What If Your Car Gets Totaled?

Each year, auto insurance companies declare millions of vehicles to be “totaled,” meaning it’s not worth the cost to repair them. It doesn’t matter whether the car was damaged in a collision, during a flood or after a thief’s joyride went bad.

It’s hard to argue with such an assessment if your car was wrapped around a telephone pole or the gas tank exploded. But what if the damage was more cosmetic, such as major dents on the roof and hood from a hailstorm?

A vehicle is considered a total loss if the insurance company determines that the total cost to repair your car to pre-accident condition, plus fees for storage, salvage and a replacement rental car (if included in your policy), is more than a certain percentage of car’s retail value. Insurers set their own allowable percentage, within state-mandated guidelines (typically around 60 to 75 percent), and use their own formulas to determine a car’s value and estimated repair costs.

Thus, if your $4,500-valued 2002 Honda Civic sustains $1,800 worth of damage – moderate bodywork and repainting these days – it might be deemed totaled, even though the engine still runs fine. On the other hand, a late-model Mercedes could sustain far greater damage and still be considered salvageable.

What’s worse, if the accident was your fault, or you must otherwise tap your own insurance (e.g., it was caused by an uninsured driver), you would only receive that $4,500 minus your deductible. Good luck finding a comparable car for that amount.

Other big losers when a car is totaled are people still paying off their auto loan. Since the lender technically owns the car, they’ll get first crack at any insurance payment; and you’ll still be responsible for paying off the loan balance.

As a preventative measure, you may want to purchase gap insurance if you owe more than the car’s retail value – or if you rolled past debt into the new car loan. It will pay the outstanding loan balance if your car is totaled or stolen. Most insurers will let you add gap insurance at any time.

Here are a few additional points you should know about when and why a car is declared totaled, and precautions you can take ahead of time to lessen the impact:

-Make sure the insurance appraisal includes the value of all extra features and aftermarket accessories, like heated seats, custom wheels or an upgraded audio system.

-Be prepared to show documentation of any major repairs or upgrades you made that might boost the car’s value – say you recently replaced the engine or bought new tires.

-Do your own research. Use independent pricing sites like Kelly Blue Book or Edmunds to determine your car’s worth, factoring in its mileage, added features and overall condition before the accident.

-If your estimate is far off from the proposed settlement, ask whether your policy includes the right to hire your own appraiser for a second opinion. Most states have a procedure for settling such disputes. Understand, however, that no matter the arbitration outcome, you’ll still have to pay your appraiser, and likely, a portion of arbitration costs.

-Make sure the insurer’s totaled car value includes estimated sales tax to replace the car, as well as registration and title costs, since you wouldn’t have incurred these costs if you didn’t need to replace the car.

Let’s hope your car is never totaled, but it pays to know in advance what to do if it is.

By Jason Alderman

Prepare Your Budget for Closing Costs When Buying a Home

Imagine the frustration that would follow if you spent hours planning and narrowing in on a dream home only to find out that you can’t afford it when push comes to shove. Starting with a price range can help you make the most of your search, but you’ll need to account for closing costs to create a realistic budget.

A catch-all for the fees and services that result from the sale of a home, closing costs are generally about 2 to 5 percent of the home’s value when you’re making a purchase. In other words, you could pay about $4,000 to $10,000 on a $200,000 home.

Estimating your closing costs. Your closing costs and fees vary depending on where you’re buying, how much you put down, who helps you with the home-buying process, the type of home you’re buying and the type of loan you’re taking out.

You can estimate the closing costs of homes you’re interested in by using one of the many closing cost calculators online. Also, ask your real estate agent to help you estimate the closing costs of homes in different neighborhoods.

A few of the fees you could encounter when closing on a home. While costs can vary and state laws dictate differences in the closing process, here are a few typical services or fees:

Inspections. You likely want to hire an inspector to make sure the home doesn’t need any major repairs and there aren’t any wood-eating pest (such as termite) infestations. Many lenders require you get these inspections, but even when they don’t it’s usually a good idea.

Attorney fees. You could have to pay attorneys to help prepare and review documents for the closing.
Survey. Some states require you to hire a surveyor to verify the size of the lot.

Homeowners insurance. You may need to pay several months’ worth of homeowners insurance premiums up front.

Origination fee. Mortgage lenders, banks or brokers often charge about 1 percent of your loan’s value.

Property taxes. Several months’ worth of property tax payments could be due at the closing.

You might see some mortgage lenders advertising “no-closing-cost” mortgages or refinancing. While these offers can be enticing, you’ll generally pay a higher interest rate on the loan or the closing costs will be wrapped into the mortgage. It might be a good option if you’re planning on moving within the next few years. Otherwise, you’ll likely wind up paying more in interest over the lifetime of the loan than you would have on the closing costs.

