8 Risky Jobs That Pay Big Bucks

Often with dangerous jobs, the pay doesn’t come close to compensating for the risk. In fact, plenty of perilous jobs pay paltry sums compared to other options. Take fishermen and loggers. They can expect median salaries of under $35,000 a year, $23,000 less than the mean for all workers. Yet the fatality rate for fishermen is nearly 39 times the rate for all occupations, the highest of any profession, in fact. Loggers, at nearly 28 times the overall fatality rate, rank second.

The COVID-19 pandemic shook up the risk scenario in the workplace. Overall, workplace injuries and illnesses were down 5.7% in 2020, compared to the previous year. But a closer look at the numbers reveals that while injuries dropped significantly, illnesses went way up. 

The pandemic also made a new group of low-paying jobs among the riskiest in the nation. Nursing assistants had the highest number of days of any profession away from work in 2020, the most recent year available, according to the Bureau of Labor Statistics. They had 1,024 days away from work per 10,000 workers in 2020, an increase of 14 times the rate in 2019. Yet nursing assistants make a mean wage of just over $30,000.

Going back the last few years before the pandemic, there were generally between 10,000 and 11,000 respiratory illnesses among U.S. workers each year. In 2020, however, there were nearly 429,000. Conversely, the days away from work decreased slightly for heavy and tractor-trailer truck drivers, whose mean wage was just over $50,000, between 2019 and 2020.

As perilous as work has become for many during the pandemic, fewer people were injured on the job in 2020 than in any year since 2013, according to the most recent data from the Bureau of Labor Statistics. Still, those data showed an American worker died every 111 minutes from a job-related injury. The most common cause of death on the job was transportation-related incidents, which resulted in 1,778 deaths that year, more than 37% of all work-related deaths.

Not surprisingly, workers in jobs that involved transportation and moving material accounted for the biggest proportion of occupational deaths at a total of 2,258, accounting for more than 47% of the total work-related deaths in the U.S.

We believe that if you’re going to take a risky job, you should at least get compensated handsomely for it. So we crunched the numbers on injuries, fatalities and salaries to identify eight occupations offering paychecks that make up for the elevated risks by paying more than the national median of about $58,000. Top earners in many of these fields can enjoy six-figure salaries, in some cases even without college degrees. Plus, many of them won’t be replaced by technology, which spells job security. 

Take a look at these risky jobs that pay well.

Data sources: All data provided by the U.S. Bureau of Labor Statistics, unless otherwise noted. Most statistics from 2020, unless otherwise indicated. That year, the fatality rate for all occupations was 3.4 deaths per 100,000 workers.. “Top pay” represents the annual salary of a worker in the 90th percentile of an occupation, unless otherwise noted. We used the most updated data provided by BLS. In some instances, that was as far back as 2019 or older. Also, in some instances, the bureau provided median salary information, while for other occupations, it provided average salary information.

1 of 8

Airline Pilot

Photo of a man in an airplane cockpitPhoto of a man in an airplane cockpit
  • Number of workers: 42,770
  • Rate of injuries/illnesses: 34.3 (3.4 for all workers). 
  • This represents a decrease of the 2019 rate of 61.8 per 100,000 FTEs
  • Median annual salary: $115,080
  • Top pay: $197,400*
  • Annual fatalities: 4

Flying may be safer than driving, with crashes exceedingly rare, but pilots still manage to get hurt. The most common injury to pilots is back strain, no doubt exacerbated by countless hours spent in flight decks. Still, the pay might well make the risks worthwhile. Annual median wages for airline pilots, copilots and flight engineers are the highest of all our risky jobs.

You can save yourself the cost of college by heading straight to flight school, though most airlines prefer to hire degree-holders. You’ll need the edge. Competition for openings can be fierce, given industry consolidation and the job market’s overall weakness. You’ll also have to clock the flight hours necessary to even apply for an airline job. The Federal Aviation Administration requires applicants for pilot and first officer positions to have a minimum of 1,500 hours of total flight time.

But if you rack up enough experience and airborne hours, annual pay with the major airlines can soar to $200,000 or more, according to AirlinePilotCentral.com. Similarly plump salaries can be had if you land an offer from one of the flying freight giants. FedEx and UPS pay their captains at least $212,000 and $233,000 a year, respectively, starting in just their second years. Bonus: no whiny passengers.

*According to Airline Pilot Central, United offers its 12th year captains of Boeing 777 planes the highest minimum annual salary of all the legacy airlines.

2 of 8

Private Detective

Photo of a man in sunglasses behind the wheel of a car holding a cameraPhoto of a man in sunglasses behind the wheel of a car holding a camera
  • Number of workers:  33,700
  • Rate of injuries/illnesses: 122.6 per 10,000 workers
  • Median workdays missed due to injury/illness: 43
  • Mean annual salary: $60,970
  • Top pay: $98,070
  • Annual fatalities: 1

Digging up information can be pretty strenuous work. Gumshoes sustain most of their injuries in car accidents and physical altercations. But even those tallies are relatively low, so the above-average pay for private eyes may be worth the slightly elevated risk.

Most detective work does not have an education requirement, but the ability to learn on the job is a must, and previous related work experience is a plus. You’ll also need a license in most states; requirements vary. And if you specialize in certain fields, say insurance fraud or computer forensics, a related bachelor’s degree might be necessary for some corporate investigators.

That expertise can not only help you solve whodunits but also push up your pay. Investigative agencies, both large and small, are by far the biggest employers of detectives. Distant runner-ups are law firms and state and local governments.

3 of 8

Registered Nurse

photo of a nurse and a patientphoto of a nurse and a patient
  • Number of workers: 3 million
  • Rate of injuries/illnesses: 1023.8 per 10,000 workers
  • Median workdays missed due to injury/illness: 8
  • Median annual salary: $75,330
  • Top pay: $103,000
  • Annual fatalities: 12

Registered nurses were among those most affected by COVID; they endured a whopping 78,740 injuries and illnesses in 2020, an increase of more than 290% over 2019 when there were 20,150 injuries and illnesses among registered nurses, according to the Bureau of Labor Statistics. In 2020, the number of cases in which registered nurses had days away from work increased by 58,590 cases (290.8 percent) to 78,740 cases, according to the Bureau of Labor Statistics.

The states with the largest increase in cases among nurses who had days away from work were Michigan, where cases rose more than 1,000% and Iowa, which had an increase of more than 900%. .

Typical wages about 88% above the national median might help compensate for  the pain. California registered nurses earn a particularly comfortable wage, into six figures in nine West Coast metro areas.

You need a bachelor’s or associate’s degree in nursing or a diploma from an accredited nursing program in order to become an RN. If you extend your education to a master’s degree, you can earn even more; median annual pay for nurse practitioners is nearly $90,000, and top earners make $120,500 a year.

According to Indeed.com, the average base salary for a registered nurse is nearly $89,000 as of May 2022. That ranges from $80,266 for nurses with less than a year of experience to $104,907 for those with more than 10 years of experience. New York is the highest paying city where registered nurses earn an average of nearly $103,000 a year. But Iindeed says just 62% of registered nurses in the U.S. think their salaries are enough for the cost of living in their area.

4 of 8

Professional Athlete

Photo of a baseball, football and basketball playerPhoto of a baseball, football and basketball player
  • Number of workers: 16,700
  • Rate of injuries/illnesses: 1,542.1 per 10,000 workers
  • Median workdays missed due to injury/illness: 10
  • Median annual salary: $77,300
  • Top pay: $107.5 million
  • Annual fatalities: 10

When your job is to exercise and physically compete on a regular basis, your body is bound to get a little run down. More than half of the injuries reported by athletes are sprains, strains and tears. But what’s becoming a little worse for wear when you get to play the game you love for a living?

The above-average pay doesn’t hurt, either. It would behoove players to save that extra income. Athletic careers offer little stability and are often short-lived. According to Indeed.com, the average professional athlete base salary as of April 20222 was $115,429, including $222,275 for the NFL. The highest paying city for professional athletes was New York, where the average salary is $133,762.

According to the job website Ladders, the top-paid American athlete is Dallas Cowboys quarterback Dak Prescott who earns a jaw-dropping $107.5 million a year.

But just 45% of professional athletes in the U.S. report being satisfied that their salaries are enough for the cost of living in their area.

