Ever Wonder How Your Auto & Home Insurance Is Priced? Get A C.L.U.E.

September 12, 2017

Did you know that any insurance claims you have filed in the past 7 years for collision or comprehensive damage to your car or theft, fire, or storm damage to your home are factored in to any insurance quote you receive?

I learned this interesting fact a few years back when I noticed a clause on my homeowner’s insurance renewal that warned me that my insurance company could cancel or refuse to renew my policy if I had 3 or more weather-related claims within the past 3 years. Considering that I’m still waiting to find out if my condo in Florida sustained any damage from Hurricane Irma, this is important information and definitely had me thinking twice and doing more research.

Getting a C.L.U.E.

What I’ve learned is that insurance claims are actually reported to C.L.U.E. (the Comprehensive Loss Underwriting Exchange.) Kind of like your credit information is reported to the reporting bureaus, there’s also an insurance “reporting” bureau for insurance companies to consult when pricing your coverage. Too many claims on your C.L.U.E. report could even lead to being dropped by your insurance company.

Not just your claims

Even more interesting, it’s important to know that it’s not just claims that you’ve filed but also any claims that any previous owners of your home may have filed in the past 7 years. So you could file your first claim and unknowingly hit the 3-claim limit and lose coverage. That’s also important to know if you’ve owned your home for less than 7 years.

Getting my own C.L.U.E.

This got me curious about what might be showing on my report so I went to the website of LexisNexis Risk Solutions, which maintains the C.L.U.E. files. In compliance with the FACT Act, you can receive a free annual report of your C.L.U.E. file on your auto and property records. I had no claims showing on my property report but I did have 2 claims showing on my auto records and 4 “possible related claims” also were included.

This finally explained why my stepson had been excluded by my auto insurer from EVER driving one of my vehicles. The 4 possible related claims showing up on my report were actually collision claims that he had on his own auto policy over the past 7 years. But since we lived at the same address when he first got his licence, these claims also show up on my personal file as possibly linked. My insurance company flagged those related claims and issued an exclusion rider on my stepson a few years ago.

Checking your C.L.U.E.

Why should you care what’s in your C.L.U.E. file? Any inaccuracy on your report could be causing you to pay additional premiums or even keeping you from getting insurance coverage at all. By reviewing your report on an annual basis, you can dispute any errors before they negatively impact you.

An extra step in buying a home

You also want to order a C.L.U.E. report if you are buying a home that will be new to you but was previously occupied by another homeowner. In that case, you’ll need to ask the seller to order the property report for you to view, as it’s only available to current homeowners.

If you are uncomfortable filling out the online request form, you can also call LexisNexis at 1-866-312-8076 to request your C.L.U.E. report. Either way, be sure to get a clue.

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Are You Prepared for the Next Natural Disaster?

April 11, 2017

I seem to have a thing for natural disasters. I know that sounds strange, but I do. I cannot hear about a local natural disaster without immediately getting on the Internet to figure where I need to go to help. I think of how helpless I would feel if everything I had was gone, and I feel compelled to do something – even if it is to pick up debris or pass out sandwiches.

Doing this for a number of years has created what many would consider to be an unusual obsession with preparing for disasters. A lot of this comes from the lessons I learned being onsite to personal disasters and talking to people who have been through a natural disaster. Below are some of the lessons I learned:

ATM’s are in slim supply after a natural disaster. Keep cash on hand to cover necessities. I remember traveling two hours to a tornado site and helping with the cleanup all day. As I got in my car to go home, I saw that my gas was nearly on empty. It took me almost an hour to find a gas station since most were destroyed in the tornado.

The only one that was working could only accept cash. If I had no cash, I would had been stuck. Most people do not think about it, but most natural disasters take out power, which would also take out the ability to use an ATM and a store owner’s ability to accept plastic. Keep a certain amount of cash on hand to cover necessities in a disaster like gas and food.

Make sure your documents are in a place that can survive a disaster and give you easy access to the documents if you need to leave in a hurry unexpectedly.  One of the biggest frustrations the survivors of the natural disasters I talk to experienced was not being able to get all of the available natural disaster aid immediately because they had no documentation to prove who they were or to file an insurance claim.  What I learned from their stories was to make sure I have all of my important documents in one place that can survive a disaster, like a fire-proof safe. You can use checklists like the one on the FEMA website to gather your documents. You can take this one step further by storing your documents electronically as a backup plan in case you could not get to them otherwise.

