smartinsurance.tips

  • Remodel vs New Construction: Which is Right for You?

    Many homeowners aspire to one day build their dream home, but are held back by confusion over the best path forward for making their dream a reality.

    Should you tear your home down and start from a blank slate, or do attempt a remodel?

    It’s impossible to give a definitive answer, but a trusted and skilled architect can help you weigh your options so that you land on the ideal solution for your project.
    Below are some critical factors you should bear in mind when deciding between a remodel or new construction so that you can make the decision that is right for you.

    Factors to Consider When Choosing Between a Remodel and New Construction

    1. Is the existing structure safe?

    This is perhaps the most important question to ask. Structural issues may be detected through a thorough property inspection. If the existing structure is not in good condition, it may rule out the possibility of a remodel.

    This is especially true in cases where the foundations or key structural members are faulty, or in cases where an older home may no longer be up to code, particularly in earthquake- or wildfire-prone areas.

    2. What is your budget?

    There is often a misconception that a remodel will be significantly cheaper than a full, ground-up, new construction. But an extensive remodel can sometimes near the cost of a new build.

    Unless you’re keeping the majority of the existing structure, you are introducing complexity to the project which the architect and contractor must account for. For example, the demolition process would need to be much more surgical and careful.

    With this in mind, it’s important to have a clear sense of what your budget is and whether or not it is appropriately aligned with the goals of your project. If your design goals are challenging enough, there are situations where new construction may start to make more sense than a remodel.

    3. What is your timeframe?

    Depending on the scope of the project, a remodel can be completed significantly quicker than a new construction, especially if key elements of the home (foundation, supporting walls, etc.) are reused.

    For individuals whose project involves the home that they currently live in, a remodel may make more sense than new construction. For individuals who don’t plan to move into the home for a significant period of time, time can be less of a constraint.

    4. How important is sustainability to you?

    If environmental sustainability is important to you, reusing as much of the existing structure as possible can help reduce your project’s carbon footprint and drive it closer to net zero carbon. This can be achieved in both a remodel or a new construction.

    Concrete, for example, is one of the largest contributors of greenhouse gas emissions when it comes to architecture. One can reuse concrete foundations even when pursuing new construction. It may take some planning but this is a great place to reduce your carbon production.

    5. What limits does your jurisdiction place on residential projects?

    Most local jurisdictions place a limit on what can legally be considered a “remodel” vs new construction.

    While it may seem like semantics, the distinction is important, if a project is deemed a new construction it will typically involve a more rigorous approval process which can disrupt the project’s timeline. Additionally, being deemed a new construction might trigger a tax reassessment that might potentially lead to a higher tax burden.

    Usually, in order for a project to qualify as a remodel instead of a new construction, it will need to meet certain requirements.

    First, it may need to fall within the same footprint (the foundation). Second, it will need to be the same number of stories, because building higher than the original structure could threaten surrounding views. Third, the home will typically need to preserve a certain percentage of the existing structure, which will typically be measured in walls. While the exact percentage will depend on local regulations, many jurisdictions require at least 50% of the structures existing walls be untouched.

    An architect who is skilled in substantial remodels should be able to meet all of these requirements while still meeting the goals of your project, if it is important to you that your home be classified as a remodel instead of a new construction.

    6. Is your home in a historical district?

    If your home exists in a historical district or already has a historical designation, this can limit how much you are able to change or update the structure of the home. (This is typically only a concern when it comes to the exterior—not the interior—of the home.) It might, for example, limit the materials or colors that you use on the exterior portion of the home, or even the overall style of architecture.

    In San Francisco, for example, if a structure is more than 50 years old it will automatically trigger a historical review. If the review determines that someone historically significant lived there in the past or that something of historic or cultural significance occurred there, it could lead to historical designation.

    The Value of an Architect

    If you are still unsure as to which path is the right one for you, a skilled architect, with experience in both new construction as well as significant remodeling projects, can help guide you toward the appropriate solution.

    The sooner in the process that you are able to involve the architect, the better the end result will be. When you begin discussing your project, it’s important that you explain the goals, budget, and timeframe for your project, as all of these will impact which route is best for you.

  • Creativity Is a Process, Not an Event

    In 1666, one of the most influential scientists in history was strolling through a garden when he was struck with a flash of creative brilliance that would change the world.

    While standing under the shade of an apple tree, Sir Isaac Newton saw an apple fall to the ground. “Why should that apple always descend perpendicularly to the ground,” Newton wondered. “Why should it not go sideways, or upwards, but constantly to the earth’s center? Assuredly, the reason is, that the earth draws it. There must be a drawing power in matter.”

    And thus, the concept of gravity was born.

    The story of the falling apple has become one of the lasting and iconic examples of the creative moment. It is a symbol of the inspired genius that fills your brain during those “eureka moments” when creative conditions are just right.

    What most people forget, however, is that Newton worked on his ideas about gravity for nearly twenty years until, in 1687, he published his groundbreaking book, The Principia: Mathematical Principles of Natural Philosophy. The falling apple was merely the beginning of a train of thought that continued for decades.

    Newton isn’t the only one to wrestle with a great idea for years. Creative thinking is a process for all of us. In this article, I’ll share the science of creative thinking, discuss which conditions drive creativity and which ones hinder it, and offer practical tips for becoming more creative.

    Creative Thinking: Destiny or Development?

