'Were in a chip war': Koreas lead on chips worries about losing to the U.S.
Tesla incentives help realize record deliveries in the fourth quarterbut they're still short of Wall Street estimates
Heres what to do when your home insurance has been canceled
Homeowners insurance is an essential tool to protect one of your most valuable assets: your home. These policies are designed to cover you financially in the event of theft, fire, and other costly events.
But with many regions of the country being impacted by the worsening fallout from climate change, non-renewal of homeowners insurance policies is becoming more commonplace. And there are other reasons your home insurance could unexpectedly be canceled as wellincluding lapses in payment or even misrepresentation of information.
When this happens, it can (understandably) cause panic. But this dilemma can be solved if you know the critical next steps to take.
Different types of terminations
There are many different reasons why an insurer might terminate your policy or decline renewal. The good news is that in some cases you may be able to rectify the issue and resume coverage. However, thats not always a possibility, and you may find yourself suddenly shopping for new insurance.
Insurance companies have strict rules about what makes a home uninsurable and look at a lot of factors.Those factors can change over time, making a previously acceptable home no longer eligible. Or the insurance company may have only just discovered an issue that was there all along, says Leslie Kasperowicz of Insurance.com.
Some of the reasons your insurance might be terminated or not renewed range from being in a geographic area thats impacted by increasingly severe weather events, the home falling into severe disrepair, and or misrepresentation of information when you initiated the policy.
Cancellation
The most common reasons a home insurance policy is canceled include material misrepresentation or breach of contract. Material misrepresentation typically means something about the home isnt as it was described on the application, and the omitted information would have prevented the insurance company from issuing the policy in the first place.
That can be a statement that isnt true or the omission of an important fact, says Kasperowicz. For example, if an applicant states that the roof of the home was replaced five years ago, but an inspection reveals that the roof is 25 years old and has a lot of damage, the insurance company could cancel the policy.
Issues that can trigger a breach of contract include instances of fraud, lying about a claim, or inspection-related reasons like the poor condition of your home.
Lapses
Non-payment or a lapse in your payments is also grounds for canceling a home insurance policy. However, this is typically the easiest situation to resolve as theres often a grace period during which youre allowed to catch up with payments and have the policy reinstated.
However, during the lapse in coverage, any claims filed wouldnt be paid, and when there are too many lapses, even though you eventually pay, can be grounds to cancel the policy altogether, says Kasperowicz.
Its also not a good idea to have too many lapses because other insurance companies will see it as a risk, and you may incur higher premiums elsewhere when you apply for a new policy.
Non-renewal
Non-renewal is the most common type of cancellation and typically means that the policy will not be made available again at the end of its current term. This situation is often triggered by a change in the risk level associated with your home.
An insurance company, for instance, may see your home as a higher risk if there have been a lot of claims. There are laws that prevent insurers from dropping coverage based on claims that were caused by natural factors like storms, but other claims, like theft or fire, can be used against you, explains Kasperowicz.
In addition, if perhaps your home hasnt been well maintained and the insurance company finds out, it may opt not to non-renew the policy if the necessary repairs arent made. Anything the insurance company sees as a risk, like a worn-out roof, can lead to non-renewal.
In still other cases, insurers may choose to end all policies in a given geographic area when that area has become too risky. This typically happens in areas that are at a high risk of natural disasters but may also be related to other issues like high levels of litigation or fraud.
In some cases, an insurer may find that certain coverages are not financially viable, says Renata Balasco, insurance expert and a licensed agent for The Zebra. An insurance company may pull out of covering your area due to extreme weather conditions. Homeowners in California have struggled with such changes in recent years after extensive wildfires and other natural disasters. Companies have attempted to void or refuse coverage in these areas, resulting in non-renewals for homeowners.
In advance of a non-renewal, you should receive a notice explaining the reasons for the insurers decision. This notification is designed to allow you time to find a new policy. Legal notification requirements vary by state, but insurers are usually required to give customers between 30 and 60 days notice in the event of non-renewal, says Balasco.
What to do if your insurance is terminated
Having your policy canceled can be worrisome and frustrating. Depending on the reason for cancellation, you may have some options.
Non-payment: Typically in cases of non-payment, you can reach out to your insurance provider and make your past-due payments in an attempt to get the policy reinstated. Every company is different, and nothing is guaranteed, but some insurers may offer a grace period and may work with you on reinstatement, says Balasco
Similarly, if your policy was canceled or non-renewed because of an inspection-related issue, its possible the company may reinstate you if you fix the problem. You also have the right to dispute the cancellation, request remediation or file a complaint with your states insurance department.