5 of 8

Police Officer

Photo of a torso of a police officer holding a firearmPhoto of a torso of a police officer holding a firearm
  • Number of workers: 665,000
  • Rate of injuries/illnesses: 121.7 per 10,000 workers
  • Median workdays missed due to injury/illness: 15
  • Median annual salary: $64,610
  • Top pay: $102,530
  • Annual fatalities: 105 

Police work is truly risky business. Exhibit A: The number of work-related deaths for cops is the greatest of all the occupations on this list. Still, the fatality rate is just 18.6 per 100,000 workers, about on par with taxi drivers.

If you don’t mind mixing it up with the occasional physical altercation or high-speed chase, paychecks 59% higher than the national median may be worth sustaining some sprains, strains and tears (the most common injuries for police officers). You can enter the police academy after graduating from high school or getting your GED, though many agencies require some college coursework or a college degree. But you have to be at least 21 years old to become an officer (younger recruits can be cadets and do clerical work until they’re of age). A college degree can help fatten your paycheck, however. A B.A. in criminal justice can push salaries into six figures, according to Payscale.

Indeed.com reports the average base salary for a U.S. police officer is $55,390. This ranges from $46,900 for officers with less than a year of experience to $76,650 for those with more than ten years of experience. The highest paying city is San Jose, California, where officers make an average of $131,000. According to Indeed, 53% of police officers report being satisfied that their salaries are enough for the cost of living in their area. 

Note that while the Bureau of Labor Statistics data for wages for police officers refer to 2021, the most currently available injury and illness information dates to 2018.

6 of 8

Railroad Conductor/Yardmaster

Photo of a trainPhoto of a train
  • Number of workers: 48,030 
  • Rate of injuries/illnesses: 180 per 10,000 workers
  • Median workdays missed due to injury/illness: 22
  • Median annual salary: $63,960
  • Top pay: $82,460
  • Annual fatalities: 11 in 2019

Train-track tragedies are as uncommon as they are heartbreaking. Overall, railroad safety has improved dramatically over the past decade. Heading the crews of freight and passenger trains and rail yards, railroad conductors and yardmasters have the highest rates of injury of all rail transportation workers, but they have the potential to score the biggest paychecks, too. You need just a high school diploma or the equivalent to get started, and you have to be certified by the Federal Railroad Administration to become a conductor. Most employers require one to three months of on-the-job training. Amtrak and some freight companies offer their own training programs, while smaller railroads may send you to a central facility or community college to prep you for the job.

7 of 8

Mining Machine Operator

Photo of a construction vehicle in a minePhoto of a construction vehicle in a mine
  • Number of workers: 14,740
  • Rate of injuries/illnesses: 248.0 per 10,000 workers
  • Median workdays missed due to injury/illness: 23 for surface mining, 46 for underground and 60 for continuous Median annual salary: $60,300
  • Top pay: $78,060
  • Annual fatalities: 5 for surface mining, 7 for underground

Not surprisingly, pumping the Earth for its resources can really suck the life out of you. Extraction workers, a broad category of workers who mine and drill for oil, gas, coal and the like, recorded a total of 92 deaths and 3,990 injuries in 2011. And while some extraction jobs offer scant compensation for such risks, pay for certain mining machine operators is more tempting.

Education requirements are minimal to get started (some jobs don’t even require a high school diploma). But if you go into mining with a college degree, you stand to earn a fatter paycheck and added safety as a mining engineer. Indeed says mining engineers, who inspect mining areas and design underground systems of entries, exits and tunnels, make an average national salary of more than $97,000 as of April 2022. Their job is also dangerous as they are often close to heavy machinery and are exposed to air pollution and in danger of being hurt in a cave-in.

8 of 8

Electrician

Photo of a hand and a screwdriver working on wiresPhoto of a hand and a screwdriver working on wires
  • Number of workers: 729,600 in 2020
  • Rate of injuries/illnesses: 122.2 per 10,000 workers
  • Median workdays missed due to injury/illness: 15
  • Median annual salary: $60,040
  • Top pay: $82,930
  • Annual fatalities: 68 in 2019

With high demand to plug in our various devices at home and work, electricians are practically guaranteed prosperous careers. 

But this profession comes with its stumbling blocks — literally. Electricians’ injuries are most often caused by falls. That’s not surprising, considering they often spend lots of time at construction sites and on ladders. If you watch your step, you typically stand to enjoy paychecks 43% higher than the national median.

You can start your career as an electrician with a high school diploma (or the equivalent) and a paid four-year apprenticeship, which you can find through the U.S. Department of Labor. But having a Bachelor’s degree can help boost your income; according to Payscale, a college-educated electrician can earn up to about $93,000 a year. Most states also require you to be licensed.

According to Indeed.com, the average base salary for an electrician is about $56,800 as of May 2022.

Source: kiplinger.com

How to Become a Plumber in 2022

Licensed master plumbers have the highest earning potential. The top 10% of plumbers can earn ,920 a year, according to the Bureau of Labor Statistics.
And on the high end, earning potential for master plumbers nearly reached 0,000 for the top 10%.
How Much School Do Plumbers Need?

How to Become a Plumber in 4 Steps

Potential education topics at a vocational school might include plumbing theory, water distribution, blueprint reading, draining and venting, pipe cutting and soldering and even electrical basics.
If you are currently a high school student interested in becoming a plumber, take all the math courses you can. In addition, choose classes like physics and shop to help you build an effective knowledge and skills base.
Becoming a plumber is all about licensure, so college is not a requirement. However, plumbers typically need to have their high school diploma or general equivalency diploma (GED) to start an apprenticeship. A diploma or GED is also important if you plan to take any plumbing courses at a community college (more on that below).

1. Get Your High School Diploma or GED

To be considered a journeyman plumber, you will need to pass your state’s licensing exam. In general, you will need to renew this license every three to five years and take continuing education courses to maintain your licensed status.
A plumber’s skill set is varied. As a plumber, you will need the technical knowledge to diagnose plumbing problems and make repairs. You will also need to be proficient in using a wide variety of tools, including saws, hammers, screwdrivers, wrenches and torches. Remaining in top physical condition is crucial, as you will frequently do heavy lifting and perform tasks that require stamina, often in very hot or cold environments.
Most states require you to operate as a journeyman plumber for a set number of years (between two and five) before you can seek licensure as a master plumber. To earn your license, you’ll need to pass a written and practical exam.

2. Become an Apprentice

Upon completing your apprenticeship, you can apply to become a licensed journeyman plumber. Once you reach this status, you will be able to work unsupervised on commercial and residential projects.
Becoming a plumber does not require the college career path. Instead, you will complete high school and find work as an apprentice. After a few years, you can get licensed as a journeyman plumber and then a master plumber.
We’ve found the answers to the most commonly asked questions about becoming a plumber, including how long it takes until you’re repairing leaky sinks on your own.
To earn a plumbing license, you must first complete a four- to five-year apprenticeship and then pass the journeyman exam; an apprenticeship includes classroom instruction but no formal school program. Some plumbers choose to attend a year or two of plumbing trade school before their apprenticeship.
A plumbing apprenticeship program includes on-the-job training and some classroom instruction, but many plumbers choose to attend a vocational school as a first step. Plumbing trade schools may offer special certification or even a two-year associate degree.

3. Become a Journeyman Plumber

In general, you can find a plumbing apprenticeship program through trade unions, community colleges, trade schools and even private businesses. You might need to pass an exam or interview with a licensed plumber.
How Long Does It Take to Become a Plumber?
How Much Money Do Plumbers Make?

4. Become a Master Plumber

Ready to stop worrying about money?
Depending on your state, you may be able to earn special endorsements and certifications. For example, in the Lone Star State, in addition to your Texas plumbing license, you can obtain endorsements for medical gas piping installation, multipurpose residential fire protection sprinkler installation and water supply protection installation and repair.
Scroll on to learn how to become a plumber — and what you can expect out of the career.

Wondering how to become a plumber? Our guide covers the education, apprenticeship and licensing requirements on your journey to getting certified as a licensed plumber — and offers a peek into the day-to-day, job outlook and typical salary.

Optional: Go to a Trade School

Earning a special degree or certification can give you a leg-up when applying for competitive apprenticeships.
In high school, math will be crucial to your role as a plumber. Each day, plumbers use concepts from algebra and geometry, and they’re regularly calculating using various units of measure.
At the journey level, you can work for a plumbing company or start your own business.

How Much Do Plumbers Make?

