Small business owners are finding their insurance policies have limits on the payouts for demolition of buildings torched in riots.
A report by the Minneapolis Star Tribune showed that most insurance payouts for demolition cover about $25,000 to $50,000 in costs. Meanwhile, contractors in the area have submitted bids ranging from $200,000 to $300,000 for the work.
Small business owners should check their policies for limits on demolition. Depending on the policy, insurance could pay from $25,000 up to $250,000.
Total damages for riots could exceed $2 billion, according to a Bloomberg News insurance analyst. In Minnesota alone, insurers expect gross losses of $254.6 million. In Minnesota, 1,612 claims have been received, but insurers expect that number to rise to at least 1,714.
According to the Star Tribune, it often costs more to demolish buildings than the property is actually worth.
After Minnesota’s riots, cities have hired demolition crews to take down structures that were dangerous, presenting the property owners with bills totaling hundreds of thousands of dollars to haul away debris.
With most major insurers suffering losses in the millions now and with more riots expected, commercial property insurance premiums are rising, sometimes doubling. In other areas, carriers won’t write policies at all.
Author: Victor Varma
Long-term care insurance deductible limits raised
Long-term care insurance is one way to protect your assets in retirement. The plans often pay for half of the cost of care in a nursing home, for example.
For the 2020 tax year, the deduction limits have increased, according to the American Association for Long-Term Care Insurance.
Age 2020 $ 2019 $
40 or less 430 420
40-49 810 790
50-59 1,630 1,580
60-69 4,350 4,220
70+ 5,430 5,270
These deductions are available under the medical care expenses that are not reimbursed during the tax year and exceed 7.5 percent of adjusted gross income. Your adjusted gross income (AGI) is your taxable income minus adjustments such as contributions to a traditional IRA, according to TurboTax. That means most people won’t be able to claim medical expenses as a tax deduction at all, until they retire.
Unreimbursed medical expenses can include preventative care, surgeries, dental and vision care, psychological care, prescription medications and medical devices such as glasses, contacts, false teeth and hearing aids.
Here is an example of a medical deduction from efile.com:
AGI is $40,000 and your medical expenses are $5,000. In 2019 and 2020, you can deduct 7.5 percent of unreimbursed medical expenses. So, multiply $40,000 by 7.5 percent. The result is $3,000. That is how much you can deduct. So, $2,000 of your $5,000 medical expenses are not deductible.
Keep in mind these deductions are not applicable to linked benefit policies, such as life insurance and annuity policies.
Take advantage of the holiday mood in November real estate
At this time of year, everyone else is going over the river and through the woods to grandma’s house, but a brave few are headed into the real estate market. Is that a smart move?
Depends on how you look at it. There is no doubt that the real estate market slows down at the end of October. According to the National Association of Realtors, sales of existing homes drop about 30 percent between December and January. Home sales traditionally do not pick up until the end of January.
For sellers, the holidays still can be profitable. Holiday home buyers are usually serious about buying quickly. The buyers are hitting open houses while the browsers are off at the mall. Plus, for sellers, there is no better time to show a house than the holidays, when a tasteful Christmas tree, wreath and sparkling lights can make a house feel like your future home.
For buyers, it’s a great time too, because with less competition from others, buyers have a good negotiating position with sellers who want to move quickly. If a buyer finds a house during the holidays, it is possible that he or she will be able to come to an agreement with the seller to accommodate holiday plans.
If you are selling your home during the holidays, take this advice from home staging experts:
- Stick with simplicity. Take down your personal pictures and collections. Put up simple Christmas decorations, including a tree, wreath and a few strands of lights outside. Put a few nicely wrapped presents under your tree.
- Build a fire in the fireplace. Play holiday music softly. Put potted evergreens in place of potted flowers.
New Loan Estimates and Closing Disclosures
If it has been years since you took out a mortgage, you may notice that instead of a Good Faith Estimate, you are getting a Loan Estimate. You may wonder if these are the same things?
In 2015, the Consumer Financial Protection Bureau, a government agency that regulates consumer financial instruments such as mortgages, retired the Good Faith Estimate form (in part) and created the Loan Estimate form.
The Good Faith Estimate form was designed to reveal the terms and fees of a mortgage. However, since the lenders used their own language to describe the loans, multiple estimates could seem very different. Consumers were confused by that document.
The new Loan Estimate consolidates four forms into two: The Loan Estimate and the Closing Disclosure.
The new Loan Estimate is a three-page form that you receive within three business days after you apply. It is not a loan approval or rejection. It simply gives you loan terms, projected payments and closing costs for review.
Since the Loan Estimate standardizes the wording that lenders can use, you’ll see which costs are fixed and which are not, allowing you to shop lenders.
It also prevents surprise fees by establishing tolerance levels. If you do take the loan and the fee amount estimated is more than the amount paid, the lender makes up the difference.