    Creative thinking requires our brains to make connections between seemingly unrelated ideas. Is this a skill that we are born with or one that we develop through practice? Let’s look at the research to uncover an answer.

    In the 1960s, a creative performance researcher named George Land conducted a study of 1,600 five-year-olds and 98 percent of the children scored in the “highly creative” range. Dr. Land re-tested each subject during five year increments. When the same children were 10-years-old, only 30 percent scored in the highly creative range. This number dropped to 12 percent by age 15 and just 2 percent by age 25. As the children grew into adults they effectively had the creativity trained out of them. In the words of Dr. Land, “non-creative behavior is learned.”

    Similar trends have been discovered by other researchers. For example, one study of 272,599 students found that although IQ scores have risen since 1990, creative thinking scores have decreased.

    This is not to say that creativity is 100 percent learned. Genetics do play a role. According to psychology professor Barbara Kerr, “approximately 22 percent of the variance [in creativity] is due to the influence of genes.” This discovery was made by studying the differences in creative thinking between sets of twins.

    All of this to say, claiming that “I’m just not the creative type” is a pretty weak excuse for avoiding creative thinking. Certainly, some people are primed to be more creative than others. However, nearly every person is born with some level of creative skill and the majority of our creative thinking abilities are trainable.

    Now that we know creativity is a skill that can be improved, let’s talk about why—and how—practice and learning impacts your creative output.

    Intelligence and Creative Thinking

    What does it take to unleash your creative potential?

    As I mentioned in my article on Threshold Theory, being in the top 1 percent of intelligence has no correlation with being fantastically creative. Instead, you simply have to be smart (not a genius) and then work hard, practice deliberately and put in your reps.

    As long as you meet a threshold of intelligence, then brilliant creative work is well within your reach. In the words of researchers from a 2013 study, “we obtained evidence that once the intelligence threshold is met, personality factors become more predictive for creativity.”

    Growth Mindset

    What exactly are these “personality factors” that researchers are referring to when it comes to boosting your creative thinking?

    One of the most critical components is how you view your talents internally. More specifically, your creative skills are largely determined by whether you approach the creative process with a fixed mindset or a growth mindset.

    The differences between these two mindsets are described in detail in Carol Dweck’s fantastic book, Mindset: The New Psychology of Success.

    The basic idea is that when we use a fixed mindset we approach tasks as if our talents and abilities are fixed and unchanging. In a growth mindset, however, we believe that our abilities can be improved with effort and practice. Interestingly, we can easily nudge ourselves in one direction or another based on how we talk about and praise our efforts.

    Here’s a brief summary in Dweck’s words:

    “The whole self-esteem movement taught us erroneously that praising intelligence, talent, abilities would foster self-confidence, self-esteem, and everything great would follow. But we’ve found it backfires. People who are praised for talent now worry about doing the next thing, about taking on the hard task, and not looking talented, tarnishing that reputation for brilliance. So instead, they’ll stick to their comfort zone and get really defensive when they hit setbacks.

    So what should we praise? The effort, the strategies, the doggedness and persistence, the grit people show, the resilience that they show in the face of obstacles, that bouncing back when things go wrong and knowing what to try next. So I think a huge part of promoting a growth mindset in the workplace is to convey those values of process, to give feedback, to reward people engaging in the process, and not just a successful outcome.”

    —Carol Dweck

    Embarrassment and Creativity

    How can we apply the growth mindset to creativity in practical terms? In my experience, it comes down to one thing: the willingness to look bad when pursuing an activity.

    As Dweck says, the growth mindset is focused more on the process than the outcome. This is easy to accept in theory, but very hard to stick to in practice. Most people don’t want to deal with the accompanying embarrassment or shame that is often required to learn a new skill.

    The list of mistakes that you can never recover from is very short. I think most of us realize this on some level. We know that our lives will not be destroyed if that book we write doesn’t sell or if we get turned down by a potential date or if we forget someone’s name when we introduce them. It’s not necessarily what comes after the event that worries us. It’s the possibility of looking stupid, feeling humiliated, or dealing with embarrassment along the way that prevents us from getting started at all.

    In order to fully embrace the growth mindset and enhance your creativity, you need to be willing to take action in the face of these feelings which so often deter us.

    How to Be More Creative

    Assuming that you are willing to do the hard work of facing your inner fears and working through failure, here are a few practical strategies for becoming more creative.

    Constrain yourself. Carefully designed constraints are one of your best tools for sparking creative thinking. Dr. Seuss wrote his most famous book when he limited himself to 50 words. Soccer players develop more elaborate skill sets when they play on a smaller field. Designers can use a 3-inch by 5-inch canvas to create better large scale designs. The more we limit ourselves, the more resourceful we become.

    Broaden your knowledge. One of my most successful creative strategies is to force myself to write about seemingly disparate topics and ideas. For example, I have to be creative when I use 1980s basketball strategies or ancient word processing software or zen buddhism to describe our daily behaviors. In the words of psychologist Robert Epstein, “You’ll do better in psychology and life if you broaden your knowledge.”

    Sleep longer.  Sleep debt is cumulative and if you get 6 hours of sleep per night for two weeks straight, your mental and physical performance declines to the same level as if you had stayed awake for 48 hours straight. Like all cognitive functions, creative thinking is significantly impaired by sleep deprivation.