Plumbers can work on both residential and commercial projects. The day-to-day duties might include remodeling bathrooms and kitchens, replacing and repairing water and drain lines, installing new water heaters, installing new faucets, installing new toilets and installing water filtration systems.
In 2021, the median pay for plumbers was ,880, but the top 10% earned ,920.
As a master plumber, you’ll reach peak earning potential and can even run your own plumbing business.

What Do Plumbers Do?

If you want to work in a supervisory capacity or be able to employ additional plumbers for your business, you will need to become a licensed master plumber.

Necessary Skills

Get the Penny Hoarder Daily
Plumbing apprenticeships generally last four to five years, during which time you’ll receive roughly 2,000 hours of on-the-job training in the plumbing trade, plus technical instruction. During this time, you’ll learn about local plumbing codes and regulations, how to read blueprints and OSHA safety regulations.Advanced education may cover topics like plumbing fixtures and drainage systems. Unlike pursuing a college degree, however, plumbing apprenticeships are paid.

Challenges

The median pay for plumbers last year was ,880, according to the Bureau of Labor Statistics. Though the labor is tough, hours can be long and the work can be dangerous, becoming a licensed plumber may be well worth it if you have the necessary skills and dedication.

Frequently Asked Questions (FAQs) About Becoming a Plumber

Privacy Policy

Becoming a licensed plumber takes at least four to five years, as this is the general length of an apprenticeship. Some aspiring plumbers choose a year or two of vocational school before their apprenticeship. After completing an apprenticeship, you can earn your journeyman and then master plumber license.
As an apprentice plumber, you won’t be able to tackle projects yourself. Instead, you will shadow a journeyman plumber or a master plumber, depending on the program.
License laws and types vary by state. Determine the state that you wish to operate in as a plumber, and research those specific guidelines. The steps below offer a more general look at how to become a plumber.
Plumbers need to be able to cut and solder pipes, diagnose and troubleshoot issues with plumbing systems and interpret (or even draw) blueprints. If you run your own plumbing company, you will also need to handle advertising, scheduling, taxes and billing — or hire someone to do that for you.
An apprenticeship offers on-the-job experience and classroom education. Programs vary by state and organization in terms of structure, length and application process.
Skilled plumbers fulfill a crucial need in society, and demand for plumbers continues to grow. Though the manual labor is often grueling, a career in plumbing can be quite lucrative — and doesn’t require expensive schooling and massive student loan debt.

Once you have your diploma or GED, the next step to becoming a licensed plumbing contractor is either attending plumbing school or completing an apprenticeship. Plumbing school is typically optional (but we’ve got more details below); many plumbing hopefuls skip straight to an apprenticeship. <!–

–>


While the BLS targets 5% job growth through 2030, the increase in home renovation projects due to the ongoing pandemic may create even more plumbing jobs in the years ahead.

Walmart Q1 Earnings Likely Boosted By Inflation

The latest consumer price index (CPI) released last week indicates inflation remained sky-high in April. And while rising prices were a headwind for most companies in the first three months of 2022, they likely served as a tailwind for mega-retailer Walmart (WMT, $147.48).

Wall Street will find out this week, with WMT an early entrant on the earnings calendar; WMT will report its first-quarter results ahead of the May 17 open. 

The consumer staples stock has shown resilience amid the recent market volatility, up roughly 2% for the year-to-date compared to a more than 17% decline for the broader S&P 500.  

WMT beat on both the top and bottom lines in its fourth quarter thanks in part to its ability to keep prices competitive in a high-inflation environment. And this trend probably continued in Q1, despite a challenging backdrop, says UBS Global Research analyst Michael Lasser (Buy).

“With low prices as its core value proposition, WMT is uniquely positioned to benefit from rising inflation,” the analyst adds. “Its scale helps give it the ability to keep healthy price gaps versus its peers, which can help it achieve further share gains in the grocery channel.  

While Lasser admits there will likely be some “moving pieces” in the report – including unpredictability related to macro headwinds – components such as U.S. same-store sales and full-year guidance will be good.

“We view WMT’s shares as compelling as they offer more certainty than others in this uncertain backdrop,” the analyst says.

Amid tough year-over-year (YoY) comparisons that include last year’s stimulus-related pop, consensus estimates are for Walmart to report a 12.4% drop in earnings to $1.48 per share. Revenue is expected to arrive at $138.8 billion (+0.4% YoY).

Lowe’s Faces Tough Comps in Q1

First-quarter earnings from Lowe’s (LOW, $191.70) are due out before Wednesday’s open. Similar to Walmart, the home improvement retailer is facing hard comparisons from Q1 2021. 

As such, analysts, on average, are calling for a slim 0.9% YoY rise in earnings to $3.24 per share. And revenue is projected to be flat at $23.8 billion.

Still, Lowe’s entered 2022 with momentum following a solid fourth-quarter print, says UBS Global Research analyst Michael Lasser (Buy). 

Sign up for Kiplinger’s FREE Investing Weekly e-letter for stock, ETF and mutual fund recommendations, and other investing advice.

Additionally, the consumer discretionary name raised its full-year guidance in February. This reflects an inflation tailwind due to LOW’s “prudent pricing power” that will likely last for at least a few more quarters, the analyst adds. 

“We believe LOW is building a track record of solid execution with every passing quarter,” Lasser says. “Plus, it has several unique drivers to propel its results in the next few years independent of the market growth.”

Kohl’s Top and Bottom Lines Probably Contracted in Q1

Kohl’s (KSS, $47.51) will report its first-quarter earnings ahead of the May 19 open. 

The department store chain ended 2021 with record adjusted earnings of $7.33 per share and year-over-year revenue growth of 21.8% to $19.4 billion.

And Deutsche Bank analyst Gabriella Carbone (Buy) thinks the company is just getting started. “KSS has laid the groundwork for growth along with improving profitability, and is a more nimble company today than it was pre-pandemic,” Carbone says.

Included in the company’s plans to drive growth are goals for Kohl’s to reach $2 billion in sales from its partnership with beauty company Sephora and expand its operating margin to a range of 7% to 8%.

Carbone adds that these goals “may prove to be prudent as management has greatly considered a number of headwinds,” including supply-chain woes and a tight labor market.

As for the retail stock’s first-quarter results, analysts, on average, expect earnings to arrive at 72 cents per share (-31.4% YoY) and revenue to land at $3.7 billion (-0.5% YoY).

In addition to the company’s financial results, Wall Street will be looking for additional updates on the company’s strategic initiatives. Last Wednesday, shareholders voted on Kohl’s new slate of directors, rejecting an attempt from Macellum Advisors to add its nominees to the board. The activist investor has been pushing KSS to make changes, including unloading some of its real estate and putting itself up for sale.

Source: kiplinger.com

How Much Does It Cost to Adopt a Child?

@media (max-width: 1200px) body .novashare-buttons.novashare-inline .novashare-button-icon width: 100%; .novashare-inline .novashare-button .novashare-button-block background: #000000; .novashare-inline .novashare-button .novashare-border border-color: #000000; .novashare-inline .novashare-button .novashare-inverse color: #000000;


Additional Resources

Adoption is a life-changing journey. Whether the choice to adopt comes after years of expensive infertility treatments or is a route you’ve always wanted to take, the choice to welcome a new family member is rarely a financial one, but rather a decision of the heart.

But at some point, prospective adoptive parents have to consider the costs. It’s unlikely your decision to adopt will boil down to numbers. But it helps to know what to expect. 

The figures can vary depending on your adoption journey, from almost nothing to upward of $70,000. But you can use them as a baseline to help you financially prepare for starting a family and to make an informed decision about which type of adoption makes the most sense for you.


How Much Does It Cost to Adopt a Child?

There are three basic types of adoption: domestic infant adoption (sometimes called private adoption), international adoption, and public adoption. 


Motley Fool Stock Advisor recommendations have an average return of 618%. For $79 (or just $1.52 per week), join more than 1 million members and don’t miss their upcoming stock picks. 30 day money-back guarantee. Sign Up Now

But if you’re looking to adopt a baby, private and international adoption are the only two real options. Because of the way the foster care system operates, it’s exceedingly rare to be able to adopt an infant through public adoption. Their primary goal is reunifying families whenever possible, which can take years.     

But regardless of your adopted child’s age, some costs are common to all three, such as the expense of a home study, which involves visits by a social worker and background and financial checks. Other costs are unique to the adoption route you choose, such as the travel expenses involved with international adoption.

And the costs vary wildly, so it’s crucial you understand the ins and outs of each adoption type.