Condition of the home: If the non-renewal or cancellation was due to issues tied to the condition of the home or an inspection, find out whether fixing these issues will allow the policy to be reinstated. Its possible the company may reinstate you if you fix the problem, says Balasco. You also have the right to dispute the cancellation, request remediation, or file a complaint with your states insurance department.
For example, if your insurance company non-renews your policy because there are dead trees on the property threatening to fall and cause serious damage, having those trees taken down and providing proof should get your coverage reinstated.
Once the risk is eliminated, the home will be eligible for coverage again, says Kasperowicz.
Shopping for new insurance
If your insurance is not being renewed or cannot be reinstated, its important to immediately start shopping for another policy.
Online insurance comparison sites can be a good place to start. They can provide insight regarding the insurance companies offering coverage in your region and the general price ranges for policies. Its always a good idea to obtain quotes from multiple companies and be sure to ask about what the policy will and will not cover for the price quote that was provided.
You might also consider asking neighbors which companies insure their homes If the home is in the same neighborhood, the odds are good that it has a similar risk profile and that their company might accept your home, too, says Kasperowicz.
If you live in a geographic region where insurance companies are no longer providing coverage or are simply not having luck securing insurance for any other reason, there are state-run Fair Access Insurance Requirements plans (FAIR plans). However, there are several drawbacks to such policies. This includes higher-than-average premiums and limited coverage under such policies.
FAIR plans are an option of last resort, says Kasperowicz. After youve been turned down by several insurance companies, you can contact your states department of insurance to find out if there is a [FAIR] plan and how to apply.
Its important to note that these policies are designed to simply offer basic coverage and alleviate the financial burden for those who may otherwise not be able to obtain home insurance. FAIR policies do not provide coverage thats as comprehensive as private insurers.
The takeaway
Home insurance policies may be canceled or not renewed for a variety of reasons. This could be because youve fallen behind on payments or you misrepresented something about yourself or your home when initiating the policy. In addition, your policy may not be renewed if you live in a high-risk area. If you suddenly find yourself facing any of these challenges, its important to rectify the situation as soon as possible or begin shopping for new insurance so that your home is not without coverage.
We asked 1,261 voters about the crackdown on ESG investing. Youll never guess which partys voters are most opposed to it
Institutional homebuyer Yieldstreet slashes buying levels by 90% as it awaits a sharper home price correction
'Avengers' star Jeremy Renner in critical but stable condition after serious injury sustained while plowing snow
Avoid these mistakes with required minimum distributions
As you approach the age of 72, its time to start thinking about taking required minimum distributions (RMDs) from your retirement accounts such as 401(k)s, 403(b)s, and individual retirement accounts (IRAs). There are many rules and requirements surrounding these mandated withdrawals to be aware ofnot to mention tax ramifications.
To avoid costly mistakes, such as withdrawing the wrong amount or forgetting to take a distribution altogether, its a good idea to make a long-term plan that maps out your retirement distribution schedule.
What is a required minimum distribution?
An RMD is a mandated annual withdrawal from a retirement account such as an IRA or 401(k). Its the minimum amount you must withdraw after reaching a certain age in order to comply with federal tax laws.
After you reach age 72, the IRS requires you to distribute some of your retirement savings each year from qualified retirement accounts like a 401(k), 403(b), and most IRAs, says Sri Reddy, senior vice president of retirement solutions for Principal Financial Group. However, there are certain exemptions that qualify for delayif someone is still working at age 72, and they dont own more than 5% of a business, they can wait to start RMD until April 1, following the year they retire.
Roth IRAs, which are funded with after-tax money, represent yet another exception to distribution rules. There are no required minimum distributions with these accounts, meaning the money can be left in the IRA by the original owner for their entire lifetime if desired.
For other retirement savings accounts, the required minimum distributions must be taken during retirement, whether or not you need the money.
Taking the RMD is a routine task for many retirees, but there are specific situations where more consideration should be given to your options, says Melissa Shaw, wealth management advisor for TIAA.
Mistakes to avoid with required minimum distributions
1. Delaying your first RMD
Generally, youre required to take RMDs by December 31 each year. However, for the first year after you turn 72 and are retired, you have until April 1 of the subsequent year to take your initial distribution.