Try to do your own calculations to determine if a no-cost closing makes sense based on your estimated closing costs, increase in monthly payments and how long you plan on staying in the home.

You’ll know approximately how much you have to pay before the closing. Mortgage lenders have three business days from when you submit a loan application to give you a loan estimate. The standardized document shows your estimated interest rate, monthly payments, taxes, insurance and closing costs.

The Consumer Financial Protection Bureau has an interactive example of a standard loan estimate form with explanations and definitions of terms. On the second page, there’ll be a list of closing costs, including a breakdown of which services you may be able to negotiate.

You shop mortgage lenders, compare the loan estimate you receive and then continue the process with the lender that gives you the best estimated terms.

Three business days before your scheduled closing, the lender you choose must give you a five-page closing disclosure form with the finalized terms.

Carefully look over the closing disclosure and ask your real estate agent, loan officer or attorney questions. If you don’t agree with the new terms of the deal, it’s not too late to back out. If you’re happy with the terms and the closing goes smoothly you’ll be a homeowner soon.

Bottom line: Estimating your closing costs, and budgeting accordingly, can help ensure you’re looking for homes within your price range. That’s important because you want to be able to move quickly when you find a home you love. However, don’t move so fast that you miss out on savings opportunities. Shopping mortgage lenders and service providers could help you minimize your closing costs.

By Nathaniel Sillin

Scammers Pull Heartstrings to Get to Our Money

There are a lot of scams being perpetrated by those who wish to make a quick buck. Some are very complex, but others are surprisingly simple to pull off and therefore, they persist. Following are three of the most common types of scams that take advantage of human compassion.

Advance Fee Lottery

In this one, the victim is promised a prize, a service, or money with interest if he or she pays a “fee.” The most well-known of this type is the Nigerian Prince or “419” scam. The story goes that a Nigerian prince is in trouble due to unrest in his country. He needs the victim’s help to move large amounts of money into a U.S. bank account so that it doesn’t get into the wrong hands. All it requires is that money be deposited into a bank account in Nigeria in the victim’s name first. Then the transfer of funds won’t be detected by the “bad guys.” Once the money is in the Nigerian account, it is promised that a large sum will be transferred to the victim’s U.S. bank account later as a thank you.

Another version of this is that the victim has somehow won a lot of money in a foreign lottery. All he has to do is send a “fee” and identifying documentation and the money will be sent. Of course, this does not ever happen, but that fee will never be seen again.

Remote Impersonation

In these types of scams, someone claims to be a friend of someone who is in trouble and requests monetary assistance on behalf of the person in trouble. Often it is supposed to be for an injured relative or friend. Sometimes, the fraudster claims help is needed to bring a friend or loved one home from overseas after he or she has been robbed.

Another popular version, referred to as a romance scam happens on online dating sites. The scammer will pose as a potential love-interest, gain the trust of the victim, and ask for money. Many times the poser pretends to be in the military, stationed overseas, and needs money to buy things like pre-paid phone cards to call home.

Disaster Relief/Charity/Dying or Sick Baby

Americans are an empathetic lot and scammers know it. That’s why scams persist that piggyback on natural disasters such as the Nepal Earthquake in 2015 or Hurricane Matthew that hit the east coast of the U.S. late in 2016. Often these become so successful because they spread very quickly on social media such as Facebook and Twitter.

The Dying or Sick Baby version is when someone pretends they have a very sick or dying child who needs medical care. The compassion for a sick child sets in and people donate to help pay the bills. There is also a “sick parent” version of this where someone requests financial help for a bus or train ticket to visit sick parents.

For all of these types of scams, there are some guidelines to follow to avoid being taken by them:

1. Always take time to verify the story independently; even if it sounds like a very urgent matter and even if your heartstrings are pulled tight. It doesn’t usually take long to place a separate phone call to another person to confirm if a relative or friend is sick and really does need help. If you cannot verify it, don’t send money.

2. If you are told that cash, a money service such as Western Union, or pre-paid cards are the only form of payment accepted, question the legitimacy of the request.

3. When natural disasters happen and you want to send money, donate through a well-known and respected charity. They will accept payment cards on their websites.

4. Beware of anyone who tries to place an undue sense of urgency on the matter. If it is a real need, taking a few moments to confirm it is not out of the question.

The Nigerian Prince or 419 scam is a newer version of the Spanish Prisoner Scam that started in the 16th century. As you see, it has been around and working for a very long time and is not going away any time soon. None of these will. Instead, they will likely morph into many new versions as technology changes. That is, along as they are still working.