Do not assume you are covered by your insurance. Review your insurance policies and call your insurance carrier and ask about coverage. Nothing broke my heart more than the anguish of people who realized that few or none of their possessions would be covered by their insurance carrier. Please do not assume that everything you own will be covered. Thirteen years of talking to natural disaster survivors have taught me that this is not the case.

Make it a practice to review your insurance policy annually. Consider using websites like AlertSystemsGroups.com to learn the disasters your area is the most at risk to experience. Contact your insurance carrier and ask if you are covered for these disasters.

Ideally, you want to be covered for cost to replace your possessions at today’s cost without factoring in depreciation. Also, do not assume your insurance company will take your word on everything you have in your home. Consider taking pictures of your possessions and scanning receipts of high dollar purchase to prove what you own.

Find out how you are covered if you can no longer live in your home. This may sound obvious, but one of the biggest needs for many survivors was having a place to stay if they could not live in their homes.  FEMA does offer rental assistance, but this can take time when patience is in short supply. Contact your homeowner’s policy about additional living expenses coverage. This coverage could cover hotel, rental, and even restaurant meals and storage fees.

Don’t wait until it’s too late. Take action now. FEMA has a comprehensive guide to prepare you financially for a disaster, but don’t step there. Make it an annual practice to review your homeowner’s insurance policies to make sure that if the unexpected hits, you can return to your normal life as soon as possible.

How To Save Money on Your Homeowners Insurance

March 08, 2017

When my husband and I shopped for homeowners insurance back when we bought our condo a couple of years ago, I knew from my CFP® training that all homeowners policies are required to cover the basics. I also knew that if we wanted coverage of things like flooding from a backed up toilet or frozen pipes, we’d need to ask for those. But beyond that, we wanted to make sure we were adequately covered without over-paying.

Now as our premiums go up about 6% per year, purportedly to account for the increase in what it would cost for the insurance to cover a loss (if only wages kept up with this supposed increase in costs!), we are shopping around to make sure we’re still getting the best value for our money. If it’s been several years since you’ve shopped your homeowners insurance policy around, it could be a great place to find some extra money in your budget. Here are some tips from my colleague Teig Stanley on how to go about doing that:

First, you’ll need your “DEC page,” which is short for “declarations” page. Then, take the following 5 steps:

1. Use a broker to shop for coverage. There is no need for you to go through all the time/effort yourself. Ask the broker to provide three quotes compared side by side so you can compare apples-to-apples.

2. Make sure the quotes have the same criteria:

Deductible – This should include the separate deductible for wind/hail/water or other events that are geographically specific.

Home Value – If it’s been several years, this probably needs to be adjusted since your home has probably increased in value. Most insurance companies’ software will assign a value automatically based on actuarial data specific to the address.

Cost – Is the payment quoted monthly, annual, quarterly, etc?

Replacement Cost Coverage – Some policies replace up to 100% of the benefit for which they’re written. Others replace 125% – 150% if the home is a “total” loss.

3. See if you can apply any special discounts – military, occupation, no recent claims, alarm systems, etc.

4. Contact insurance companies that don’t broker out (like USAA) if you qualify so you can obtain a quote to compare.

5. Give the broker a copy of your current DEC page and cost (don’t worry, they can’t do anything manipulative with the premium) as well as permission to pull your credit so they can get accurate quotes. It’s a “soft” credit hit, so it won’t have a negative effect on your credit score.

Finally, you can find some additional insight and tips in this post from another colleague, Greg Ward. He shopped around himself and found a much better deal. Of course, I would be remiss if I didn’t point out that any cost savings you realize from this process should be used to either increase high-interest debt payments or bump up your savings rate toward your emergency fund, retirement or other goals.

 

Kelley Long is a resident financial planner with Financial Finesse, the leading provider of unbiased workplace financial wellness programs in the US. For more posts by Kelley or to sign up to have her weekly post delivered to your inbox each Wednesday, please visit the main blog page and sign up today.