Domestic Infant Adoption

When adopting a baby in the United States, you have two options: adopting through an agency or independent adoption.

Costs of Adopting an Infant Through an Agency: $25,000 – $70,000 

Adopting through an agency is more expensive, but there’s also a higher success rate. Also, some agencies offer a sliding scale for those who need help affording adoption, which can potentially save you a few thousand dollars, depending on your income. However, each state has its own laws that regulate adoption fees, including sliding scale fee structures. 

Average Costs of Domestic Agency Adoption

Agency Fees $15,000 – $45,000
Legal Fees $2,500 – $6,000
Birth Mother Expenses $4,000 – $16,250
Home Study Fee $2,750

Adoption agencies are typically full-service operations. Thus, their fees generally include everything involved in the adoption process, which can be complex. The journey to bring a child home involves many parties, including attorneys, social workers, physicians, counselors, government administrators, and adoption specialists. 

There are also costs associated with matching birth parents and adoptive parents. For example, there are advertising expenses to find expectant mothers. And then there are medical expenses and court costs to ensure the health of the mother and child during pregnancy as well as the safety and security of the child after placement.

When you adopt through an agency, it typically completes the entire process from beginning to end, hence the expense. 

Adoption agencies that charge more include more services. For example, if you find an agency with fees at the lower end, it’s likely because their fee doesn’t include the costs of hiring an attorney, unlimited advertising for birth parents, certain birth mother expenses, or adoption disruption insurance (a guarantee you won’t lose your money if the birth mother changes her mind).

So always ask for a written, line-by-line breakdown of the agency’s costs to see what services its rate covers before signing with it. 

Costs of an Independent Adoption With an Attorney Only:  $10,000 – $40,000

If agency adoption is too expensive but you’d still like to adopt a newborn, you can save a lot of money by hiring an attorney to facilitate an independent adoption. Independent adoption happens when prospective parents locate a birth parent on their own and use an attorney to process the necessary paperwork.

Average Costs of Independent (Attorney) Adoption

Legal Fees $3,000 – $6,000
Advertising Fees $0 – $1,000
Birth Mother Expenses $6,000 – $30,000
Home Study Fee $1,000 – $4,000

The cost of an independent adoption can range from $10,000 to $40,000, though it could go higher based on your circumstances. The final bill depends on how much you need to spend to find an expectant mother and how much you pay for medical and living expenses, which may be regulated by state law. 

Further, adopting independently is a bit like trying to sell a house without a realtor. You must find a birth mom on your own, which means advertising for and vetting birth moms without help. 

So, while it can be cheaper, you still have to go it alone. And if you have trouble finding a birth mother, your costs can quickly add up. Agencies give a flat rate no matter how much advertising it takes. If you have trouble finding someone, you could quickly blow past the $40,000 mark.

Another reason independent adoption costs can vary more widely than those through a private agency is because in most states, adoptive parents won’t have their costs reimbursed if a birth mother changes her mind, what’s commonly called a disrupted adoption. Most adoption agencies build disruption insurance into their fee structures. 


International Adoption: $26,500 – $73,000

Those unfamiliar with the adoption process often believe it’s less expensive to adopt a child from another country. But the reverse is more often true. 

Average Costs of International Adoption

Agency Fees $15,000 – $30,000
Legal Fees $500 – $6,000
Immigration Application Fee $1,000 – $2,000
Dossier Preparation and Clearance $1,000 – 2,000
Home Study Fee $1,000 – $4,000
In-Country Adoption Expenses $2,000 – $10,000
Travel Expenses $5,000 – $15,000
Child’s Passport, Visa, Medical Exam $1,000 – $4,000

The cost of an international adoption can range from just over $20,000 to more than $70,000. The wide variance is due to the different requirements of each country. 

International adoption (also called intercountry adoption) has some similarities to domestic adoption. But it has its own unique steps and expenses that can quickly escalate beyond the cost of domestic adoption.

The costs of international adoptions can include immigration processing and court costs (both in the foreign country and the U.S.), travel expenses, foreign and domestic legal fees, foreign agency fees, passport and visa fees, medical examinations, and in-country adoptions expenses (such as foster care for the child, donations to the orphanage, and payments for the in-country adoption liaisons).

The costs also depend on whether a government or private agency, orphanage, nonprofit organization, attorney, or a combination of entities is managing the adoption. 

Additionally, some international adoptions are finalized in the child’s country of origin, while others must be finalized in the U.S., depending on the laws of your state, further adding to the total cost. And depending on the country’s regulations, you may have to plan an extended stay, which means time off work and (potentially) lost wages.


Public Adoption: $0 – $2,500

The least expensive route to growing your family is unquestionably public adoption, or adopting through the foster care system. It’s very difficult to adopt a baby, though. So this option is best for those who wish to adopt an older child.

Public adoption costs next to nothing because the government subsidizes many associated fees and expenses. 

Average Costs of Public Adoption

Agency Fees Usually $0
Legal Fees $0 – $2,000
Home Study Fee $0 – $500

Federal and state financial adoption assistance programs exist to encourage the adoption of children with special needs that make them difficult to place, such as older children, sibling groups, or those with physical or mental disabilities. 

Thus, most prospective parents who are adopting through public agencies will find their state is often willing to waive most or all of the fees associated with adopting through the foster care system, including both the home study fee and attorney fees. 

Additionally, if you become a foster parent and apply to foster-to-adopt, the government subsidizes some of your future adopted child’s living expenses while you await finalization. 

But if you have your heart set on adopting a newborn, foster care adoption isn’t the route for you. It’s nearly impossible to adopt an infant that way. 

Some babies in the foster care system were abandoned by their biological parents or taken by the state due to abuse, neglect, or drug addiction. But no child in the system — infant or otherwise — is immediately available for adoption. 

The state’s No. 1 priority is to reunite children with their biological families. That includes extensive sessions with counselors and social workers. If that effort ultimately proves unsuccessful, the state next tries to place the child with a biological relative. 

Only after these efforts — which could take several years — are children placed for adoption. Thus, by the time babies in foster care become eligible for adoption, they’re no longer babies. But if they were placed with a foster family, that family gets the first chance at adoption. 
However, if you’re interested in adopting an older child and are prepared to help them work through the trauma, the rewards can be immense. My parents adopted my little brother from foster care at the age of 6, and his presence has enriched our family in myriad ways.

Happy Family Son Saving Money In Piggy Bank Budgeting Teaching Saving

Factors That Influence Adoption Costs

Every adoption is unique, and though adoption agencies typically try to work within your budget, unforeseen costs can occasionally raise the base projected cost. And that can have a significant impact on your overall family budget.


Birth Mother Expenses

Depending on your state’s adoption laws, a birth mother may be eligible for coverage of certain expenses. You may have to pay medical expenses related to the pregnancy, including insurance coverage if she’s not already covered or eligible for Medicaid.

If you work with an agency, they should take care of helping her find coverage. But you may still be responsible for some medical expenses, such as doctor copays. Once you’re matched with a birth mother, her medical expenses become your medical expenses. 

Adoption agencies typically work these into their overall fee structure but allow for variances that could affect your cost. For example, you may pay more or less depending on what stage of pregnancy the mother’s in when the agency matches you. If you’re matched in the ninth month, there will be fewer expenses.

And if you’re adopting independently, some or all of the medical costs the birth mother incurs as a result of the pregnancy may be your responsibility as defined by the laws of your state. Consult with an adoption lawyer for more information.  

Additionally, in some states, you may need to cover other birth mother expenses. Birth mother expenses are court-approved funds adoptive families provide to help prospective birth mothers with pregnancy-related expenses. In addition to medical care, costs could include living expenses like maternity clothing, groceries, rent, and transportation. 

Some states that allow birth mothers to request living expenses cap the total amount. For example, Ohio caps the amount birth mothers can be reimbursed for living expenses at $3,000 and Connecticut at $1,500. Other states have no cap but permit a judge to set one on an individual basis. 

Thus, these expenses can vary widely from one adoption to another.


Advertising

The longer you have to wait for a birth mother match, the more money an agency must pay toward advertising to find you one. Ask the adoption agency how they deal with this variable cost. Some charge one flat fee regardless of the amount of advertising required; others set a variable cost.

And if you’re doing an independent adoption, you’ll be covering this expense on your own. If you don’t already know a birth mother to adopt from, you’ll need to find one. That means drawing on your personal connections, using social networks or community organizations, utilizing adoptive family websites, posting print ads, or seeking referrals from adoption attorneys. 

