+ 100% FREE
+ Unlimited Credit Reports
+ Unlimited Credit Scores
+ Credit Monitoring Protection
+ Credit Improvement Tips
+ Automatically Finds Savings
No credit card needed
You’re correct in wondering whether health insurance companies can drop you because just a couple of years ago, it was common for providers to stop covering customers once they got sick – something the insurers called “rescissions.” They would look for and exploit technical errors on your application in order to make the case that your claims were fraudulent or simply require that you sign forms giving them the right to curtail coverage at their discretion.
Things have changed, however, following the implementation of the Affordable Care Act of 2010, which contains a provision prohibiting health insurance companies from dropping you due to honest application errors. While this provision legally applies to policy years beginning on or after September 23, 2010, the health insurance companies agreed to apply it starting in May 2010, following negative press coverage over the insurance company WellPoint allegedly targeting breast cancer patients for rescission.
With that being said, insurance companies can still drop you if: 1) you intentionally use false information on your application or 2) fail to pay your premiums. If they choose to do so, they must provide you with 30 days' notice, giving you time to either appeal the decision or look for a new provider so that your coverage does not lapse.
It’s always difficult to give definitive answers when discussing matters of insurance coverage because so much depends on the specific language of your policy and the cause of your claim. At any rate, there are two issues at hand when you’re talking about burst pipes: 1) whether the insurer covers the pipes themselves and 2) whether they cover any resulting water damage.
Standard home insurance policies will generally pay for water damage that occurs as a result of a pipe within your house bursting. Whether or not they pay for replacing the pipe itself depends on whether the break occurred as a result of “sudden and unexpected” damage or some fault of your own (e.g. lack of proper maintenance or leaving your house unheated during the winter).
This also holds true if, for example, your washer leaks water into your basement. In most cases, the insurer will cover the water damage, but you’ll likely have to pay for the washer’s replacement parts. However, if it’s clear that the washer broke because of some fault of your own, you may be on the hook for everything.
Now, there are a few things for which you are hardly ever covered by a standard homeowner’s insurance policy, which means you might have to get more specialized supplemental coverage, like flood insurance, in order to garner the proper protection:
• Water damage resulting from a sewer backup
• Seepage from the ground into your home
• Flooding from a body of water (e.g. nearby stream, lake or ocean)
• Water damage done to your lawn
Finally, remember that water damage and flooding are very different in the minds of insurance agents, so if you are reporting flooding due to a burst pipe, do not actually use the word “flooding” to describe it. In addition, avoid reporting damage that you know is not covered by your policy because your insurance company may document it and it may look like a claim to insurance companies you work with in the future.
A student loan’s principal is not taxable, but the interest that you’ve paid on it during the tax year can be if certain conditions are met. More specifically, you must:
- Be the person liable for the loan
- Not file separately from your spouse (if applicable)
- Have a modified adjusted gross income below $60,000 for individuals and $120,000 for married couples filing jointly, for a full deduction. To be eligible for a prorated deduction, your modified adjusted gross income must be between $60,000 and $75,000 for individuals and between $120,000 and $150,000 for married couples filing jointly. Starting in 2013, student loan interest will only be deductible for the first 60 months.
It’s also important to note that one can only deduct interest that has accrued on student loan funds actually used for educational expenses (e.g. not a rental car used for traveling to job interviews). The loan in question also cannot come from a qualified employer plan or a relative. Finally, you do not have to fill out any additional forms to claim a student-loan-related deduction, but if you did not receive a 1099-E form indicating the amount of interest paid during the year, you’ll have to contact your lender for this information.
In short, no, homeowners insurance will not cover termite damage. Although it is always important to check the specifics of the policy in question, in general, homeowners insurance only covers sudden and accidental events. In the mind of an insurance agent, a termite or other pest infestation is considered a maintenance issue. If a pipe were to burst, it would be considered sudden and would most likely be covered by homeowners insurance. Since a termite infestation does not immediately cause irreversible damage, and is considered a manageable problem, it cannot be considered accidental or sudden.
It is important to schedule annual pest inspections and proactively treat potential infestations. However, if you do have a termite problem and it causes collateral damage, such as a collapsed wall or damage to electronics, all may not be lost. The collateral damage caused by the termites is most likely covered by your homeowner’s insurance policy because it is considered sudden damage. However, the cost of replacing the termite-damaged portions of the home will still fall on you. Read your homeowner’s policy carefully to determine what types of collateral damage are covered.
If you live in an area known to have active termite populations, a termite bond may offer the type of protection you need. A termite bond is an agreement between the homeowner and a local pest control company. Typically, it states that the company will perform regular inspections and treatments and will be responsible for any damage caused by a termite infestation. The language and specifics of a termite bond agreement differ between companies, so be sure to read what is covered before signing anything.
Under the National Flood Insurance Program (NFIP), federally regulated or insured lenders must require that customers living in high-risk flood areas have flood insurance. That, of course, begs the question of what is a high-risk flood area.