You’ll notice that costs are also broken down into these categories: Loan Costs (origination charges, services you can’t shop for and services you can shop for) and Other Costs (taxes, government recording fees, pre-paid fees and initial escrow payments, for example).
The Closing Disclosure is a five-page form that buyers receive before closing. It has the final terms and costs associated with the mortgage and specifies the amount of money you need on-hand at closing. Buyers can easily compare the Loan Estimate to the Closing Disclosure. Buyers have three days to review and ask questions.
Fantastic seller’s market offers best prices in years
The millennial generation has grown up and they want to buy homes.
Every year for the next 10 years, millions of millennials will hit home buying age. The average age of a millennial is 32. The average age for home buying is 31, according to ETF Trends.
No wonder there is a record boom in buyers and potential buyers.
Available housing down
While there are lots of buyers, there are fewer homes for sale. That adds up to a supply and demand formula that puts sellers comfortably seated in the parlor, taking offers.
Half of the buyers who purchased a home in the last three months were forced into a bidding war, according to internet real estate company Redfin, as the average home sale price spiked 6 percent. That equals 100 straight months of price gains, according to the National Association of Realtors.
It isn’t just millennials who are buying these days, either. A new wave of city dwellers from cities like New York are looking to the suburbs to escape violence and lockdowns. In July, there was a 44 percent increase in suburban home sales and in some cases, homes sold for prices that were as much as 21 percent over list, according to The New York Times.
Homebuilders busy
With this reality in mind, homebuilders are busy. New home starts jumped to their highest level since 2006. Housing starts increased 17 percent in June. Nearly six in 10 homebuilders have raised their prices, according to CNBC.
More houses built
Privately-owned housing starts in July zoomed up 22.6 percent above estimates and 9.4 percent above July 2019, according to the Census Bureau.
The number of completed homes was up 3.6 percent above estimates in July. That was 1.7 percent higher than the June 2019 rate.
COVID-19 lockdowns impacted housing starts in March, which were at their highest level since 2006. But starts have rebounded.
For home investors, the robust nature of the housing market should offer some safety for the next few years, according to Stephen McBride of ETF Trends.
Young retail investors win big with small stock buys
Many billionaire hedge fund managers did not see it coming.
When the stock market tanked in early 2020 as COVID-19 hit the U.S., hedge fund managers weren’t looking to buy. They thought stocks would go much lower.
Young retail investors were more optimistic. In March, stock in big companies was trading low and young people were buying.
Using retail stock apps like Robinhood, young investors saw bargains and invested stimulus money, savings or just their extra change into stocks.
But who would buy into Las Vegas casino and hotels when there was a global quarantine? Young people would. In March, if you had an extra $40, you could have bought one share of Wynn Resorts and more than doubled your money by now. You could have done even better on pharmaceutical stocks, especially the ones making vaccines. Those stock prices have tripled. One stock, Genius Brands, was selling at 33 cents in the first quarter. The stock reached over $10 per share recently.
According to Robinhood, three million new clients plunged their money into the market in 2020 during one of the worst first quarters on record. It created a ‘generational buying moment.’
Buying zero-commission stock by the share, or even a fraction of a share, is relatively new and millennials understood it immediately. The stock market has been democratized and everyone has access now.
COVID-19 vaccine could save many lives, despite rampant myths
Most people know by now that Bill Gates is not going to give you money or a free computer if you respond to a Facebook post.
He’s also not going to give you a secret microchip in a COVID-19 vaccine. This is one of the many myths madly circulating about a COVID-19 vaccine that have prompted about a quarter of Americans to say that they would decline a vaccine when it becomes available.
The Gates myth started in March 2020, when a widely shared article announced, incorrectly, “Bill Gates will use microchip implants to fight coronavirus.” Gates actually said in an interview that digital certificates could be used to show who has recovered, who has been tested and who received the vaccine. According to the BBC, one study, funded by The Gates Foundation, suggested that a special invisible tattoo mark could be used to show who has been vaccinated. Like a small pox vaccination scar, it would not be tracked and personal information would not be entered into a database.
Even so, the Microsoft billionaire does not control public health policy in the U.S.
Another myth in high circulation is that a DNA-based vaccine will genetically modify humans.
According to Mark Lynas, a visiting fellow at Cornell University’s Alliance for Science group, no vaccine can genetically modify human DNA.
In an interview with Reuters, Lynas said that the DNA in DNA vaccines does not integrate into the cell nucleus, so there is no genetic modification. When cells divide, they will only include your natural DNA. But DNA-based vaccines are promising for COVID-19 because DNA sequences could match the required bits of genetic code in the virus.
Understanding opportunity costs
In the thousands of little decisions we make every day, the costs are probably minimal. The difference in cost between taking a bologna sandwich or a turkey sandwich to work for lunch is trivial.