But if you take advantage of that extended deadline, you will then have to take two distributions within a 12-month timeframe. This is because youll still need to take your next annual minimum distribution by December 31 of that year.
Taking two RMDs in one year can impact your annual income as the distributions are taxed as ordinary income. Too much income in one year from retirement accounts can potentially put you into a higher tax bracket.
2. Forgetting to take your RMD
Another common mistake is simply forgetting to take your RMD. The IRS assesses a 50% penalty on the RMD amount if you dont take it by the annual deadline.
This is a completely avoidable penalty, says Shaw. Most financial institutions give you options to set up automatic RMD withdrawals each year. These withdrawals can be set to monthly distributions if you need to replace your income, semi-annual distributions, quarterly distributions, or annual distributions. Automating your RMD withdrawals is a good way to ensure it will be taken care of, even if you forget about it.
3. Mixing plan types to meet RMDs
For those who have multiple types of retirement accounts, its important to understand the rules regarding annual distributions for each individual account. Most importantly, you are not allowed to use withdrawals from different types of retirement accountssuch as an IRA and a 401(k)to meet the annual RMD threshold for one of those accounts.
For instance, you cannot take withdrawals from both a traditional IRA and your 401(k) in order to simply meet the RMD requirements for your traditional IRA. On the other hand, if you have several retirement accounts of the same typesuch as multiple traditional IRAs, you can use withdrawals across those accounts to meet your annual RMD for one.
If someone has more than one traditional IRA account, they can take the total IRA RMD from one of the IRAs or from any combination of them, explains Reddy.
Theres also a distinction to understand with regard to employment plans you hold with past employers you may have worked with over the course of your career. Here too, there are specific nuances that must be followed carefully.
For those with an employer-sponsored retirement plan from a former employer, the RMD must be taken directly from that plan. If they have more than one former retirement plan, its required to take RMD from each plan separately, with no consolidation permitted, adds Reddy.
4. Combining RMDs with your spouse
While there are a host of financial benefits to consider as part of a marriage, retirement accounts must be held individually. They are not joint assets. And that reality impacts how RMDs are handled. Often, couples assume they can take the entire annual required distribution out of one spouses account. But that is not the case.
This will be viewed as a missed distribution for the non-withdrawing spouse, activating the 50% excise tax guideline on that distribution, says Reddy. As well, that larger distribution from the withdrawing spouse can have several tax implications, including the possibility of pushing [annual income] into a different income bracket.
5. Withdrawing the wrong amount
Finally, its important to calculate your RMDs correctly. Withdrawing less than your RMD, for instance, may result in a tax penalty of up to 50% of the amount you were required to withdraw. There are RMD calculators available online that can help you sort through the complicated task of determining the correct withdrawal amount.
Most importantly, you must calculate your annual RMD using the account balance as of December 31 of the previous year. But thats not the only consideration.
RMDs are calculated by dividing the December 31 balance of each account by life expectancy, as estimated by IRS life expectancy tables, explains Reddy. As retirees get older and life expectancy decreases, RMD will increase. At age 90, for instance, the withdrawal amount is almost 10% of an accounts value.
The IRS provides worksheets to help with these calculations. In addition, many financial institutions calculate RMD for plan participants. But, the account holder is still responsible for withdrawing the correct amount.
Making a long-term plan for required minimum distributions
One of the best ways to keep track of your RMDs and manage the tax bills associated with your withdrawals is to develop a long-term plan mapping out your distributions. This is particularly essential if you have multiple retirement accounts that youll be juggling.
Talking with a financial advisor can be helpful when developing this type of plan.
When considering a long-term plan, its important to factor in basic needs, potential health care expenses, and the lifestyle you want to live in retirement, says Reddy. This will help you understand your drawdown plan when it comes time to take an RMD each and every year. These considerations should be thought through in the five or so years leading into your proposed retirement.
The takeaway
Required minimum distributions can have a significant impact on your retirement income. If you miss withdrawal deadlines or withdraw the wrong amount, it may trigger costly consequences, including a tax penalty of 50% on your RMD and bump you into a higher tax bracket for the year. Understanding the rules and regulations surrounding how you meet annual RMDs from different types of retirement accounts is also critical.
Creating a long-term plan that maps out how your RMDs will be handled and when they will be taken can help you avoid expensive mistakes.
More Articles ...
Newspapers
