whichever businesses chose to optimize their buildings using Cove services before the pandemic, those clients are the leading edge of what physical office space will be in the future. Think about the whole situation like this. Once corporations and smaller entities make the adjustments for distancing, access assurance, safety measures, and added efficiency, how many do you think will switch back to business as usual? I should not have to spell out Cove’s potential here. From custom virtual events to building access management, Cove had a finger on the pulse of office buildings to start with. The next generation of office space will be all about remote work and managing a new kind of physical space. Who better to help transform the work at home corporate synergy? So, Cove has one of those rare opportunities brought about by the cosmos.

The post The Commercial Space Post-COVID – With Cove CEO Adam Segal appeared first on RealtyBizNews: Real Estate News.

Source: realtybiznews.com

Orchard expands to Houston, East Coast

Orchard announced Tuesday its immediate availability to consumers in Houston, as well as future expansion into Charlotte, Raleigh-Durham, and the Washington, D.C. suburbs in the upcoming months.

Court Cunningham, chief executive officer and co-founder, said he’s excited for Orchard to help consumers in the new markets, where demand has outpaced inventory.

“We’ll make it easier for home buyers in these markets to secure their dream home as soon as they see it, while still selling their old home for top dollar,” he said.

Cunningham added that the Move First initiative, Orchard’s program allowing homeowners to buy their next home before selling their old one, proved popular during the COVID-19 pandemic because it let consumers avoid living in their old home while potential homebuyers toured it.

“Buying and selling homes the traditional way isn’t sufficient in today’s hyper-competitive market,” he said. “With demand at an all-time high, people need to make offers – ideally in cash – without contingencies.”

Houston, according to multiple listing service data, is selling homes above price at triple the rate of 2019, and Cunningham added that the number of homes going under contract within 30 days of listing has increased by 50%.

Orchard adds Houston to a service area that includes Austin, Dallas-Fort Worth, San Antonio, Denver, and Atlanta.

Originally called Perch, Orchard branched into the lending business in July. This followed the creation of a title and escrow unit, dubbed Orchard Title, in the fall of 2018. It also closed on a $69 million Series C round led by Revolution Growth in September.

In October, Orchard announced the launch of a digital platform that enables homeowners to manage the entire real estate transaction in one place.

The post Orchard expands to Houston, East Coast appeared first on HousingWire.

Source: housingwire.com

5 Tips Every Renter and Homeowner Should Know About Insurance

This week, I had to evacuate because of Hurricane Dorian. If you’ve ever experienced a natural disaster or had to evacuate your home, you know that insurance is a top concern. No matter where you live, there are common threats—such as California earthquakes, Oklahoma tornados, and Texas floods—that affect renters and homeowners.

Let's review five essential insurance tips that every renter and homeowner should know. You’ll learn the variety of protections you get from basic renters and home policies, mistakes to avoid when buying a policy, and ways to save money on premiums.

5 Tips Every Renter or Homeowner Should Know About Insurance

  1. Not every type of damage is covered
  2. Certain belongings have low coverage limits
  3. Know the difference between cash value and replacement cost
  4. There are special types of deductibles
  5. Don’t leave discounts on the table

Here’s more information about each insurance tip.

1. Not every kind of damage is covered

A basic homeowners policy pays for claims when a natural disaster—such as a fire, tornado, hail, or windstorm—damages your property. Personal belongings like your furniture, electronics, and clothing are generally covered up to specific limits for damage and theft.

Home insurance includes liability, which protects you from legal issues that could arise if someone is hurt on your property.

Homeowners coverage also pays "additional living expenses." That might include things like some amount of hotel and meal expenses if you can't stay in your home after a covered disaster.

If you’re a renter, you also need insurance, because your landlord is not required to cover you. Renters insurance gives the same protections as a homeowners policy. You get coverage for your personal belongings, liability, and additional living expenses. But it doesn’t cover damage to rental property because that’s your landlord’s responsibility.

