A person who accidentally injures another, or damages his/her property, could be sued for hundreds of thousands of dollars, maybe millions of dollars. Having an “umbrella” insurance policy could keep them from losing their homes, investments, life’s savings and future income.
The term umbrella is used because it covers liability claims from all policies underneath it, such as auto and homeowner policies.
The question is: Do you need an umbrella?
Recent stories in the New York Times show how an umbrella policy would work. Say you crash into a Mercedes with a highly paid executive at the wheel. He is injured so badly, he cannot return to work. A jury awards him millions of dollars, and you have to pay it. The court takes your savings, your home, all other assets, and requires you to pay part of your salary for decades.
People who have an umbrella policy would be covered for the damages. It protects their net worth over and above what other insurance does. And it pays legal costs for defending yourself against a law suit.
For people who have any sort of assets, like a home with a large amount of equity, umbrella insurance can be a key part of financial protection. But not many people carry it.
State Farm, the biggest home insurer in the country, says only about 12 percent of its policy holders buy umbrella coverage.
State Farm charges about $160 a year for a million dollars in coverage.
Insurance: Do you need an ‘umbrella’?
Home worth less than the mortgage?
If they had to be sold today, almost a quarter of American homes would bring less than the amount of their mortgages. Some of these mortgage holders decide to walk away from their homes even if they can afford to make the payments.
That is a mistake, especially if the homeowner plans to live in the home for several more years. Aside from legal problems and a credit rating that would keep them from buying a home or a new car, they lose money in the long run.
Consider a home bought for $500,000 in 2006 with a $50,000 down payment. Now the home is worth $375,000. If the owner walks away, the down payment and the principal payments are lost.
Historically, housing prices rise over time by 6 percent a year, according to the National Association of Realtors. Prices hit bottom in August of 2009.
To walk away now would be almost like selling at the bottom of the market. But if housing continues to recover at a modest 5 percent a year, after six years, the owner would break even, according to Smart Money magazine.
The $500,000 home would be worth $610,835 in 10 years and $1.3 million in 26 years when the mortgage is paid off.
Those who walk away now will also have to pay higher prices for a home by the time their credit rating allows them to buy again. In the meantime, renting a home will cost more with each succeeding year, while fixed-rate mortgage payments stay the same.
The case for staying with a mortgage is better than presently underwater property owners think it is.
Lithium could be the next golden mineral
In today’s market, lithium-ion batteries power everything from hybrid autos to laptops, cell phones and digital cameras. But just what is lithium and where does it come from?
Will it replace oil as the next “golden mineral asset”?
Listed as the third element on the periodic table, lithium has had many uses, most notably as a mood-altering drug for the treatment of mental disorders.
In manufacturing, it is used in the production of grease and glass. A crude form of lithium was used in production of the first hydrogen bomb.
Found in variable quantities in many countries, its mining is a growing industry in the South American countries of both Chile and Argentina.
Salar de Atacama, a dry lakebed700 miles north of Chile’s capital, Santiago, is one of the driest locations on earth. It is dry on the surface, but about 130 feet below the lakebed lies a brine-laden aquifer. It produces a greasy yellow substance from which lithium is extracted. This lakebed contains about 27 percent of the earth’s known supply of lithium.
The boom in lithium demand began in 1991 when Sony began producing its lithium-ion rechargeable batteries.
Hybrid and all-electric vehicles are now a market for larger versions of these batteries, which were first used to power small electronic devices.
The lithium carbonate salt is refined and used to create either lithium cobalt phosphateorlithiummanganese oxide, which act as an electrolyte in the batteries. Lithium ions travel between the battery’s anode and cathode in the production of electricity.
It’s a fact: Home prices rise over time
The marvel of the 30-year mortgage
Real estate prices have always had their ups and downs, and in the last year or two, they have certainly been in a down cycle. Over time, however, the median price of a home in the United States has consistently risen.
In the 30 years from 1968 to 1998, the median home price rose from $20,100 to $128,400, according to the National Association of Realtors. Anyone who stayed with their 30-year mortgage during this period was a big winner.
After only five years, the price of the $20,100 median home rose, on average, to $28,900.
The median price in 1978 was $48,700, and by 1988, it was $89,300, which means very significant gains were made within 10 and 20 years.
The NAR study shows that the average annual price increase in the 36-year study, from 1968 to 2004, was 6.4 percent.
What does all this mean now?
This is such an exciting time for home buyers!
First, while prices are no longer falling in most parts of the country, there are still many bargains available.
As prices recover more, buyers will find that the value of a home bought in 2010 will probably increase at a greater percentage than the 6.4 percent average. That’s because they bought their homes for less than they were actually worth.
While mortgage interest still hovers at 5 percent, buyers will be able to lock in this low rate for 30 years .
That interest rate won’t be available much longer. If you are a buyer, don’t take too long to make a decision.
Expecting an income tax refund?
The best things you can do now with $1,000
You love the idea of getting an income tax refund check from Uncle Sam. But you know that it’s really your own money, so consider these best-advised uses.
*Stash it. In case of a calamity or job loss, you could need money for six months’ worth of expenses set aside.
* Put it in a stock fund. Blue chips are expected to rise in the next year. Consider one by FMI Large Cap, recommends Money magazine.
* Buy a new front-loading washing machine. It will save up to $125 in water and electric costs in the coming year. Rebates of up to $250 are available. Other energy-saving appliances qualify for the rebate as well.
* Buy a gym membership. You’ll feel good and save money on medical expenses. A person 5 feet 10 inches tall who weighs more than 209 pounds spends an average of $1,429 more on health care costs in a year than someone weighing 174 pounds or less. For $1,000, you can buy a year’s gym membership and the services of a personal trainer to advise you on what to do there.
* If you are age 50 or older, put the $1,000 into your individual retirement account.
* Pay the $1,000 on your highest interest-rate debt. The interest you save, say 18 percent, is the same as getting a guaranteed 18 percent return on any investment. Eighteen percent is now common for credit cards.