    Enjoy sunshine and nature. One study tested 56 backpackers with a variety of creative thinking questions before and after a 4-day backpacking trip. The researchers found that by the end of the trip the backpackers had increased their creativity by 50 percent. This research supports the findings of other studies, which show that spending time in nature and increasing your exposure to sunlight can lead to higher levels of creativity.

    Embrace positive thinking. It sounds a bit fluffy for my taste, but positive thinking can lead to significant improvements in creative thinking. Why? Positive psychology research has revealed that we tend to think more broadly when we are happy. This concept, which is known as the Broaden and Build Theory, makes it easier for us to make creative connections between ideas. Conversely, sadness and depression seems to lead to more restrictive and limited thinking.

    Ship it. The honest truth is that creativity is just hard work. The single best thing you can do is choose a pace you can sustain and ship content on a consistent basis. Commit to the process and create on a schedule. The only way creativity becomes a reality is by shipping.

    Final Thoughts on Creative Thinking

    Creativity is a process, not an event. It’s not just a eureka moment. You have to work through mental barriers and internal blocks. You have to commit to practicing your craft deliberately. And you have to stick with the process for years, perhaps even decades like Newton did, in order to see your creative genius blossom.

  • What Are the Advantages of Smart Home Technology?


     
    Smart home automation systems offer homeowners enhanced security, convenience, and energy efficiency. By integrating various smart systems, the technology provides real-time alerts, remote monitoring, and easier control over household functions from your mobile device.

    1. How Do Smart Home Automation Systems Provide Real-Time Security Alerts?
      Unlike more traditional security systems, smart home systems are equipped to alert you to problems as they happen, not after. Features include:
      Contact sensors and immediate notifications for unauthorized access or environmental hazards.
      Alerts when someone leaves doors or windows open or unlocked.
      Motion sensors monitor the activity of loved ones, especially children, elderly family members, and pets.
    2. What Are the Benefits of Remote Monitoring and Video Surveillance?
      Smart home systems let you monitor your property in real-time, whether you’re at home or away. Benefits include:
      Live video feeds you can access on your phone, tablet, and computer.
      Notifications when family members arrive home.
      Two-way audio and video communication through porch security cameras.
    3. Which Household Functions Can You Remotely Control?
      Smart home automation lets you manage various household functions from anywhere by phone and other smart devices.
      Control garage doors
      Control smart locks for the front door and other entrances and exits.
      Turn on lights to make it look like someone’s home.
      Schedule appliances and electronics to turn off automatically, especially if you think you forgot to do so before leaving.
      Receive alerts for potential issues, such as water leaks or temperature fluctuations.
    4. How Do Smart Home Systems Help Save on Utility Bills?
      By optimizing energy usage, smart home systems can lead to significant energy savings.
      Smart thermostats can adjust heating and cooling based on your schedule.
      Automated lighting and smart plugs reduce unnecessary energy consumption.
      Smart monitoring tools help identify and reduce energy waste.
    5. Do Smart Home Features Increase Property Value and Offer Insurance Benefits?
      Installing smart technology can enhance your home’s market appeal.
      Potential buyers often seek homes that are up-to-date and have integrated smart systems that can be controlled remotely.
      Some insurance providers offer discounts for homes equipped with advanced security features.
    6. Can Smart Home Systems Enhance Entertaining and Daily Routines?
      Beyond security and efficiency, smart home devices can make your day-to-day life easier and fun.
      Have music play as your wake-up call instead of an annoying beeping alarm clock.
      Set virtual tripwires to activate holiday lawn decorations and outdoor lighting for passing neighbors.
      Control your home’s entertainment system with voice commands.

  • How to Manage Debt of Any Size


    Everyone with even a little bit of debt has to manage their debt. If you just have a little debt, you have to keep up your payments and make sure it doesn’t get out of control. On the other hand, when you have a large amount of debt, you have to put more effort into paying off your debt while juggling payments on the debts you’re not currently paying.

    Know How Much You Owe

    Make a list of your debts, including the creditor, total amount of the debt, monthly payment, interest rate, and due date. You can use your credit report to confirm the debts on your list. Having all the debts in front of you will allow you to see the bigger picture and stay aware of your complete debt picture. Debt reduction software can make this process easier.

    Note

    Once you have a handle on your debt and your income, you can calculate your Debt to Income ratio (DTI). This ratio tells you how much of your income is going toward debt payments. To find yours, divide your debt payments by your income, and multiply by 100. For example, $1,200 of monthly debt divided by $3,000 of monthly income is 0.4 x 100 = 40%. The lower this number is, the better, and tracking it can help you understand your finances more clearly.
    Don’t just create your list and forget about it. Refer to your debt list periodically, especially as you pay bills. Update your list every few months as the total amount of your debt changes.

    Pay Your Bills on Time Each Month

    Late payments make it harder to pay off your debt since you’ll have to pay a late fee for every payment you miss. If you miss two payments in a row, your interest rate and finance charges will increase.

    If you use a calendaring system on your computer or smartphone, enter your payments there and set an alert to remind you several days before your payment is due. If you miss a payment, don’t wait until the next due date to send your payment, by then it could be reported to a credit bureau. Instead, send your payment as soon as you remember that it was missed.