Unfortunately, about half of renters don’t have renters insurance. Many mistakenly believe that their landlord would pay to repair or replace their damaged or stolen personal belongings. Or they mistakenly think a renters policy is too expensive. The good news is that a typical renters policy is quite affordable, costing just $185 per year on average across the U.S.

The good news is that a typical renters policy is quite affordable, costing just $185 per year on average across the US.

But what surprises many people is that a standard home or renters policy doesn't cover some natural disasters. These include earthquakes and flooding from groundwater.

If you live in an earthquake-prone area, you can typically add earthquake coverage to a home or renters policy. But flooding is a different category of insurance that must be purchased separately. Flooding is handled differently than other types of disasters because it’s the nation’s most common and expensive disaster. Floods can happen anywhere, and they don’t even have to be catastrophic to cause significant damage.

If your town or community participates in the National Flood Insurance Program, you can buy a policy for your rental or your home. And if you buy a home in a designated flood zone, mortgage lenders typically require you to have flood insurance.

Most flood policies have a 30-day waiting period, so you can’t wait until a storm is bearing down on you to sign up. You'd be too late.

Even though the federal government backs flood insurance, it’s brokered by regular insurance companies or agents. You can learn more at floodsmart.gov.

Most flood policies have a 30-day waiting period, so you can’t wait until a storm is bearing down on you to sign up.

Remember that water damage from rain, high winds, or a tree that fell on your roof are covered by a standard home or renters insurance policy. But damages to your home or personal belongings that occur due to rising groundwater are never covered, except when you have flood insurance.

Also note that if you have a home-based business with inventory, specialized equipment, or customers who enter your property, you typically need a commercial policy. Likewise, if you turn your home into a rental, Airbnb, or a vacation property, you generally need additional coverage or a landlord insurance policy.

2. Certain belongings have low coverage limits

Just like not every disaster is covered, not every type of personal belonging is fully covered under a home or renters policy. Some belongings, such as cash, aren’t coved at all. Many others have coverage caps.

For instance, jewelry, watches, furs, silverware, electronics, and firearms are typically limited to one or two thousand dollars of coverage. If you have jewelry that’s worth $10,000 and it’s lost or stolen, you’d come up very short with just $2,000 of coverage.

If you have items worth more than the coverage caps, you can add an insurance rider for more coverage. This addition is known as “scheduling” your personal property. It costs more, but it gives your most expensive items separate coverage so they could be replaced.

Another often-overlooked protection you get with renters and home insurance is that your belongings are covered outside of your home.

Another often-overlooked protection you get with renters and home insurance is that your belongings are covered outside of your home. If your vacation luggage gets stolen, you lose valuable jewelry, or your laptop gets stolen from your car, your homeowners or renters policy covers it.

So, pay close attention to the insurance limits for possessions inside and outside of your home and consider adding a rider or property schedule to beef up coverage when needed for valuable items.

3. Know the difference between actual cash value and replacement cost.

It can be a little confusing to know exactly how much money you’d receive from a renters or home insurance claim. So be sure you understand the different types of policies you can buy.

Actual cash value coverage pays to repair or replace your property or possessions up to the policy limits, minus a deduction for depreciation. The calculation can vary from insurer to insurer. But what you need to know is that a cash value policy only pays a percentage of what it would cost you to go out and buy a new item.

Cash value coverage is the least expensive option. However, it means that if you experience a severe disaster, you probably won't receive enough to rebuild your home or fully replace personal belongings.

Replacement cost coverage pays to repair or replace your property and possessions up to the policy limits, without a deduction for depreciation. That means you would receive enough money to rebuild a home with materials of similar quality. Or buy new items to replace your damaged belongings.

Yes, replacement coverage costs more than cash value. But it would allow you to replace what you lost.

There are also guaranteed or extended replacement cost policies which give you even more protection. They pay to replace your home as it was before a disaster, even if costs more than your policy limit.

Remember that a home insurance policy is based on the cost to rebuild your home and any outbuildings, not the amount you paid for the property or its appraised value.

Remember that a home insurance policy is based on the cost to rebuild your home and any outbuildings, not the amount you paid for the property or its appraised value. You never include the value of your land in your home insurance. Depending on the age, location, and style of your home, the insured value could be much higher or lower than its market value.