It could take a long time to find a birth mother if you don’t have extensive networking options. And that can substantially drive up your adoption costs. Depending on how long it takes you to find someone, fees for print and online advertising can range from several hundred dollars to tens of thousands. 


Attorney Fees

Lawyers are necessary for dealing with the legal aspects of any adoption. These include the original consent to adoption and termination of parental rights as well as the court proceedings to finalize the arrangement. 

However, the fees can vary considerably based on the type of adoption you opt for. Attorney fees can also vary depending on other factors, including:

  • The Complexity of the Case. Will they need to represent you multiple times in court? All adoptions must eventually be finalized before a judge. But some adoptions — such as international adoptions or those in which birth mother expenses must be court-ordered — could require more paperwork or court appearances than others.
  • The Number of Hours the Attorney Works on the Case. Lawyers charge by the hour. Even if you don’t have to appear in court more than once, adoption can involve a lot of paperwork.
  • The Number of Additional Attorneys or Support Staff Needed. Depending on the complexity of your case or who you hire, you may be represented by a law firm rather than a single attorney. Additionally, your lawyer may use a support team to fulfill basic tasks like clerical work.

Depending on your case, rates are often negotiable. And while attorneys often charge by the hour, many offer a flat fee for certain types of cases. 

For example, a family law attorney might charge a flat fee for a straightforward adoption case that requires a simple filing of paperwork and one court appearance. But they might charge by the hour for a more complex case, such as an international adoption.

Regardless, most lawyers offer payment options so clients can find an arrangement that works for their budget. And all lawyers have fee agreements informing clients of costs upfront. So ensure you thoroughly read the agreement beforehand. 


Time Off

Unfortunately, in the U.S., paid parental leave isn’t guaranteed by law, and many workplaces don’t have this benefit. Even when they do, it may not apply to adoptive parents. So check with your human resources department about whether your workplace offers adoption benefits. 

Whether your employer offers paid time off, all adoptive parents are entitled to up to 12 weeks (three months) of leave through the Family Medical Leave Act. The act equally guarantees maternity and paternity leave for biological and adoptive parents.

But it only guarantees your job and health insurance. It doesn’t guarantee paid time off. If your company doesn’t provide paid parental leave, you need to plan for lost wages.


Final Word

The costs of adoption may feel formidable, especially if you have your heart set on adopting an infant through domestic or international adoption. But they don’t have to be insurmountable.

Many resources are available to help families afford to adopt, including options for post-placement reimbursement, like the adoption tax credit. Talk with adoption professionals to explore your options before completely ruling it out. 

Also, talk with other families who’ve adopted. Many are happy to share stories of how they were able to afford adoption, especially if it helps others fulfill their dreams of a family.

.kb-table-of-content-nav.kb-table-of-content-id_0d0fb5-39 .kb-table-of-content-wrappadding:30px 30px 30px 30px;background-color:#f9fafa;border-color:#cacaca;border-width:1px 1px 1px 1px;.kb-table-of-content-nav.kb-table-of-content-id_0d0fb5-39 .kb-table-of-contents-titlefont-size:14px;line-height:18px;letter-spacing:0.06px;font-family:-apple-system,BlinkMacSystemFont,”Segoe UI”,Roboto,Oxygen-Sans,Ubuntu,Cantarell,”Helvetica Neue”,sans-serif, “Apple Color Emoji”, “Segoe UI Emoji”, “Segoe UI Symbol”;font-weight:inherit;text-transform:uppercase;.kb-table-of-content-nav.kb-table-of-content-id_0d0fb5-39 .kb-table-of-content-wrap .kb-table-of-content-listcolor:#001c29;font-size:14px;line-height:21px;letter-spacing:0.01px;font-family:-apple-system,BlinkMacSystemFont,”Segoe UI”,Roboto,Oxygen-Sans,Ubuntu,Cantarell,”Helvetica Neue”,sans-serif, “Apple Color Emoji”, “Segoe UI Emoji”, “Segoe UI Symbol”;font-weight:inherit;.kb-table-of-content-nav.kb-table-of-content-id_0d0fb5-39 .kb-table-of-content-wrap .kb-table-of-content-list .kb-table-of-contents__entry:hovercolor:#16928d;.kb-table-of-content-nav.kb-table-of-content-id_0d0fb5-39 .kb-table-of-content-list limargin-bottom:7px;.kb-table-of-content-nav.kb-table-of-content-id_0d0fb5-39 .kb-table-of-content-list li .kb-table-of-contents-list-submargin-top:7px;.kb-table-of-content-nav.kb-table-of-content-id_0d0fb5-39 .kb-toggle-icon-style-basiccircle .kb-table-of-contents-icon-trigger:after, .kb-table-of-content-nav.kb-table-of-content-id_0d0fb5-39 .kb-toggle-icon-style-basiccircle .kb-table-of-contents-icon-trigger:before, .kb-table-of-content-nav.kb-table-of-content-id_0d0fb5-39 .kb-toggle-icon-style-arrowcircle .kb-table-of-contents-icon-trigger:after, .kb-table-of-content-nav.kb-table-of-content-id_0d0fb5-39 .kb-toggle-icon-style-arrowcircle .kb-table-of-contents-icon-trigger:before, .kb-table-of-content-nav.kb-table-of-content-id_0d0fb5-39 .kb-toggle-icon-style-xclosecircle .kb-table-of-contents-icon-trigger:after, .kb-table-of-content-nav.kb-table-of-content-id_0d0fb5-39 .kb-toggle-icon-style-xclosecircle .kb-table-of-contents-icon-trigger:beforebackground-color:#f9fafa;

GME is so 2021. Fine art is forever. And its 5-year returns are a heck of a lot better than this week’s meme stock. Invest in something real. Invest with Masterworks.

Sarah Graves, Ph.D. is a freelance writer specializing in personal finance, parenting, education, and creative entrepreneurship. She’s also a college instructor of English and humanities. When not busy writing or teaching her students the proper use of a semicolon, you can find her hanging out with her awesome husband and adorable son watching way too many superhero movies.

Source: moneycrashers.com

Understanding the Parent Plus Loan Forgiveness Program

Parent PLUS loan forgiveness provides financial relief to parents who borrowed money to cover the cost of their children’s college or career school. It isn’t always a quick fix, but there are certain federal and private programs that might offer the financial assistance needed to help them get on track.

To receive federal relief for Parent PLUS loans, parent borrowers have a few options.

They can consolidate the loan in order to enroll in an Income-Contingent Repayment plan after 25 years, pursue Public Service Loan Forgiveness after 10 years, or choose from a number of private student loan assistance programs or refinancing options.

Keep reading to learn more about what the available student loan forgiveness possibilities are for Parent PLUS loans.

Will Parent Plus Loans Be Included in Student Loan Forgiveness?

Parent PLUS loans are eligible for several of the same student loan forgiveness programs as federal student loans for students, including:

•   Borrower Defense Loan Discharge

•   Total and Permanent Disability (TPD) Discharge

•   Public Service Loan Forgiveness (PSLF)

That said, Parent PLUS loans generally have fewer repayment options in the first place and the eligibility requirements for these forgiveness programs can be strict and may require borrowers to consolidate their PLUS loan, such as with PSLF. This can make it tricky for borrowers to navigate how to use these federal relief programs to their advantage.

Refinancing is another option for Parent PLUS loan borrowers — applying for a new private student loan with an, ideally, lower interest rate. That said, some lenders offer less flexibility for repayment and the fine print can be lengthy, so there’s an inherent risk associated with refinancing Parent PLUS loans. It’s also worth noting that refinancing a PLUS loan will eliminate it from any federal repayment plans or forgiveness options.

Recommended: What Is a Parent PLUS Loan?

Parent Student Loan Forgiveness Program

When it comes to student loan forgiveness, the programs aren’t just available for the students. Parents who are on the hook for student loan debt can also qualify for student loan forgiveness.

As previously mentioned, a Parent PLUS loan may be eligible for Parent Student Loan Forgiveness through two specific federal programs:

•   Income-Contingent Repayment

•   The Public Service Loan Forgiveness (PSLF) Program

There are also a few private student loan forgiveness options, which we’ll get into below.

Income-Contingent Repayment (ICR)

An Income-Contingent Repayment plan, or ICR plan, is the only income-driven repayment plan that’s available for Parent PLUS borrowers. In order to qualify, parent borrowers must first consolidate their loans into a Direct Consolidation Loan, then repay that loan under the ICR plan.