    Note

    A budget can help you stay out of debt, and it can help you climb out. It allows you to see how much money you earn and where that money is going. Create a bare-bones budget that allows you to pay for necessities like your rent or mortgage and utilities. Set aside everything else to pay off your debt as quickly as possible.
    Create a Monthly Bill Payment Calendar

    Use a bill payment calendar to help you figure out which bills to pay with which paycheck. On your calendar, write each bill’s payment amount next to the due date. Then, fill in the date of each paycheck. If you get paid on the same days every month—the 1st and 15th—you can use the same calendar from month to month. But, if your paychecks fall on different days of the month, you’ll need to create a calendar every month.

    Make at Least the Minimum Payment

    If you can’t afford to pay anything more, at least make the minimum payment. Of course, the minimum payment doesn’t help you make real progress in paying off your debt. But, it keeps your account in good standing, which avoids late fees. When you miss payments, it becomes harder to catch up and eventually your accounts could go into default.

    Note

    While you’re working on paying down debt, stop using credit cards. Start carrying cash instead. Stick to the budget you created and only buy what you can pay for with cash.
    Decide Which Debts to Pay Off First

    Paying off credit card debt first is often the best strategy because credit cards have higher interest rates than other debts.1 Of all your credit cards, the one with the highest interest rate usually gets priority on repayment because it’s costing the most money.

    Use your debt list to prioritize and rank your debts in the order you want to pay them off. You can also choose to pay off the debt with the lowest balance first. This might cost a little more in the long run, but knocking off small debts first can build confidence.

    Pay Off Collections and Charge-Offs

    You can only pay as much on your debt as you can afford. When you have limited funds for repaying debt, focus on keeping your other accounts in good standing. Don’t sacrifice your positive accounts for those that have already affected your credit. Instead, pay those past due accounts when you can afford to do it.

    Build an Emergency Fund to Fall Back On

    Without access to savings, you’d have to go into debt to cover an emergency expense. Even a small emergency fund will cover little expenses that come up every once in a while.

    First, work toward creating a small emergency fund—$1,000 is a good place to start. Once you have that, make it your goal to create a bigger fund, like $2,000. Eventually, you want to build up a reserve of three to six months of living expenses.

    Note

    It’s easy to convince yourself that you “need” to purchase a new tv or that you “need” to go on vacation. The truth is, there aren’t that many true needs in life. You need food, shelter, clothing, transportation, and things like that. You want steak, a nice house in the suburbs, designer labels, and a luxury car, for example.
    Recognize the Signs That You Need Help

    If you find it hard to pay your debt and other bills each month, you may need to seek outside help, like a credit counseling agency. Other options for debt relief are:

    Debt consolidation
    Debt settlement
    Bankruptcy
    These each have advantages and disadvantages, so weigh your options carefully

  • The Ultimate Financial Success Checklist for Young Adults



    Start investing in your 20s to build lifelong wealth.
    Creating a budget helps identify smart saving methods.
    Debt and credit should be used carefully to avoid financial trouble.
    Compounding interest benefits young investors significantly.
    Custodial accounts allow minors to begin investing early.


    High school and college students should be on the road to financial success by learning some basics and following some guiding principles. This ultimate checklist will guide them on their way. And most importantly, time is on their side.

    “Young people have perhaps the biggest advantage compared to other investors: time. The earlier you learn and apply key financial skills, the greater your rewards will be over the long term,” says Phillip Durbin, a financial planner with Generational Wealth Development.

    Financial Checklist for Young Adults
    Young people can build financial success by following the tips on this checklist:

    Start by creating a realistic budget that takes into account wants and needs.
    Start saving and establish an emergency fund to cover unexpected expenses.
    Be smart about credit.
    Don’t be scared of investing in the stock market.

    1. Learn How to Budget
      Getting a handle on the money coming in and going out each month is the first step to building a solid financial foundation. So, tally up all bills and expenses as well as income each month and build a budget. Make note of monthly bills and monthly income. How much money is left over after paying bills? Rather than spending it all, this is a great opportunity to begin saving.

    Understand Wants vs. Needs
    As you build your budget, consider the difference between needs and wants. There are many ways people want to spend their money, but not all of them are essential—these are needs. Take care of needs first and then consider what wants will fit into the budget.

    “Prioritize spending on things you need (housing, food, gas) before things you want (new phone, concert tickets, gas station junk). Budget for some fun, but learn to say no,” Durbin says.

    1. Start Saving Efficiently
      “The sooner you learn to budget for your life, the better off you’ll be. Once you control where your money is going, you can start controlling how much you save,” Durbin says. “Pay yourself first by saving a portion of any money you earn or receive before spending it.”

    One way to achieve that is to set up automatic savings into a high-yield savings account or a brokerage account.

    Learn the Power of Compound Interest
    Depending on the account you put your savings into, it’s important to ensure you understand how that money grows. When interest gets applied not only to the principal amount you invest in an account but also to the interest accumulated previously, this is compound interest. And it’s a sort of superpower, particularly when you’re young.

    “Take advantage of compound interest by contributing to a 401(k) or Roth IRA as soon as possible. Even small contributions in your 20s can grow significantly over time,” says Daniel Milks, a certified financial planner and founder of the Fiduciary Organization.

    Build an Emergency Fund
    Not everything that happens to you will fall into a neat budgeting bucket. An unexpected expense, such as a big car repair or getting laid off from a job, can happen to anyone. Be prepared by building a savings cushion to cover these expenses.