© Copyright 2017 Stickley on Security

Why Disability Insurance Is Critical

Most people understand why having life insurance is a good idea: Nobody wants to leave their survivors in a financial lurch if they were to die suddenly. But what if you suffer an accident or illness and don’t die, but rather, become severely disabled? Could you or your family make ends meet without your paycheck, possibly for decades?

Although most people are entitled to Social Security disability insurance (SSDI) benefits if they’ve paid sufficient FICA payroll taxes over the years, the eligibility rules are extremely strict, applying can take many months, and the average monthly benefit is only about $1,150.

So what are your other disability coverage options? Many companies provide sick leave and short-term disability coverage to reimburse employees during brief periods of illness or injury. Some also provide long-term disability (LTD) insurance that replaces a percentage of pay for an extended period of time.

But employer-provided LTD plans usually replace only about 60 percent of pay and the money you receive is considered taxable income, further lowering your benefit’s worth. Plus, such plans often have a waiting period before benefits kick in, will carve out any SSDI benefits you receive, and cap the monthly benefit amount and maximum payout period (often as little as two years).

Thus, even if your employer provides basic LTD, you might want to purchase additional coverage. Just be prepared: LTD insurance can be expensive. Yearly premiums may cost 1 to 3 percent of gross income, depending on plan features, your age, and whether you have preexisting conditions.

First, see if you can buy supplemental coverage through your employer’s plan – their group rate will be cheaper than an individual policy and you probably won’t need a physical exam. Or see if any professional or trade organizations you belong to offer group coverage.

If not, you’ll have to buy an individual policy. A few of the things to keep in mind:

  • The younger and healthier you are, the lower the premiums you’ll be able to lock in.
  • Some policies won’t pay benefits unless you can’t perform the duties of your own occupation, while others specify that you must be physically unable to perform any job (the latter coverage is much cheaper).
  • Look for a “non-cancelable” policy, which means the insurer can’t cancel or refuse to renew your policy – or raise the premium – if you pay on time.
  • The longer the waiting period before benefits are paid, the lower the premium. Thus, if you have enough sick time and savings to wait 120 days before payout, your premiums will be significantly less than for a 60-day waiting period.
  • Some policies only provide benefits for two years, while others pay until your normal Social Security retirement age – most cover somewhere in between. The shorter the term, the lower the cost.
  • Many plans exclude preexisting conditions, mental health or substance abuse issues.
  • For an additional fee, policies with a “future purchase option” allow you to increase coverage as your wages rise, without having to take another physical or rewrite the policy.
  • Check whether the benefit payout amount is fixed or if cost-of-living adjustments are made periodically. The latter type is more expensive but offers better protection against inflation if you’re disabled for many years.

Bottom line: If you became seriously disabled it could easily wipe out your savings and put your family in financial jeopardy. Before you actually need it, investigate what disability coverage you already have and what other options are available.

By Jason Alderman

Having Trouble Paying Your Heating Bill? LIHEAP Could Help

The chill of winter can be offset with the pleasure of curling up inside a warm home. Turning on the heat and settling into your favorite chair to open a new book or watch a movie feels even better when snow falls or rain patters against the windows. Unfortunately, some families have to choose between paying high winter utility bills and buying groceries or gas for their cars. The necessity of food and transportation often wins.

Fortunately, there are assistance programs. One such program, the federal Low Income Home Energy Assistance Program (LIHEAP), helps low-income households with heating or cooling costs, during an energy-related crisis (such as a shutoff notice from your utility) and with weatherization improvements.

If you, a parent or a friend are struggling to make ends meet this winter, LIHEAP and similar programs might be able to help keep your home warm.

Apply as soon as you can if you think you’ll need assistance. The federal government provides the funding for LIHEAP, but the programs are run at the state level. The money gets distributed on a first-come-first-served basis and states give priority to households with children, elderly or disabled members. Often the largest benefits are awarded to the homes with the most need.

States open their winter applications at different times, and you should apply for LIHEAP right away if you think you’ll have trouble paying for heating.

LIHEAP won’t cover your entire utility bill, but it can help keep your home warm. LIHEAP’s heating benefit is only intended to help you pay to heat your home. For example, if you’re heating unit runs on gas, the program will contribute towards your gas bill, but not your electricity bill.

You might only be able to receive a benefit once every 12 months, but it can make a big difference for your finances. For the fiscal year 2014, the most recent data available, over 5.7 million households received heating assistance and it offset an average 45.9 percent of recipients’ annual heating costs.

Qualifying for LIHEAP assistance. States, tribes and territories have some control over the services, qualifications, aid limits and application process for the LIHEAP program in their area.