4. There are special types of deductibles.

A deductible is an amount you’re responsible for paying for an insured loss. The higher your deductible, the more you can save on premiums. So be sure to get quotes for different deductible amounts when shopping for renters and home insurance.

As I previously mentioned, disasters such as windstorms, hailstorms, and hurricanes, are typically covered by standard renters and home insurance. However, in some high-risk areas, you may have separate deductibles for damage caused by these disasters.

According to the Insurance Information Institute, nineteen states and the District of Columbia have hurricane deductibles: Alabama, Connecticut, Delaware, Florida, Georgia, Hawaii, Louisiana, Maine, Maryland, Massachusetts, Mississippi, New Jersey, New York, North Carolina, Pennsylvania, Rhode Island, South Carolina, Texas, Virginia and Washington D.C.

These special deductibles are additional and separate from the regular deductible for all other types of claims, such as fire or theft. A hurricane deductible applies only to damage from hurricanes, and windstorm or wind/hail deductibles would apply to any wind damage.

Hurricane and wind deductibles are typically given as a percentage that may vary from 1% to 5% of a home's insured value but can be even higher in some coastal areas. The amount you must pay depends on your insured value and the "trigger" event.

For instance, if you have a 3% hurricane deductible and your home is insured for $200,000, you’d be responsible for the first $6,000 ($200,000 x 3%) in repair costs. That’s much more expensive than paying a standard $500 or $1,000 home deductible.

In some states, the triggering event for hurricane deductibles to apply is when a Category 1 storm causes damage whether it made landfall or not. Other states allow Category 2 to be the threshold. In others, a hurricane deductible applies from the moment a hurricane watch or warning gets issued until 72 hours after it ends.

A hurricane deductible can only be applied once each hurricane season, from June to November.

5. Don’t leave discounts on the table.

When it comes to the price of renters and home insurance, there are some factors you can control and some you can’t. Here are some ways to save and typical discounts to ask for:

  • Bundling insurance is when you purchase different types of policies, such as renters or home and auto, from the same insurance company. Buying two or more policies can help reduce your total cost. Just make sure that the combined price from one insurer is less than buying policies separately from different insurers.
  • Shopping around may seem obvious, but many people don’t do it. Prices can vary considerably from insurer to insurer. Be sure to compare the same coverage and deductibles to get the best deal possible.
  • Installing safety features in your home or rental, such as smoke detectors, alarm systems, deadbolts, storm shutters, shatterproof windows, or roofing, may allow you to qualify for discounts. Even being a non-smoker or being retired reduces the risk for insurers, so be sure to let them know any factors that could work in your favor.
  • Raising your deductible is an easy way to cut the cost of premiums. Just make sure that you could afford to pay it in the event of a claim. Also, the savings vary depending on where you live and your insurer, so get quotes with multiple scenarios.
  • Maintaining good credit is vital for many aspects of your financial life, including the rates you pay for home, renters, and auto insurance. Depending on where you live, having poor credit can cause you to pay double the premium compared to having excellent credit! The only states that currently prohibit home insurers from using credit when setting rates are California, Maryland, and Massachusetts
  • Being a loyal customer can pay off with a discount. However, don’t let that keep you from periodically shopping around to make sure you’re still getting a good deal.

No one enjoys paying for home or renters policy, but when disaster strikes, you’re the victim of theft, or you get involved in a lawsuit, having insurance can be a financial lifesaver.

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Source: quickanddirtytips.com

How To Avoid Being House Poor

How Much Home Can I AffordEarlier this year, I published the post Is Being House Poor Limiting You? While no one ever thinks they will fall into being house poor, it does happen to some. Due to this, when asking yourself the question “how much home can I afford,” it’s best to think about ALL of the expenses that go into homeownership.

There are many “hidden” costs that go into homeownership that many do not think about when buying a home. While some homes may seem affordable, there are many factors and expenses to think about.