    “Aim to save three to six months’ expenses in a high-yield savings account. This provides a financial cushion for unexpected expenses like medical bills or job loss,” Milks says.

    1. Manage Credit Wisely
      Be smart about your credit. Your bank will likely make it easy to set up automatic bill pay to ensure your credit card bills (and other recurring bills) get paid on time. Keep your credit card balances low. And only borrow money for essentials you need. These can help you create a credit history. And a good credit rating can go a long way as you map out your future.

    “Build a strong credit history by paying bills on time, keeping credit utilization low, and avoiding unnecessary debt. Good credit helps with securing loans, renting apartments, and even job applications,” Milks says.

    1. Invest in the Stock Market Early
      Investing early and often when you are a young person is one of the best financial moves you can make. Time and the power of compound interest are on your side. So don’t hesitate to begin investing.

    “The stock market can be this big, scary beast, but it doesn’t have to be. You have the biggest advantage of anyone: time,” Durbin says. “Spend the time learning about it now, so it can benefit you for the rest of your life. This knowledge could save you millions of dollars over your lifetime; isn’t that worth the time to learn it now?”

    TIP

    People younger than 18 can get an early start on investing through a custodial account, but you’ll need a parent or guardian’s help to set it up. In a custodial account, an adult controls investments on behalf of a minor until the minor reaches 18 or 21 years of age, depending on the state.

    To start, you’ll need to educate yourself about investing. Then, set up your investment goals before selecting your specific investments. Finally, select the right brokerage account for you.

    The Bottom Line
    These financial tips will set young people on the path to a bright financial future. All are important, so make sure to incorporate all the tips as you build your financial life. Learn to budget, use credit and debt wisely, save for emergencies and major expenses, and start investing in the stock market when you are young rather than waiting until your income grows.

    You can build a lifetime’s worth of wealth by starting to invest in your 20s and taking advantage of compound interest. So don’t be frightened by the stock market and instead invest in your financial future.

  • What Is the Income Limit for Marketplace Insurance?

    There’s no income limit for marketplace insurance, but there are limits to qualify for subsidies to make them more affordable.

    Marketplace insurance plans are health insurance policies available to individuals and families through a health insurance marketplace or exchange. Marketplace plans might also be referred to as Obamacare plans or Affordable Care Act (ACA) plans.

    There’s no income limit for marketplace insurance, but there are income limits for marketplace insurance subsidies that can help make that insurance more affordable.

    What are marketplace insurance subsidies?

    Marketplace insurance subsidies can significantly reduce what you pay for a marketplace insurance plan:

    • Premium tax credits help reduce the cost of marketplace insurance premiums. The credit is refundable, so you can get it even if you don’t owe tax to the government.
    • Cost-sharing reductions help reduce out-of-pocket costs such as copays, coinsurance and/or deductibles for Silver marketplace plans.

    What is the income limit for the marketplace premium tax credit?

    Broadly speaking, you’re eligible for a premium tax credit if your household income is between 100% and 400% of the federal poverty level (FPL). There are non-income-related eligibility requirements, too.

    For an individual in the contiguous U.S., that’s between $15,650 and $62,600 per year in 2025[3]. For a family of four in the contiguous United States, the range between 100% and 400% of the FPL would be $32,150 to $128,600 per year. (Alaska and Hawaii have their own slightly higher income limits.)

    🤓Nerdy Tip

    The American Rescue Plan Act of 2021 created “enhanced” premium tax credit subsidies starting in 2021. The enhanced subsidies are more generous and make more people eligible for subsidies based on income.

    Under the enhanced subsidies, eligible higher-income households can qualify for tax credits that reduce what they spend on premiums to no more than 8.5% of household income, even if their income is above 400% of the FPL.

    Enhanced subsidies were initially set to expire after 2022, but Congress extended them through 2025. Unless Congress extends them again, enhanced subsidies will sunset at the end of tax year 2025.

    The maximum possible premium tax credit — available to those with the lowest qualifying income — is equal to the premium for the second-lowest-cost Silver plan available to you through the marketplace[1]. If you qualify, but your income is too high for that maximum level, the subsidy gets smaller on a sliding scale according to income.

    What is the income limit for marketplace cost-sharing reductions?

    People who qualify for the premium tax credit and have household income up to 250% of the FPL can qualify for marketplace cost-sharing reductions. These cost-sharing reductions can decrease the copays, coinsurance, deductibles and maximum out-of-pocket costs you owe with a Silver plan.

    For an individual in the contiguous U.S., 250% of the FPL is $39,125 per year, for example. For a family of four, it’s $80,375 per year. (Alaska and Hawaii have their own slightly higher income limits.)

    People with lower household incomes qualify for the largest cost-sharing reductions. Like the premium tax credit, cost-sharing reductions get smaller for people with higher household income.

    Household incomeCost-sharing reductions
    100% up to 150% of the FPLLargest
    Greater than 150% up to 200% of the FPLMedium
    Greater than 200% up to 250% of the FPLSmallest

    Cost-sharing reductions are available only with Silver plans. Plans at other metal levels, such as Bronze or Gold, aren’t eligible for cost-sharing reductions.

    (The Silver restriction is only for cost-sharing reductions — so if you choose a plan with a different metal level, you might qualify for premium tax credits but not cost-sharing reductions.)

    What if my income is too low for marketplace insurance?