What to Expect When Closing on a Home

November 28, 2016

You’ve found your perfect home, you’ve qualified for a mortgage to buy it and it’s passed inspection by a qualified home inspector. Now it’s time to sign on the dotted line. A closing is the last step in buying and financing real estate.

If you are buying a home for the first time, you’ll be in for a surprise. There’s a lot more to do in order to cross the finish line. Here’s how to make sense of the process:

Your lender will ask for a lot of documentation

Your mortgage lender has given you approval for your loan, conditional on you documenting your income and assets. Be prepared to submit:

  • Tax returns
  • Account statements
  • Pay stubs
  • Documentation of the sources of recent, large bank deposits

Your lender is likely to have a “trust but verify” attitude towards your documents. They want to see everything. Make sure you include every page, including the mysterious “this page left intentionally blank” one that you think doesn’t matter. Lenders typically run an additional credit check on borrowers right before closing date, so make sure you don’t do anything which could jeopardize your loan, such as opening a new credit card, taking a car loan or switching jobs.

You’ll need homeowner’s insurance

You will need to give proof of your new homeowner’s insurance policy to your lender, so start shopping around. Ask your real estate agent for suggestions on insurance carriers if you are new to the process. Make sure to get at least three written quotes before you decide on a policy. For more tips on shopping for a homeowner’s policy, see this blog post. FYI, if you live in a flood or earthquake zone, those aren’t included in a traditional policy, so decide if you need flood insurance or earthquake insurance.

You can’t bring cash to a closing

The cash you need to close can’t actually be paid in large bills.  Make sure you receive and understand the written instructions on whether to bring a cashier’s check or plan for a wire transfer of funds on the closing day.

Review your loan estimate

It’s up to you to understand the terms of the loan agreement you’ll be signing. Your lender will send you a loan estimate. Review this very carefully and make sure that the written terms of the loan match what you’ve discussed. You can use this guide from the CFPB as a framework. Be proactive about asking your lender questions if there are differences in what you have discussed and the loan estimate terms.

You can shop around for closing service providers

Closing costs can be expensive, especially costs relating to title. Not all of them are fixed, however. You can shop around for services in section c of your loan estimate (“Services You Can Shop For”):

  • Title costs, including insurance, title search and settlement agent
  • Pest inspections
  • Survey

Receive a closing disclosure and other key documents

Your lender is required to give you a closing disclosure statement three business days prior to your closing. Use this checklist as a guide to double check that all the details on the closing disclosure are correct. If you find that something isn’t correct, contact your lender immediately and ask for an explanation.  Ask for your other closing documents in advance in order to review them:

  • Mortgage (also called security instrument)
  • Promissory note
  • Initial escrow disclosure
  • Right to cancel form

You may want to consider hiring a real estate attorney to review your documents before closing.

Take a final walk through

The last step before you start signing paperwork is to take a walk through the home with your real estate agent to make sure the home is still in the same condition it was when you made your initial offer. Make sure that everything that the seller agreed to repair is repaired and that items they agreed to leave in the home (such as a washer/dryer, air conditioners or curtains) are still there. If there are big problems, this could potentially push back the closing or even void the deal. See this article for more walk through tips.

Don’t sign anything you don’t understand

Read everything you’ll be signing and ask questions about things that don’t seem clear or seem different from what you expected. This is the step that many homeowners skip and later regret. Remember, it’s up to you to understand the legal documents you are signing. Use the CFPB’s closing checklist for things to review before, during and after your closing. Don’t sign anything until you are comfortable that it’s correct!

 

Do you have a question you’d like answered on the blog? Please email me at [email protected]. You can follow me on the blog by signing up here, and on Twitter @cynthiameyer_FF.

 

Do You Know the Real Costs of Home Ownership?

August 15, 2016

How much does owning a home really cost? It’s more than you think it will. Owning a home requires more financial resources than just paying the mortgage. You must be prepared to make an ongoing investment in the care of your home. If you are thinking of buying a home or just want to plan better for the costs of keeping up your property, take this quiz to test your home ownership savvy:

1. What kind of damage does a standard homeowner’s insurance policy cover?

a) sewer back up

b) flood

c) termites

d) none of the above

Answer: d  Homeowner’s insurance is designed to cover events that are sudden and accidental, not things that could be prevented with routine maintenance, such as pest control or inspecting a sewer line for tree roots. In addition, standard homeowner’s insurance policies do not cover floods, but flood insurance may be purchased from the National Flood Insurance Program. Many homeowners find this out the hard way after a problem has already occurred.