According to recent data from Zillow:

  • U.S. homeowners on average spend more than $9,000 per year in hidden homeownership costs and maintenance expenses
  • U.S. homeowners pay an average of $6,042 per year in unavoidable hidden costs: homeowners insurance, property taxes and utilities
  • U.S. homeowners pay an average of $3,435 per year in annual optional costs including house cleaning, yard care, gutter cleaning, carpet cleaning, and pressure washing.

That’s a lot of extra money each year that many homeowners do not realize that they may need to pay for.

By not knowing about these costs, a person may become stressed due to the amount of debt they may rack up from being house poor. It may also delay retirement, lead to a house being empty (there might be no money left to decorate), and more.

There are things you can do though so that you can make sure you don’t fall into a house poor situation, though. When pondering the question “How much home can I afford,” think about the many tips below.

 

Add up all of the costs.

Buying a home can easily lead to being house poor if you don’t do enough research. This can limit you because you may be even more house poor than you originally thought.

When some families buy a home, they don’t think about the total cost of homeownership. While you may be able to afford the monthly mortgage payment, you may not be able to afford everything else if you don’t do your research.

Before you say “yes” to a home, I recommend you add up all of the extra costs that you may have to pay for if you decide to buy a specific home.

Other homeownership costs include:

  • Gas. Many homes run on gas in order to have hot water, to use the stove, and so on.
  • Electricity. Generally, the bigger your home then the higher your electricity bill will be.
  • Sewer.  This isn’t super expensive, but it is generally around $30 a month from what I’ve seen.
  • Trash.  This isn’t super expensive either but it does cost money.
  • Water (and possibly irrigation).  Water bills can vary widely. I know many who live in areas where the average water bill is a few hundred each month.
  • Property taxes. Property taxes can vary widely from town to town. You may find yourself looking at two similar houses with similar price tags, but the property taxes may vary by thousands of dollars annually. That is a LOT of money. While it may seem small when compared to the actual home purchase price, remember that you have to pay property taxes annually and a difference of just $3,600 a year is $300 a month for life.
  • Home insurance. Home insurance can be cheap in some areas but crazy expensive in others. Don’t forget to look into the cost of earthquake, flood, and hurricane insurance as well as that can add up quickly depending on where you live.
  • Maintenance and repairs. Even if your home is brand new, you may have to pay for repairs, which is something that many don’t realize. No matter how old your home is, repair and maintenance costs will eventually come into play.
  • Homeowners association fees. This can also vary widely. You should always see if the house you are interested in is in an HOA because the fees can be high and there may be rules you don’t like as well.
  • Home furnishings. Furnishing your home can be done cheaply, but I know some who buy huge homes but can’t afford to put anything in them, such as a table, a bed, and so on. Why own a $500,000 house if you don’t have any furniture?

Related: Home Buying Tips You Need To Know Before You Buy

 

Buy for less than what you are approved for.

Many potential homeowners are approved for home loans that are somewhere around 30% to 35% of their salary before taxes.

That’s a lot of money. This amount is before taxes as well, which means that your actual monthly home payment would be a significant portion of your take-home income each month. Many who buy at the full approval amount cannot afford their homes due to the fact that it is such a significant percentage of what they earn.

If you don’t want to be house poor, then you should make sure to buy a home that is less than what you are approved for. You should also add up all of the costs of owning a home and make sure it is an amount that you are comfortable with.

Related posts:

  • Renting Out A Room In Your Home For Extra Money
  • How To Live On One Income
  • Ways To Make An Extra $1,000 A Month

 

Have an emergency fund.

An emergency fund isn’t just to protect you from your job. They also exist to help you in case something goes wrong with your home.

Your roof could spring a leak, a tree may fall on your home, a pipe may burst, there may be an electrical problem and more. Homes have many things that go into them and you never know if something may need to be fixed.

By having an emergency fund, you will have a fund that will help you if something were to go wrong. It will be you be more prepared so that you don’t have to take on any debt in order to help pay for an expense.

What would you say to someone who asks “How much home can I afford?” Do you know anyone who is house poor?

 

The post How To Avoid Being House Poor appeared first on Making Sense Of Cents.

Source: makingsenseofcents.com