You can review each state’s income eligibility for the fiscal year 2017 on this table. The state or local organizations that distribute funds also consider applicants’ utility costs, family size and location. Renters and homeowners could be eligible for LIHEAP assistance, but you might not qualify if you have subsidized housing.

Being qualified doesn’t guarantee that you’ll get assistance. Each state receives a set amount of funds for the year, and on average only 20 percent of qualified household receive benefits.

How to apply for LIHEAP. Often you’ll apply for LIHEAP at a Community Action Agency (CAA), local non-profit organizations that help administer federal, state and local grant programs. Some states let you complete the application online, otherwise you may need to mail, fax or hand in an application.

The Office of Community Service’s website has contact information for each state and territory, including a link to a website where you’ll find state-specific eligibility guidelines and program information.

As part of the application process, you may need to share identifying and financial information, including:

  • Recent utility bills.
  • Recent pay stubs, or a profit-and-loss statement if you’re self-employed.
  • Documentation for other income, such as Social Security benefits.
  • A lease or property tax bill as proof of your address.
    Your Social Security number.
  • A list of people living in your home, their relation to you, dates of birth and incomes.
  • A copy of a utility termination notice, if you received one.
  • Your energy provider’s information.

If you’re having trouble with your state’s website, or want to help someone who isn’t computer savvy, you can call the LIHEAP Clearinghouse’s National Energy Assistance Referral (NEAR) at 1-866-674-6327 (TTY: 1-866-367-6228).

Bottom line: When the temperature drops, heating costs can quickly rise. You shouldn’t have to suffer, and LIHEAP could help provide much-needed financial aid. You can look for additional assistance programs using the Benefits.gov search tool. Also look into state-based programs and payment plans or assistance from your local utility.

By Nathaniel Sillin

Make the Most of Your Rewards Program Membership

I’m often intrigued and sometimes inspired by stories of people traveling the world using points and miles. There’s a well-known (within certain circles, at least) man who earned over a million airline miles by purchasing more than $3,000 worth of pudding during a special promotion in 1999. Or, you might have heard about people using coupons during a grocery store’s membership-only sale to get food and household products for free.

While I might not be as enthusiastic as some world travelers, or as extreme as some couponers, I do see the benefit in a program that’s free to join and offers you potentially money-saving perks. However, I also know it’s important not to get so caught up that I wind up spending more money than I would otherwise. As a friend of mine loved to say, “never spend a dollar to save a nickel.”

The perks of membership. There are many loyalty or rewards programs to choose from and the rules and benefits can vary. For example, a grocer’s program might offer the same in-store savings and exclusive coupons to all its members. By contrast, travel rewards programs often have tiers, different levels of membership with varying benefits depending on how often you travel or how much you spend. While the basic tier may offer discounted hotel rates or free Wi-Fi, the higher tiers might come with free room upgrades (including to coveted suites) and guaranteed early check-in and late check-out.

Recognize why companies might have rewards programs. When you’re a big fan of a company or product, getting rewarded for your loyalty can be great. After all, it’s a free perk if you were going to make the purchase anyway. But try not to get too attached to a particular company or product based solely on the rewards program.

Buying something simply because you get a discount as a member, or making a purchase “for the points,” might be a waste. You could find yourself with a pantry full of products that are slowly going bad, or paying more for a trip because you didn’t comparison shop the offerings from other airlines or hotel chains.

Joining a rewards program could lead to overspending if you’re not careful. Recognizing that the programs could be designed to get you to spend more, and more often, can help you refrain from overspending. Here are a few additional ways to make sure you maximize your benefits.

Don’t double-count your savings. You’re tricking yourself if you consider the rewards points from a retailer’s program as savings when making a purchase and then consider the same points as savings (again) when you redeem them for store credit. Count the rewards once, or don’t make them part of your buying decision at all.
Keep your programs organized. Points in some programs expire if you don’t use them within a specified period or have recent account activity. You could use a website, app or spreadsheet to help track your accounts, how many points or miles you’ve earned and when they expire.
Another way to avoid overspending is to consider your net cost when comparison shopping. To do this, you’ll need a list of the dollar value of each programs’ rewards points. You could take a shortcut and copy the values other enthusiasts place on each program’s points. Or, you could make estimates of your own based on trips or purchases you regularly make.

Now you’ll know when 1,000 points are worth $1 or $10 and can plan your purchases accordingly. In the end, you want to be able to make as close to an apples-to-apples comparison as possible, inclusive of the value you place on the rewards.

Bottom line: Consumer rewards programs offer a wide variety of benefits, including exclusive savings and complimentary perks. While it’s often free to join the programs, and you could get rewarded for doing so, keep the big picture in mind and be careful about letting your membership lead to unnecessary purchases.

By Nathaniel Sillin