Review your homeowner’s insurance once a year to make sure you’re covered for your risks. For an additional premium of $50-$400, you may be able to add coverage for certain perils to your standard policy. If you are considering buying in a flood region, keep in mind while flood insurance averages $700 per year, premiums can be exponentially higher if you live in a very high risk area.  Make sure you keep additional cash reserves in the amount of your homeowner’s insurance deductible as part of your emergency fund.

2. The average annual cost of a home repairs and maintenance is:

a) one half of 1 percent of the home’s value

b) 1 to 4 percent of the home’s value

c) $2500

d) $1250

Answer: b  What will you do when the furnace breaks, the roof leaks or you need to replace a washing machine? Don’t forget to look at maintenance costs before leaping into home ownership. For a $250,000 property, that means budgeting $2,500 to $10,000 for home repair and maintenance costs every year.

While it’s difficult to predict what is going to need repair or replacing during the year, count on the fact that something is going to require work. Have a brand new home with new appliances? You can probably get by for the first decade by reserving 1 percent of your home’s value in liquid savings to meet repair/maintenance expenses. Got a 150 year old house? You may find that maintenance and repair costs closer to 4 percent of the home’s value per year.

3. How much more will a mortgage cost if you have fair to good, but not excellent, credit?

a) .25 to 1.5 percent more than the rate of borrowers with high credit scores

b) .25 percent less than the rate for borrowers with high credit scores

c) the same as the rate for borrowers with high credit scores

d) people with fair credit scores will find it very hard to get a mortgage

Answer: a  The average FICO score for U.S. borrowers is good but not excellent, at 695. At current rates, a borrower with that score would pay about  four tenths of a percent more than a borrower in the highest tier of credit scores. According to this calculator for a $200,000 fixed rate 30 year term mortgage, the borrower with the average FICO score would pay $15,768 more in interest over the life of the loan given current rates – about  $44 more per month. Try this mortgage loan comparison tool to compare mortgages.

4. Maintaining the land and gardens surrounding my home is likely to require regular:

a) tree trimming and removal

b) lawn care, such as buying a lawnmower and garden tools or paying a landscaping service

c) investments in plants, bushes and other garden features

d) all of the above

Answer: d  If you have outdoor space, maintaining the lawn and garden is an important component of your home’s value. Doing all the work on the lawn and garden yourself is cost effective, but it will still cost money for equipment, plants and outdoor furniture, so make sure to include that in your annual budget. If you plan to hire help, expect to pay $40-$120 per visit for landscaping and lawn care, depending on where you live and the size of your property. Tree care is not something people can usually do on their own, so if you have large trees, make sure to budget for a tree service. The cost of trimming or removing just one large tree could be as much as $500 to $1000 because of the hazards involved.

5. When buying a home, homeowners generally spend how much on furnishing their new space:

a) $15,147

b) $3,895

c) $5,288

d) $9,733

Answer:  c   According to a National Association of Home Builders study, new home buyers spent $5,288 on furniture in the first year after buying a home built in 2004 or later. Many homebuyers fail to budget for what it will take to turn their house into a home that meets their personal aesthetic. It is unrealistic to think you won’t want to make changes. Expect that you will want to personalize your new space with paint, furniture and accessories and include those costs in your home buying budget.

Do you have questions or comments about the costs of home ownership? Email me at [email protected]. You can also follow me on Twitter @cynthiameyer_FF.

 

 

3 Lessons I Learned About Insuring A College Bound Kid

May 03, 2016

I was talking to a group of friends whose kids were going off to college. Since I am a late-in-life parent, I was curious to see how they are handling being empty nesters. I expected some tears and sad stories about their kids leaving the nest. Instead, my friends were high-fiving each other that they survived the teen years and deciding what do with their kids’ rooms. They were even talking about going out and celebrating!

Of course, as the financial professional in the group, I had to burst everyone’s bubble. I asked the group if they had talked to their insurance providers about their kids going to college. I  brought this up because of all the lessons my family learned when my nephew went to college.