But the difference between a bologna sandwich for lunch and a lunch at a pricey restaurant starts to get our attention.
This is what economists call an opportunity cost.
The bologna sandwich costs a little more than a buck. The lunch at Swells Restaurant costs $40. That choice – the opportunity cost — is $39.
We could even think of the opportunity cost as much higher.
If we buy a $40 lunch every day during a 260-day work year, we would spend $10,400. If we brought a $1 sandwich to work, we would spend about $260. The opportunity cost is $10,140.
You could say that we had the opportunity to do something else with that $10,140 but instead, we bought lunch at Swells.
For some, buying lunch at Swells would be a low opportunity cost if they were negotiating million-dollar contracts at lunch.
For others, this would be a wildly inappropriate way to spend their money. That $10K could be the difference between an emergency savings account or an investment in an IRA for retirement. But one thing is for sure: The money can’t be in two places at once.
Opportunity costs can be dramatic when you look at big ticket items like cars and mortgages, or in savings and investment.
Suppose we did take that bologna sandwich to work every day for a year and banked the $39 per day. We’ll round up our savings to $10,000 for this example.
Now we have a choice. We can keep our $10K in a regular savings account at an interest rate of .01 percent. We won’t make any money, but we have the advantage of having the money handy for emergencies. On the other hand, we could invest the money in an IRA and expect a return of 5 percent or 10,500. Over 30 years, that would accumulate a balance of close to $50,000.
So, we could say that lunch every day for a year at Swells cost $40,000.
Consider disability insurance for unexpected illness or injury
Everyone knows a little about Social Security Disability, but not many working people realize it is very difficult to get. Only about 30 percent of the applicants are approved, and the system is cash strapped.
Still, becoming even temporarily unable to work is a very real problem. According to the Social Security Administration, one in four 20-year-olds will experience a disability for 90 days or more before they reach age 67. Suddenly, paying rent, making a car payment, even buying groceries will depend entirely on non-work resources. In the short term, maybe you could rely on savings, if you have them. Disability that lasts longer than 90 days becomes increasingly difficult.
One solution is disability insurance.
There are two kinds: Short-term and long-term.
According to Nerd Wallet, both types replace a portion of your monthly income up to a cap.
Short-term disability insurance typically replaces 60 to 70 percent of a base salary. It will pay out for a few months, or maybe even a year, depending on the policy. It has a short waiting period, sometimes just two weeks, after you become disabled and before benefits are paid.
Long-Term coverage replaces 40 to 60 percent of a salary and benefits end when disability ends. It may have a cap on the number of years, or it may end at retirement age. The waiting period usually is longer: up to 90 days after disability before benefits are paid.
Rates vary according to age, smoking, income, occupation, gender (women usually pay more because they file more claims) and other factors. The annual price ranges from 1 percent to 3 percent of annual income.
As the work force ages and Americans live longer with diseases such as cancer, disability rates are rising. People aren’t always able to keep working.
Some things an individual should consider when buying a policy:
- Check to see if disability insurance is available at work.
- Find out what conditions are covered as a disability under the policy.
- If the policy covers you for “own occupation,” it protects you if you can’t perform the specialized tasks of your career. “Any occupation” coverage will not pay if you can still work in any occupation at all.
- To save money, lengthen the time before benefits kick in rather than limiting the period during which you can receive payments.
- Choose long-term disability over short-term disability.
- Check to see if a policy you buy at work is portable or convertible so you can take it with you to another job.
Are you uninsured or under-insured?
Life comes at you fast. In your youth at the peak of your health, in middle age, at the height of responsibility, what if an accident or illness took you off the family map? We all know it can happen and few think it will.
As a matter of fact, about 40 percent of people have no life insurance at all. Of the people with life insurance, about half are underinsured.
But the cold fact remains: What happens to your family if you die? Will they be able to afford the house? How will their lifestyle change? Who will support the family? How will they support the family?
Life insurance answers many of those questions — and it answers them affordably.
The least expensive form of life insurance — term insurance — is very inexpensive. A healthy 30-year-old can get $250,000 of insurance for about $15 per month. The earlier you buy term insurance, the less expensive it is and many policies don’t even require a health check.
Many people have life coverage at work, but this should be reviewed because it may not be enough. Primary breadwinners should have coverage equal to six to 10 times their annual incomes. Term policies usually cover only your working life.
Whole life is another kind of life insurance. Unlike term policies, it covers you for life, as long as you make payments. It also has the benefit of building cash value. Although most experts say it shouldn’t be considered an investment, if you get a big policy at a young enough age, and keep it until retirement, you could have a nice nest egg to tap into at retirement. Whole life policies can also be cashed in by your Power of Attorney for some part of the face value if you enter a nursing home, for example. It could be considered a small inheritance. Whole life policies usually require a medical exam and are unlikely to cover smokers.
Many websites compare costs of life insurance options.