    If you make less than 100% of the FPL, your income is too low to qualify for marketplace insurance subsidies — both the premium tax credit and the cost-sharing reductions.

    Having income too low for subsidies doesn’t mean you’re not allowed to buy marketplace insurance — but the cost of unsubsidized plans might be unaffordable.

    In most states, people with income too low for marketplace insurance subsidies might qualify for Medicaid based on income. You can check your eligibility through your state’s Medicaid agency or at HealthCare.gov.

    Catastrophic health plans might also be an option with more affordable premiums if you’re under 30 or qualify for an affordability or hardship exemption.

    Catastrophic plans cover preventive services at no cost and at least three primary care visits per year before you meet your deductible. Other health benefits are covered only after you meet the high deductible.

    What if my income is too high for marketplace insurance subsidies?

    If your income is too high for marketplace insurance subsidies, you can still buy a marketplace health insurance plan — but you’ll have to pay full price. It’s a good idea to work with a licensed insurance agent or broker to find the best option for you.

  • Home Insurance Claims and Damage Caused by Trees

    Trees are pleasing features of many areas and homes, but what happens if a tree falls on your home and causes damage? Does insurance cover the removal of the fallen tree and the damage that comes along with it?

    It all depends on what the cause of the damage is. Home insurance will cover many forms of damage caused by trees, but it might not cover all issues.

    Key Takeaways

    • Home insurance is meant to cover sudden and accidental damage. In most cases, it doesn’t cover damage that happens over time.
    • Whether your plan will cover damage caused by a tree depends on the reason the tree fell.
    • If someone else’s tree damages your property, your insurance company will attempt to recover the costs from the party at fault.

    Tree Damage Covered by Insurance

    Your homeowner’s insurance covers certain risks and perils. For example, lightning and windstorms are two common perils. The first step in knowing whether your home plan will cover tree damage is to determine whether the damage was sudden and accidental. You will also need to find out if the damage happened over time. Insurance is meant to cover sudden and accidental damage, not slow damage or home maintenance.

    Accidental Damage vs. Gradual Damage

    One example of sudden damage would be if a windstorm uprooted a tree and it came crashing down on your house.

    An example of gradual damage is when the roots of a tree grow into parts of your home or plumbing. The damage where the roots of the tree have been growing into would not be covered because the tree roots did not grow overnight. On the other hand, if the damage caused another issue, such as your pipe bursting and water flowing into your home, then you might be covered for the water damage.

    Types of Tree Damage Home Insurance Covers

    Insurance plans have special limits and things they will and will not cover. Damage that happens as a result of weather and storm damage is often covered by insurance.

    If you have an all-risk policy versus a named-perils policy, your plan will cover more events. If your home was damaged by a hurricane, tornado, or other named storms, your plan should have a claim deductible based on the total value of your home.

    When a Tree Falls on a House or Property

    Depending on the cause of the damage, a tree falling on a house may be covered or not. If the tree was healthy and it was not a maintenance issue, then there is a good chance you have coverage in your homeowner’s plan. If the tree was unhealthy and fell due to it not being taken care of, you may not be covered.

    Sometimes It Matters to Whom the Tree Belongs

    During a major storm, trees and branches from trees may be flying around and travel a long way. It may not always be clear who owns the flying debris that hit and damaged your home. You don’t have to worry about finding out where the branches or tree came from if you do not know. If you have damage, call your insurance and let them know what happened. They can help you with your home insurance claim.

    Deductibles for a Fallen-Tree Claims

    You should always know ahead of time the amount of your deductible. This is the out-of-pocket money you pay before your plan pays its portion of damages. When you have an insurance claim, you should be ready to pay that amount.

    Often, the cost of damage from the fallen tree is less than the deductible or close to it, so you might decide not to make the claim in order not to lose a discount on your home policy. In a major claim, if the cost of the damage is very high, there may be a large loss deductible waiver.

    If the cause of the damage to your property is not your fault, you may still need to pay the deductible, but you may be able to get it back. For instance, if a neighbor’s tree fell on your home, your insurance may require you to pay the deductible but may try to get the money back from your neighbor’s plan to pay you back. This concept is called subrogation, and it is quite common.

    Coverage for Tree Removal

    Fallen trees not only cause damage to homes but also must be removed once they have fallen after a storm. Most homeowner’s insurance plans offer limited coverage for the removal of fallen trees and other storm debris. There may be a maximum dollar limit on your policy, such as $500 or $1,000. Your plan also might not cover the removal of trees if no structure was damaged. Each policy is different, so ask before you need to file a claim.

    Root Damage Coverage

    Many people will end up having damage to their building structures, pipes, and property from tree roots. One common problem is when the roots of a tree grow into the foundation of a home or the water entry pipe.

    This damage can be very costly to repair. Always call your insurance to ask if the damage is covered because every policy and event is unique. The concept of tree roots growing does not fit the definition of sudden and accidental because roots grow very slowly. This explains why damage caused by roots would not be covered in most cases.

    Getting a Tree Replaced After a Claim

    Getting a tree replaced after filing a damage claim would fall under the landscaping section of your home policy. Your plan may limit or not cover a new tree even if the damage and removal of the tree were covered.