Lesson #1: Times have changed. When I was in college, my car, TV and computer were worth about $1,000. Today, a kid is going to college with thousands of dollars of electronics between their smartphones, iPads, X boxes and laptops. When my nephew’s dorm room was burglarized, my brother and his wife learned that their homeowner’s policy extended to my nephew’s dorm room but unfortunately, the extension did not cover the amount that was stolen. Contact your insurance company to make sure you have adequate insurance and consider adding additional coverage.

Lesson #2: Moving off campus is a game changer. The second lesson we learned is that when my nephew moved off campus, my brother’s homeowner’s policy did not provide my nephew with any coverage and in our case, a renter’s insurance policy may be needed. Contact your insurance carrier to see if your child will still be covered under your policy if your child lives off-campus. If not, consider renter’s insurance.

Lesson #3: Always update your auto policy carrier about any changes. If your child is leaving his or her car at home, ask about a discount since they will be driving it significantly less. This could have saved my brother and his wife hundreds of dollars in unnecessary car insurance.

Sometimes you may need to pay more though. After my nephew took his car with him to college, he was involved in a fender bender. When my brother contacted the insurance company, they refused to pay because my nephew was using the car for work to deliver pizzas part-time and we learned that he needed additional coverage.

So what’s the bottom line? Whenever you have a major life event, like a child going to college in this case, contact your insurance carrier to make sure that you have the best insurance for your needs. You don’t want to learn any of these lessons the hard way.

 

Protecting Your Dream

June 30, 2015

Years ago, I had a wonderful friend who grew up like me as an “apartment kid” in New York City. This fueled her desire as an adult to own her own home. With a lot of work and relocating to an area where the home prices aren’t ridiculous, she was able to live out her dream of home ownership. Like many of us, she got the homeowner’s policy she was given and never questioned the policy or asked questions. Continue reading “Protecting Your Dream”

Get a C.L.U.E.

September 02, 2014

Want a clue on how your auto and homeowners insurance is determined? Any prior claims you have filed in the past 7 years for collision or comprehensive damage on your car or theft, fire, or storm damage to your home are reported to C.L.U.E. – which is the Comprehensive Loss Underwriting Exchange. Too many claims on your C.L.U.E. report could even lead to being dropped by your insurance company. Continue reading “Get a C.L.U.E.”

You Got Insurance, Don’t You?

February 27, 2014

I was recently watching the 1980s cult classic Roadhouse (listed as one of “The 100 Most Enjoyably Bad Movies Ever Made”) on TV with a couple of friends and there was a scene in which the typical rich evil businessman antagonist sets one of the character’s properties on fire. One of my friends joked that it wasn’t such a big deal since it should be covered by insurance. Later in the movie, one of the characters actually said “you got insurance, don’t you?” after another similar incident. Continue reading “You Got Insurance, Don’t You?”

My Homeowners Insurance Has a New Place to Live

November 06, 2013

This November, my homeowners insurance policy came up for renewal.  I’ve had my current policy ever since I purchased the home six years ago.  In North Carolina, if the cost of your homeowners insurance is more than what the insurance commissioner deems a reasonable rate, the insurance company must send a “consent to rate” form, whereby the homeowner consents to pay a premium higher than the threshold set by the state commissioner.  For the last several years, I’ve signed the consent without much thought, but this year I decided to shop around to see if I could get better rates somewhere else. Continue reading “My Homeowners Insurance Has a New Place to Live”

Could Your Employees be Facing a Hazard From Mother Nature?

July 10, 2012

Last week’s east coast storms came as a shocking surprise to many of us living near the Chesapeake Bay.  High winds toppled trees like dominoes, lightning zapped out the power, and a tidal surge flooded the marinas.  Mother Nature was not in a good mood last week, and your employees may have been on the receiving end of her wrath.  Whether it was a tree hitting Bob’s roof, lightning causing an electrical surge that fried Kenny’s electronics, or churning water causing damage to Sue’s cabin cruiser, you might not even be aware of the extent of the damages that your workforce may be facing and the financial hardship these repairs could cause. Continue reading “Could Your Employees be Facing a Hazard From Mother Nature?”