Well, they are areas that have at least a 1% chance of flooding annually and therefore at least a 26% chance of flooding over the life of a 30-year mortgage, according to FEMA (Federal Emergency Management Agency). You can find maps here (http://www.floodsmart.gov/floodsmart/pages/flooding_flood_risks/map_update_schedule.jsp) that allow you to look up the flood risks of different areas based on zip code, but as I’m sure you can guess, the areas with the highest risk of flooding are inevitably going to be coastal towns and low-lying areas either close to a body of water or where it rains a lot.
In moderate-to-low flood risk areas, you won’t be required to get flood insurance, but it could be a good idea. FEMA says that these areas account for 20% of all National Flood Insurance Program claims and 33% of the assistance provided. You might therefore want to check out historical flood data and ask others who live in the area whether they have flood insurance or not before making a final decision.
Now, it’s important to note that what FEMA designates as high-flood-risk areas often changes as a result of regular statistical analysis of river flow, tides, rainfall, topography, etc. So don’t be surprised if your mortgage lender sends you a letter one year informing you of a new flood insurance requirement.
Ultimately, if you aren’t required to have flood insurance, you’ll want to make an informed decision about whether it is truly needed, based not on insurance company scare techniques or anything like that, but rather on the true risk that comes with not having it.
It’s, well, common for people to wonder about the most common tax deductions, given that everyone inevitably feels the tab is too high. We’ve also heard a lot about companies and the super wealthy largely skirting taxes because of deductions and creative accounting, so it’s fair to wonder how we can join the party.
Indeed, taxpayers claim roughly $1.7 trillion in deductions annually, so being aware of the most common ones can certainly help you save and not being aware will cost you. Everyone gets what is called a standard deduction – the amount of which varies by year and filing status – if they do not itemize their expenses on their tax returns. Whether to itemize or not largely depends on whether individual deductions in the following major categories would exceed the amount of the standard deduction.
Homeowner’s Costs: There are a number of deductions related to home ownership that you might qualify for. One of the most common tax deductions is that related to mortgage interest. You can deduct the full cost of your annual mortgage interest if you are the party liable for the home loan and the home is “qualified,” which simply means that it has places to cook, sleep, and use the restroom.
Discount points (i.e. amounts paid to lower the interest rate on a home loan) can also be deducted. For new mortgages, you can deduct in a single year the full amount paid for discount points, while you can only deduct a fraction each year after refinancing (e.g. each year, you can deduct 1/30 the cost of discount points purchased in refinancing a 30-year mortgage).
Finally, you can deduct state, federal, and foreign real estate taxes as well as up to $500 in energy-saving home improvements (e.g. new insulation).
State and local taxes: You can either deduct state and local income taxes or state and local sales taxes. Which to choose is a no-brainer for people living in states without one or the other. If you don’t live in such a state, the income tax deduction will likely be more beneficial, but if you’ve made a big-ticket purchase (e.g. a car, motorcycle or boat) in the past year, it might be reason enough to go for the sales tax deduction. The IRS has tables online for how much you can deduct based on where you live and how much you make – remember to add the sales tax from any significant purchases (up to the amount paid at the general tax rate) to these amounts.
Medical Expenses: You can deduct certain medical expenses (e.g. prescriptions, doctor’s appointments, etc.) in addition to logistical costs related to your medical expenses (e.g. parking and gas). Deductible expenses must be related to the prevention, diagnosis, treatment and cure of disease (i.e. not things like cosmetic procedures, health club membership fees, nutritional supplements), and only the amount of those expenses that exceed 7.5% of your adjusted gross income can be deducted.
Charitable donations: This not only includes money you give, but also donated credit card rewards, materials purchased when volunteering, gas and tolls paid when driving for a charitable organization, and donated goods.
Job-search expenses: You can generally deduct cab fare, printing costs, business cards, and mailing costs associated with looking for a job. If you have to travel out of town for an interview, food and lodging can also be deducted. This does not apply to people looking for their first jobs; however, if your first job takes you more than 50 miles from your old home, you can deduct certain moving costs.
Baggage Fees: If you are self-employed and travel for business, you can deduct the cost of checking luggage on a flight.
Estate IRA: If you inherit an IRA from a friend or relative’s estate, which qualified for the federal estate tax, you can deduct the interest this account added to the estate’s tax bill as you withdraw funds.
Education: You can deduct interest from a student loan and, if your adjusted gross income is less than $80,000, get up to a $2,500 credit for education expenses incurred during the year (American Opportunity Credit).
Reservist Travel: If you’re a military reservist who travels more than 100 miles from home for training and drills that require an overnight stay, you can deduct the cost of lodging and 50% of your meals as well as gas if you drive your own car.
Medicare for the Self-Employed: People who run their own businesses after qualifying for Medicare can deduct premiums and Medigap insurance costs.
Childcare: If you have to pay for childcare while working, you can get a tax credit worth 25% - 35% of the cost.