•   A Parent PLUS loan that’s included in a Direct Consolidation Loan could be eligible for Income-Contingent Repayment, but only if the borrower entered their repayment period on or after July 1, 2006.

•   A Parent PLUS loan that’s included in the Federal Direct Loan Program or the Federal Family Education Loan Program (FFELP) is also eligible for ICR if it’s included in the Federal Direct Consolidation Loan.

ICR determines a borrower’s monthly payment based on 20% of their discretionary income or the amount by which their AGI exceeds 100% of the poverty line. After a 25-year repayment term, or 300 payments, the remaining loan balance will be forgiven.

Typically, the IRS considers canceled debt a form of taxable income, but the American Rescue Plan Act of 2021 made all student loan forgiveness tax-free through 2025.

Public Service Loan Forgiveness (PSLF)

Borrowers with Parent PLUS loans may be eligible for Public Service Loan Forgiveness Program, but in order to pursue that option must first consolidate the Parent PLUS loan into a Direct Consolidation Loan.

Then, after they’ve made 120 qualifying payments (ten year’s worth), borrowers become eligible for the Public Service Loan Forgiveness Program (PSLF). The parent borrower (not the student) must be employed full-time in a qualifying public service job. PSLF also has strict requirements such as certifying employment so it’s important to follow instructions closely if pursuing this option.

The Temporary Expanded Public Service Loan Forgiveness (TEPSLF) is another option for Parent PLUS borrowers if some or all of their 120 qualifying payments were made under either a graduated repayment plan or an extended repayment plan. The catch here is that the last year of their payments must have been at least as much as they would if they had paid under an ICR plan.

Refinance Parent Plus Loans

Refinancing a Parent PLUS loan is another option that could provide some financial relief.

For borrowers who don’t qualify for any of the loan forgiveness options above, it may be possible to lower their monthly payments by refinancing Parent PLUS student loans with a private lender.

In doing so, you’ll lose the government benefits associated with your federal loans, as briefly mentioned above, such as:

•   Student loan forgiveness

•   Forbearance options or options to defer your student loans

•   Choice of repayment options

Refinancing a Parent PLUS loan into the dependent’s name is another option, which some borrowers opt for once their child has graduated and started working. Not all loan servicers are willing to offer this type of refinancing option, though.

Transfer Parent Plus Student Loan to Student

Transferring Parent PLUS loans to a student can be complicated. There isn’t a federal loan program available that will conduct this exchange, and, as mentioned above, some private lenders won’t offer this option.

That said, some private lenders, like SoFi, allow dependents to take out a refinanced student loan and use it to pay off the PLUS loan of their parent.

Alternatives to Student Loan Forgiveness Parent Plus

When it comes to Parent PLUS loans, there are a few ways to get out of student loan debt legally, including the scenarios outlined below.

Student Loan Forgiveness Death of Parent

Federal student loans qualify for loan discharge when the borrower passes away. In the case of Parent PLUS loans, they are also discharged if the student who received the borrowed funds passes away.

In order to qualify for federal loan discharge due to death, borrowers must provide a copy of a death certificate to either the U.S. Department of Education or the loan servicer.

Recommended: Can Student Loans Be Discharged?

State Parent PLUS Student Loan Forgiveness Programs

Many individual states offer some sort of student loan repayment assistance or student loan forgiveness programs for Parent PLUS loan borrowers.

For an overview of options available in different states, you can take a look at The College Investor’s State-by-State Guide to Student Loan Forgiveness . For information on student loan and aid available take a look at the SoFi guide on state-by-state student aid available for borrowers.

Disability

In the event of the borrower becoming totally and permanently disabled, a Parent PLUS loan may be discharged. To qualify for a Total and Permanent Disability (TPD) discharge , borrowers must complete and submit a TPD discharge application, as well as documentation showing that they meet the requirements for being considered totally and permanently disabled. Note that in order to qualify for TPD, the parent borrower must be considered disabled. This type of forgiveness does not apply to Parent PLUS loans in the event that the student becomes disabled.

Bankruptcy

If a borrower can demonstrate undue financial hardship upon repaying the student loan, they might be able to discharge their Parent PLUS loan. Note having student loans discharged in bankruptcy is extremely rare. Proving “undue hardship” varies depending on the court that’s granting it, but most rulings abide by the Brunner test, which requires the debtor to meet all three of these criteria in order to discharge the student loan:

•   Poverty – Maintaining a minimal standard of living for the borrower and their dependents is deemed impossible if they’re forced to repay their student loans.

•   Persistence – The borrower’s current financial situation will likely continue for the majority of the repayment period.

•   Good faith – The borrower has made a “good faith” effort to repay their student loans.

Closed School Discharge

For parent borrowers whose children attended a school that closed while they were enrolled or who withdrew from the school during a “lookback period” of 120 days before its closure, a Closed School Discharge is another available form of student loan forgiveness.

In some circumstances, the government may extend the lookback period even further. For example, The Department of Education has changed the lookback period to 180 days for loans that were issued after July 1, 2020.

Borrower Defense

Borrower Defense Loan Discharge is available to Parent PLUS borrowers whose children were misled by their college or university or whose college or university engaged in certain forms of misconduct or violation of state laws.

To make a case for borrower defense, the Parent PLUS borrower must be able to demonstrate that their school violated a state law directly related to their federal student loan.

Explore Private Student Loan Options for Parents

Banks, credit unions, state loan agencies and other lenders typically offer private student loans for parents who want to help their children pay for college and refinancing options for parents and students.

Refinancing options will vary by lenders and some may be willing to refinance a Parent PLUS loan into a private refinanced loan in the student’s name. In addition to competitive interest rates and member benefits, SoFi does allow students to take over their parent’s loan during the refinancing process. Interest rates and terms may vary based on individual criteria such as income, credit score, and history.

If you decide refinancing a Parent PLUS loan makes sense for you, SoFi makes it simple. The application process is entirely online and SoFi offers flexible repayment options to help you land a loan that fits your budget. You can find your rate in a few minutes and checking if you prequalify won’t affect your credit score.*

The Takeaway

Parent PLUS Loan forgiveness offers financial relief to parents who borrowed money to help their child pay for college.

To receive federal relief for Parent PLUS loans, parent borrowers can enroll in an Income-Contingent Repayment plan, pursue Public Service Loan Forgiveness, transfer their student loan to another student, take advantage of a state Parent PLUS student loan forgiveness program, or opt for private student loan assistance or refinancing.

Learn more about refinancing a Parent PLUS loan with SoFi.


*Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. A hard credit pull, which may impact your credit score, is required if you apply for a SoFi product after being pre-qualified.
SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC), and by SoFi Lending Corp. NMLS #1121636 , a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law (License # 6054612) and by other states. For additional product-specific legal and licensing information, see SoFi.com/legal.

SoFi Student Loan Refinance
IF YOU ARE LOOKING TO REFINANCE FEDERAL STUDENT LOANS PLEASE BE AWARE OF RECENT LEGISLATIVE CHANGES THAT HAVE SUSPENDED ALL FEDERAL STUDENT LOAN PAYMENTS AND WAIVED INTEREST CHARGES ON FEDERALLY HELD LOANS UNTIL SEPTEMBER 1, 2022 DUE TO COVID-19. PLEASE CAREFULLY CONSIDER THESE CHANGES BEFORE REFINANCING FEDERALLY HELD LOANS WITH SOFI, SINCE IN DOING SO YOU WILL NO LONGER QUALIFY FOR THE FEDERAL LOAN PAYMENT SUSPENSION, INTEREST WAIVER, OR ANY OTHER CURRENT OR FUTURE BENEFITS APPLICABLE TO FEDERAL LOANS. CLICK HERE FOR MORE INFORMATION.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income-Driven Repayment plans, including Income-Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’swebsite .
External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Third-Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Photo credit: iStock/DragonImages
SOPS1121040

Source: sofi.com

What Is Inflation (Definition) – Causes & Effects of Rate on Prices & Interest

@media (max-width: 1200px) body .novashare-buttons.novashare-inline .novashare-button-icon width: 100%; .novashare-inline .novashare-button .novashare-button-block background: #000000; .novashare-inline .novashare-button .novashare-border border-color: #000000; .novashare-inline .novashare-button .novashare-inverse color: #000000;


Additional Resources

People have always grumbled that a dollar doesn’t go as far as it used to. But these days, that complaint is truer than ever. No matter where you go — the gas station, the grocery store, the movies — prices are higher than they were just a month or two ago.

