Underinsuring property is a poor decision
DEAR BRUCE: My wife and I recently bought a home for $500,000. Our insurance agent suggested that we should get a liability policy for twice the value. Is this going to be enough? We are worth a lot more than $1 million and can certainly afford a higher premium. I just want to make sure that we are adequately protected. ‘ Y.P. in Nevada
DEAR Y.P.: First and foremost, $1 million is not an adequate amount of coverage at all. You should have a standard liability policy in your homeowners and add at least $2 million to $3 million with an umbrella policy. You might say that it would be difficult to get into circumstances where the liability would go that high, but trust me, it happens every day. The difference in the price of a couple million dollars’ worth of insurance is not enough to get excited about. The difference in coverage, though, can be enormous.
DEAR BRUCE: Recently, my credit-card bill showed a charge of $74.34 for items that I did not order. These items had been sent to my home, and I sent them back registered mail so I would have a record that the company received them. It has been two months, and the firm still has not credited me with my money. I keep calling, but am not getting any satisfaction. Is there anything else I can do? ‘ M.S. in Pennsylvania
DEAR M.S.: You are going to have to contact the credit-card company. Once you provide the required information, it will probably take another two months to fix the problem. Just make sure that you’re persistent, and it will get resolved.
DEAR BRUCE: A telephone-company rep convinced us to switch our long-distance service. Unfortunately, the program he discussed turned out to be unavailable. Of course, we didn’t find this out until we got the bill. Now the company will not honor the original offer. I have filed a complaint with the firm. Is this legal? What can we do? ‘ N.K. in Michigan
DEAR N.K.: The basic weakness here is that you talked to someone over the telephone. You have nothing in writing to substantiate the offer. It is possible ‘ though not necessarily likely ‘ that you misunderstood. It is also possible that the representative exaggerated to make the sale. In any event, I don’t believe there is anything you can do other than to switch back to your original carrier or to a third carrier if you find one that better meets your needs.
The real stickler: whether the new company is going to hold you to a long-term contract. If that’s the case, I would call the public-utility commission in your state and register a complaint.
DEAR BRUCE: I will soon be receiving a settlement from a malpractice lawsuit settled out of court. My 13-year-old son was included in the suit, and I plan to give him $30,000. I want to invest this money in an annuity, with checks paid to him starting at age 25, but I am at a loss as to how to go about doing this. I have no idea which company would be the best for this investment. Can you offer any advice on this matter? ‘ I.O., via e-mail
DEAR I.O.: First of all, I’m at a loss as to how you arrived at the $30,000 number. You said you plan to give your son the money and that he was included in the lawsuit. It seems as if this would be some kind of stipulation by the court. That said, I’m not at all certain that you have the authority to keep the money from him. If your son was included in the suit, the money might have to be invested under the stewardship of the court and paid out to him at age 18. It would be quite different if you were the beneficiary and could use the proceeds any way you wanted. But before you go out and buy any annuities ‘ which can be a difficult path ‘ consult an attorney.
I would be careful with regard to annuities. While they can be valuable in certain circumstances, more often than not, the salesperson gets the best deal of all with a substantial commission; there are better ways to invest.
DEAR BRUCE: My husband is 53 and has worked for the same company for 20-plus years. Recently, he was let go. He has great credentials and has been in contact with many companies, but no one has responded. I know times are tough, but it’s hard to believe that, with his credentials, no one wants him. We have talked about hiring an agency, but it charges in the thousands of dollars. We’re not sure which way to go. — Frustrated, via e-mail
DEAR FRUSTRATED: As you pointed out, many companies are having a tough time right now, and many are cutting back. It may be a struggle to find that perfect job; however, I would not pay anyone for a job — unless it was hand delivered. With so many people out of work at the moment, companies are going to claim that they will help you seek a job and spruce up your resume. But in my judgment, these avenues are not worth pursuing.
Your husband’s age may very well be working against him, too. Older employees are more expensive to insure if health and life insurance are part of the job package. He may have to seek part-time employment, where the company would not be obliged to provide the fringe-benefits package. That could make a difference. Furthermore, if he has the skills, he might offer himself as a consultant on a per-diem basis. Once again, the ordinary overhead is considerably reduced.
Send your questions to: Smart Money, P.O. Box 2095, Elfers, FL 34680. E-mail to: bruce@brucewilliams.com. Questions of general interest will be answered in future columns.