    When Someone Else Is at Fault

    Even though it’s not your fault, when the neighbor’s tree falls on your house, your plan will pay to fix your home right away. Your insurance company wants to make things safe and right for you, but they also know someone else caused the damage. If they feel a third party, such as a neighbor, is responsible for the damage, they will take care of you first. Then they go after the party at fault. This is what is meant by “subrogation.” If your plan is able to recoup the costs of the claim in subrogation, they may be able to pay you back for the deductible after the matter is settled.

  • What Is Indemnification?

    In insurance, indemnification is a legal principle that means your insurer agrees to compensate you for covered losses in amounts equivalent to what was lost. Below, we take a thorough look at what indemnification means and how it may affect you as a policyholder.

    What Is Indemnification?

    Indemnification is the act of being compensated by your insurer for a loss that restores you as closely as possible to your financial position before the loss. “Indemnity” is a similar term you might see that also has the same overall meaning.

    Your insurer agrees to take on losses stemming from covered accidents or property damage when you’re a policyholder. Instead of you paying out of pocket for liabilities or property replacements, the insurance company picks up the tab to reestablish your financial standing to a state similar to what it was before the incident. If it’s an event where there’s another party involved, such as a car accident, your insurance company may sue the other party to recover damages.1 

    How Does Indemnification Work?

    Your insurer indemnifies (compensates you for your loss) after a covered claim. With car insurance, the insurance company shifts the financial responsibility from you to itself for costs arising from an accident or other covered event. This could mean paying for vehicle repairs, medical treatments, and attorney fees or judgments in a lawsuit. Without your policy and its indemnification provision, you’d be responsible for these bills. The process and principles are the same for other types of insurance, such as homeowners and commercial property insurance.

    Note

    It’s essential to purchase as much insurance protection as you can afford in a policy because insurers only reimburse you up to your policy’s limits. Also, note that the insurer’s indemnification responsibility is limited to the conditions stated in your policy agreement.

    What Is the Role of Depreciation in Indemnification?

    Policyholders sometimes run into problems with indemnification because of depreciation. Depreciation is an item’s loss in value due to all causes, such as age and condition. It can be cause for concern because if you total an older or high-mileage car, your insurer’s payout may not be enough to replace it.

    Depreciation plays less of a role in some parts of homeowners insurance because most policies today have replacement cost coverage for structural damage. If you have to completely replace a damaged roof or other structure in your home, paying the full cost for a new roof of the same kind is the only practical option for the insurer.

    However, it’s essential to check your homeowner’s policy to verify your coverage type. Older homes may have a modified replacement cost policy so that special features like hardwood floors are replaced with standard building materials. Moreover, unless you have replacement cost coverage for your belongings, the insurer may indemnify them for only their actual cash value (ACV or depreciated value), not what it would cost to buy new items.2

    Indemnification vs. Indemnity Insurance

    Indemnification is not the same as indemnity insurance (also known as professional liability insurance).

    As mentioned, indemnification is an agreement by your insurer to return you to an equivalent financial standing after a covered loss. Indemnity insurance is a supplemental liability insurance designed to protect service providers or other professionals who counsel, give their expertise, or provide specialized services. This type of insurance provides coverage that protects professionals from claims filed against them for negligence or failing to perform their duties, and the resulting litigation costs or other financial losses.

    Typical types of indemnity insurance in the business setting may include malpractice, Errors and Omissions (E&O), and Directors and Officers (D&O) insurance. 

    Key Takeaways

    • Indemnification involves your insurer paying for losses covered in your policy to restore your financial standing or property to the same condition as before the incident.
    • Indemnification can pay for property damage, medical expenses, liabilities, legal fees, and other costs stated in your agreement.
    • You may be compensated for your home or belongings at their depreciated values, not their original prices, unless you have a replacement cost coverage policy.
    • Indemnity insurance is different from indemnification, as it protects certain professionals from the cost of claims filed against them.

  • Hail, Not Hurricanes, Is Driving Up Insurance Rates: How to Save

    Homeowners insurance now costs more in the Midwest than in disaster-prone states like California and Florida. Here’s what to do about it.

    The East Coast has hurricanes, and the West Coast has wildfires. But in the middle of the country, homeowners face a different kind of disaster: baseball-sized hail. “The damage is just catastrophic,” says Avery Moore, owner of Oklahoma-based independent insurance agency ECI Insurance.

    As insurers scramble to keep up with record losses from hail and the storms that produce it, homeowners in the “hail belt” pay the price. The highest U.S. home insurance rates are now in the middle of the country, with Oklahoma, Nebraska and Kansas leading the pack at more than double the national average, according to NerdWallet data.

    To put that into perspective: The average homeowner in hurricane-prone Florida pays $2,845 per year for homeowners insurance. The average Oklahoman pays $7,255.

    Why hail is breaking the market

    Shifting storm patterns are at least partially to blame. According to Jeff Schmidt, a meteorologist and vice president at reinsurance broker Guy Carpenter, research suggests that the part of the atmosphere that can produce this baseball-sized hail is expanding both eastward and northward.

    But it’s not just that storms are moving. There are also more homes in their way.

    This is called the “expanding bull’s-eye effect.” Picture a city as a target, with a dense urban center surrounded by rings of suburbs and rural land. In fast-growing cities like Dallas, those rings are pushing outward.

    “Cities are bursting at their seams,” Schmidt says. “If we’re shooting something at the target — whether it’s a bow and arrow or a dart or … a weather event — now you have a bigger target.” A single hailstorm that might have hit an empty field 50 years ago could now result in thousands of totaled roofs.