What we’re seeing is the return of a familiar economic foe: inflation. Many Americans alive today have never seen price increases like these before. For the past three decades, inflation has never been above 4% per year. But as of March 2022, it’s at 8.5%, a level not seen since 1981.

Modest inflation, like what we had up through 2020, is normal and even healthy for an economy. But the rate of inflation we’re seeing now is neither normal nor healthy. It does more than just raise the cost of living. It can have a serious impact on the economy as a whole. 

Recent inflation-related news:


Motley Fool Stock Advisor recommendations have an average return of 618%. For $79 (or just $1.52 per week), join more than 1 million members and don’t miss their upcoming stock picks. 30 day money-back guarantee. Sign Up Now
  • In March 2022, the U.S. inflation rate hit a 40-year high of 8.5%. 
  • Prices for gasoline have increased nearly 50% over the past year.
  • Retail giant Amazon has added a 5% fuel and inflation surcharge for sellers.
  • The Federal Reserve is planning a series of interest rate hikes to cool the overheated economy.

What Is Inflation?

Inflation is more than just rising prices. Prices of specific things we buy, from a gallon of milk to a year of college tuition, rise and fall all the time. These price increases affect individual consumers’ lives, but they don’t have a big impact on the entire economy.

Inflation is a general increase in the prices of goods and services across the board. It drives up prices for everything you buy, from a haircut to a gallon of gas. Or, to put it another way, the purchasing power of every dollar in your pocket declines.

Most of the time, inflation doesn’t disrupt people’s lives too much, because prices rise for labor as well. If your household spending increases by 5% but your paycheck increases by 5% at the same time, you’re no worse off than before.

But when prices rise sharply, wages can’t always keep up. That makes it harder for consumers to make ends meet. It also drives them to change their spending behaviors in ways that often make the problem worse.


Causes of Inflation

Inflation depends on the twin forces of supply and demand. Supply is the amount of a particular good or service that’s available. Demand is the amount of that particular good or service that people want to buy. More demand drives prices up, while more supply drives them down. 

To see why, suppose you have 10 loaves of bread to sell. You have 10 buyers who want bread and are willing to pay $1 per loaf. So you can sell all 10 loaves at $1 each.

But if 10 more buyers suddenly enter the market, they will have to compete for your bread. To make sure they get some, they might be willing to pay as much as $2 per loaf. The higher demand has pushed the price up.

By contrast, if another seller shows up with 10 loaves of bread, the two of you will be competing for buyers. To sell your bread, you might have to lower the price to as little as $0.50 per loaf. The higher supply has pushed prices down.

Inflation results from demand outstripping supply. Economists often describe this as “too much money chasing too few goods.” There are several ways this kind of imbalance can happen.

Cost-Push Inflation

Cost-push inflation happens when it costs more to produce goods. To go back to the bread example, cost-push inflation might happen because a wheat shortage makes flour more expensive. It costs you more to make each loaf of bread, so you can’t afford to bake as much.

As a result, you bring only five loaves to the market. But there are still 10 customers who want to buy bread, so they must pay more to get their share. The higher cost of production drives down the supply and thus drives up the price.

In the real world, cost-push inflation can result from higher costs for anything that goes into making a product. This includes:

  • Raw Materials. The wheat that went into your bread is an example. Higher-cost wheat means higher-cost flour, which means higher-cost bread.
  • Transportation. In today’s global economy, materials and finished goods move around a lot. Transporting products requires fuel, which usually comes from oil. So whenever oil prices go up, the price of other goods rises as well. 
  • Labor. Another factor in production cost is labor. When schools closed during the COVID-19 pandemic, many parents had to stop working to care for their children. That created a worker shortage that drove prices up.

Demand-Pull Inflation

The opposite of cost-push inflation is demand-pull inflation. It occurs when consumers want to buy more than the market can supply, driving prices up.

Typically, demand-pull inflation results from economic growth. Rising wages and lower levels of unemployment put more money in people’s pockets, and people who have more money want to spend more. If the booming economy hasn’t produced enough goods and services to match this new demand, prices rise.

Other causes of demand-pull inflation include: 

  • Increased Money Supply. Another way people can end up with more money in their pockets is because the government has put more money in circulation. Governments often do this to stimulate a weak economy or to pay off past debts. But as the money supply increases, the purchasing power of each dollar shrinks. 
  • Rapid Population Growth. When the population grows rapidly, the demand for goods and services grows also. If the economy doesn’t produce more to compensate, prices rise. In Europe during the 1500s and 1600s, prices soared as the population grew so fast that agriculture couldn’t keep up with the new demand.
  • Panic Buying. Early in the COVID pandemic, consumers started buying extra groceries to fill their pantries in preparation for a lockdown. This led to shortages of many staple products, like milk and toilet paper. As a result, prices for those goods went up.
  • Pent-Up Demand. This occurs when people return to spending after a period of going without. This often happens in the wake of a recession. It also occurred as pandemic restrictions eased and people returned to enjoying movies, travel, and restaurant meals.

Built-In Inflation

When consumers expect prices to be higher in the future, they often respond by spending more now. If the purchasing power of their savings is only going to fall, it makes more sense to take that money out of the bank and use it on a major purchase, like a new car or a large appliance.

In this way, expectations of high inflation can themselves lead to inflation. This type of inflation is called built-in inflation because it builds on itself. 

When workers expect the cost of living to rise, they demand higher wages. But then they have more to spend, so they spend more, driving prices up. This, in turn, reinforces the belief that  prices will keep rising, leading to still higher wage demands. This cycle of rising wages and prices is called a wage-price spiral.


Effects of Inflation

Inflation does more than just drive up the cost of living. It changes the economy in a variety of ways — some harmful, others helpful. The effects of inflation include:

  • Higher Wages. As prices rise with inflation, wages typically rise as well. This can create a wage-price spiral that drives inflation still higher.
  • Higher Interest Rates. When the dollar is declining in value, banks often respond by raising interest rates on loans. The Federal Reserve also typically raises interest rates to cool the economy and rein in inflation, as discussed below.
  • Cheaper Debt. Inflation is good for debtors because they can pay off their debts with cheaper dollars. This is most useful for loans with a fixed interest rate, such as fixed-rate mortgages and student loans.
  • More Consumption. Inflation encourages consumers to spend money because they know it will be worth less later. All this spending keeps the economy humming, but it can also drive prices even higher.
  • Lower Savings Rates. Just as inflation encourages spending, it discourages saving. Higher interest rates can counter this effect, but they often don’t rise enough to make a difference.
  • Less Valuable Benefits. High inflation is worse for people on a fixed income. They face higher prices without higher wages to make up for them. Benefits such as Social Security change each year to adjust for inflation, but higher benefits next year don’t help when prices are rising right now.
  • More Valuable Tangible Assets. Inflation reduces the purchasing power of the dollars you have in the bank. Tangible assets like real estate, however, gain in dollar value as prices rise.

Measuring Inflation

The most common measure of inflation is the Consumer Price Index, or CPI. The Bureau of Labor Statistics (BLS) determines the CPI based on the cost of an imaginary basket of goods and services. BLS workers painstakingly check prices on all these items each month and record how each price changes.

To calculate the annual rate of inflation, the BLS looks at how much all prices in its basket have changed since a year earlier. Then it “weights” the value of each item based on how much of it people buy. The weighted average of all items becomes the CPI.

The BLS then uses the CPI to calculate the annual rate of inflation. It divides this month’s CPI by the CPI from a year ago, then multiplies the result by 100. This shows how the purchasing power of a dollar has changed over the last year. The result is reported monthly.

Other measures of inflation include:

  • Personal Consumption Expenditures Price Index (PCE). This inflation measure is published by the Bureau of Economic Analysis. Like the CPI, it’s a measure of consumer costs, but it’s adjusted to account for changes in the products people buy. The Federal Reserve uses the PCE to guide its monetary policy, as discussed below. 
  • Producer Price Index (PPI). The PPI measures inflation from the seller’s perspective, not the buyer’s. It’s calculated by dividing the price sellers currently get for a basket of goods and services by its price in a base year, then multiplying the result by 100.

Historical Examples of Inflation

A little bit of inflation is normal. But sometimes inflation spirals out of control, with prices rising more than 50% per month. This is called hyperinflation, and it can be devastating for an economy.