    Paying more for less coverage

    In addition to raising premiums, insurance companies can respond to losses by adjusting policy details like coverage amounts and deductibles.

    For example, it’s common for policies to include a separate wind and hail deductible set to a percentage of the home’s insured value instead of a flat rate. So, instead of a typical $1,000 deductible, repairs for hail damage might be subject to a 1% to 5% deductible. If you have $300,000 of dwelling coverage, that’s $3,000 to $15,000 you have to pay out of pocket before a single shingle is covered.

    Insurers are also moving away from offering replacement cost value (RCV) coverage — which pays for the full cost of repairing covered damage — toward actual cash value (ACV) for older roofs. Under an ACV policy, the insurer pays out the depreciated value of an aging roof, leaving you to cover the gap. While Moore recommends pushing for full replacement coverage, she says many carriers simply won’t offer it once your roof hits the 10-year mark.

    “If your roof is insured at actual cash value and it’s 15 years old, you’re not going to get a lot of money back,” Moore says.

    The non-renewal dilemma

    Insurers can also drop homeowners entirely if they’re seen as too risky. You can receive a non-renewal notice for a number of reasons, and making too many claims is one of them.

    Take one of Moore’s clients who lived in a 7,000-square-foot home. After discovering a roof leak, she hired a roofer to do a temporary fix to avoid filing a claim. The roofer found extensive hail damage, so she ended up having to file a claim anyway. It was denied. When the quick fix failed during the next hailstorm, she filed another claim, along with a claim on her auto insurance.

    “We’re looking at three claims within the three-month period,” Moore says. “And guess who got non-renewed?”

    This can leave homeowners in a bind. Paying for small repairs out of pocket can protect your insurability, but Moore’s client did just that and ended up losing her policy. For some, it can feel impossible to win.

    How to lower your ‘hail tax’

    Whether you can’t afford your premiums or you just want to lower your rates, here’s how to stack the odds in your favor.

    Shop around

    If your homeowners insurance is too expensive, shop for other options before your coverage lapses. An independent agent who knows the local market can help you find carriers you might miss on your own.

    The deductible you choose for your policy could also lower your bill. NerdWallet data shows that increasing a deductible from $1,000 to $2,500 leads to an average premium decrease of 9%.

    Finally, check the financial ratings for any insurers you’re considering through AM Best, an independent agency that rates an insurer’s ability to pay out claims. “Even though B is good in school, B is not great in insurance,” Moore says. Look for an “A” rating to ensure the company can survive a catastrophic storm season.

    Think carefully before filing a claim

    NerdWallet’s editorial team found that premiums are 10% higher, on average, for homeowners who have made just one claim compared to those with a clean record.

    For minor repairs that fall near your deductible, paying out of pocket might save you more in the long run — as long as the job is well done. Make sure to protect your home from further damage right away, or you could face a denied claim in the future for failing to mitigate the loss.

    Avoid ‘storm chasers’

    After a big storm, salespeople will often go door-to-door in affected neighborhoods offering to inspect or fix roof damage. Don’t answer the door, Moore says.

    “We deal with a lot of fraud where they take the money for the down payment or they do a shoddy job, and just as soon as they blew in here with the storm that brought them, they’re gone.”

    Instead, look for local, licensed contractors with liability insurance and good reviews. Ask to see proof of insurance and a license number. You can verify the license with your state’s licensing agency.

    Invest in your roof

    Roof-related damage accounts for up to 90% of residential catastrophic losses, according to the Insurance Institute for Business & Home Safety (IBHS).

    Upgrading to the Fortified roof standard — a system developed by IBHS that involves sealing the roof deck and reinforcing its edges — can lead to discounts of up to 55% on the wind or hail portion of your premium in some states.

    If you replace your shingles, know that just because they’re marketed as “hail-resistant” or “impact-resistant” doesn’t mean they’ll stand up to baseball-sized ice. Several leading brands received a “marginal” rating from the IBHS. Aim for shingles rated “good” or higher.

  • Should I purchase an umbrella liability policy?

    What is umbrella insurance?

    Often referred to as excess liability coverage, umbrella insurance is a type of personal liability insurance that provides an additional layer of coverage beyond what standard homeowners, auto, or other vehicle coverage might provide.

    An umbrella policy kicks in when you reach the limit on the underlying liability coverage for these policies. It may also cover risks that those policies often do not, such as libel or slander.

    Should I purchase an umbrella insurance policy?

    You may want to think about umbrella insurance as an extra layer of protection for your assets. If someone sues you, your standard homeowners or auto policy will provide some liability coverage to pay for judgments against you and your attorney’s fees–up to the limit set in your policy. However, you may want to have the extra coverage of umbrella insurance in case a judgment against you exceeds your policy limits.

    Other reasons to consider umbrella insurance include certain activities and lifestyle risks that can attract the risk of someone suing you, such as:

    • owning a swimming pool and having pool parties
    • renting out a property you own
    • having a dog or a teenage driver in the house

    Since a personal umbrella policy goes into effect after the underlying policy coverage is exhausted, certain limits usually must be met to purchase umbrella coverage. Most insurers will want you to have at least $250,000 of liability insurance on your auto policy and $300,000 on your homeowners policy before selling you an umbrella liability policy for $1 million of additional coverage.