Hyperinflation has occurred at various times and places throughout history. During the U.S. Civil War, both sides experienced soaring inflation. Other examples include Germany in the 1920s, Greece and Hungary after World War II, Yugoslavia and Peru in the 1990s, and Venezuela today. In most cases, the main cause was the government printing money to pay for debt. 

The last time the U.S. had prolonged, high rates of inflation was in the 1970s and early 1980s. The inflation rate was nowhere near hyperinflation levels, but it spiked above 10% twice. Eventually, the Fed hiked interest rates to double-digit levels to get it under control.

Although high inflation can be destructive, zero inflation isn’t a good thing, either. At that point, an economy is at risk of the opposite problem, deflation. 

When prices and wages fall across the board, consumers spend less. Sales of products and services fall, so companies cut back staff or go out of business. As a result, jobs are lost and spending drops still more, worsening the problem. The Great Depression was an example.


The Federal Reserve, or Fed, is the U.S. central bank — or more accurately, banks. It’s a group of 12 banks spread across the country under the control of a central board of governors. Its job is to keep the economy on track, reining in inflation while trying to avoid recessions. 

The Fed maintains this balance through monetary policy, or controlling the availability of money.

Its main tool for doing this is interest rates. When the economy is weak, the Fed lowers the federal funds rate. This makes it easier for people to borrow and spend. 

When the problem is inflation, it does the opposite, raising interest rates. This makes it more costly to borrow and more worthwhile to save. As a result, consumers spend less, slowing down the wage-price spiral.

The Fed has other tools for fighting inflation as well. One option is to change reserve requirements for banks, requiring them to hold more cash. That gives them less to lend out, which in turn reduces the amount consumers and businesses have to spend.

Finally, the Fed can reduce the money supply directly. The main way it does this is to increase the interest rate paid on government bonds. That encourages more people to buy bonds, which temporarily takes their money out of circulation and puts it in the hands of the government.


Inflation Frequently Asked Questions (FAQs)

If you keep seeing stories about inflation in the news, you may have some other questions about how it works. For instance, you may wonder:

What Is Hyperinflation?

Hyperinflation is more than just high inflation. It’s a wage-price spiral gone mad, sending prices soaring out of control. As noted above, the usual definition of hyperinflation is an inflation rate of at least 50% per month — more than 12,000% per year. However, some economists use the term to refer to an inflation rate of 1,000% or more per year.

What Is Disinflation?

Disinflation is a fall in the rate of inflation. This is what the Federal Reserve and other central banks try to achieve through their monetary policy, such as raising interest rates.

Disinflation is not the same as deflation, or falling prices. During a period of disinflation, prices are continuing to rise, but the rate at which they rise is slowing down.

What Is Transitory Inflation?

When the first signs of a post-COVID-19 inflation spike appeared, Federal Reserve chair Jerome Powell described it as “transitory.” By this, he meant that the rise in prices would be short-lived and would not do permanent damage to the economy. 

However, in November 2021, Powell declared it was “time to retire that word.” Based on the growth in prices, he had concluded that inflation was more of a long-term trend. The Federal Reserve responded by planning to fight inflation harder, buying more bonds and plotting out a series of interest rate hikes.

What Is Core Inflation?

Measuring inflation can be tricky because prices for some products fluctuate more than others. Food and energy prices, in particular, can shift a lot from month to month. Including these products in the CPI can lead to sharp, but temporary, spikes or dips in the inflation rate.

To adjust for this, the CPI and PCE have a separate “core” version that doesn’t include food or energy prices. This core inflation measure is more useful for predicting long-term trends. The  main versions of the CPI and PCE, known as the “headline” versions, give a more accurate picture of how prices are changing right now.

What Is the Consumer Price Index (CPI)?

As noted above, the Consumer Price Index, or CPI, is the main measure of inflation in the United States. The BLS calculates it based on how much prices have risen for an imaginary basket of goods and services that many Americans buy.


Final Word

A little inflation in an economy is normal. It can even be a good thing, because it’s a sign that consumers are spending and businesses are earning. The Fed generally considers an annual inflation rate of 2% to be healthy.

However, higher inflation can cause serious problems for an economy. It’s bad for savers whose nest eggs, including retirement savings, shrink in value. It’s even worse for seniors and others on fixed incomes whose purchasing power has fallen. And it often requires strong measures from the central bank to correct it — measures that risk driving the economy into a recession.

If you’re concerned about the effects of inflation, there are several ways to protect yourself. You can adjust your household budget, putting more dollars into the categories where prices are rising fastest. You can stock up on household basics now, before the purchasing power of your dollars falls too much. 

Finally, you can choose investments that do well during periods of inflation. Stock-based mutual funds and real estate investment trusts are both good choices. Just be careful with inflation hedges like gold and cryptocurrency, which carry risks of their own.

.kb-table-of-content-nav.kb-table-of-content-id_0d0fb5-39 .kb-table-of-content-wrappadding:30px 30px 30px 30px;background-color:#f9fafa;border-color:#cacaca;border-width:1px 1px 1px 1px;.kb-table-of-content-nav.kb-table-of-content-id_0d0fb5-39 .kb-table-of-contents-titlefont-size:14px;line-height:18px;letter-spacing:0.06px;font-family:-apple-system,BlinkMacSystemFont,”Segoe UI”,Roboto,Oxygen-Sans,Ubuntu,Cantarell,”Helvetica Neue”,sans-serif, “Apple Color Emoji”, “Segoe UI Emoji”, “Segoe UI Symbol”;font-weight:inherit;text-transform:uppercase;.kb-table-of-content-nav.kb-table-of-content-id_0d0fb5-39 .kb-table-of-content-wrap .kb-table-of-content-listcolor:#001c29;font-size:14px;line-height:21px;letter-spacing:0.01px;font-family:-apple-system,BlinkMacSystemFont,”Segoe UI”,Roboto,Oxygen-Sans,Ubuntu,Cantarell,”Helvetica Neue”,sans-serif, “Apple Color Emoji”, “Segoe UI Emoji”, “Segoe UI Symbol”;font-weight:inherit;.kb-table-of-content-nav.kb-table-of-content-id_0d0fb5-39 .kb-table-of-content-wrap .kb-table-of-content-list .kb-table-of-contents__entry:hovercolor:#16928d;.kb-table-of-content-nav.kb-table-of-content-id_0d0fb5-39 .kb-table-of-content-list limargin-bottom:7px;.kb-table-of-content-nav.kb-table-of-content-id_0d0fb5-39 .kb-table-of-content-list li .kb-table-of-contents-list-submargin-top:7px;.kb-table-of-content-nav.kb-table-of-content-id_0d0fb5-39 .kb-toggle-icon-style-basiccircle .kb-table-of-contents-icon-trigger:after, .kb-table-of-content-nav.kb-table-of-content-id_0d0fb5-39 .kb-toggle-icon-style-basiccircle .kb-table-of-contents-icon-trigger:before, .kb-table-of-content-nav.kb-table-of-content-id_0d0fb5-39 .kb-toggle-icon-style-arrowcircle .kb-table-of-contents-icon-trigger:after, .kb-table-of-content-nav.kb-table-of-content-id_0d0fb5-39 .kb-toggle-icon-style-arrowcircle .kb-table-of-contents-icon-trigger:before, .kb-table-of-content-nav.kb-table-of-content-id_0d0fb5-39 .kb-toggle-icon-style-xclosecircle .kb-table-of-contents-icon-trigger:after, .kb-table-of-content-nav.kb-table-of-content-id_0d0fb5-39 .kb-toggle-icon-style-xclosecircle .kb-table-of-contents-icon-trigger:beforebackground-color:#f9fafa;

GME is so 2021. Fine art is forever. And its 5-year returns are a heck of a lot better than this week’s meme stock. Invest in something real. Invest with Masterworks.

Amy Livingston is a freelance writer who can actually answer yes to the question, “And from that you make a living?” She has written about personal finance and shopping strategies for a variety of publications, including ConsumerSearch.com, ShopSmart.com, and the Dollar Stretcher newsletter. She also maintains a personal blog, Ecofrugal Living, on ways to save money and live green at the same time.

Source: moneycrashers.com

Should I File a Home Insurance Claim? Pros, Cons, When It Makes Sense

@media (max-width: 1200px) body .novashare-buttons.novashare-inline .novashare-button-icon width: 100%; .novashare-inline .novashare-button .novashare-button-block background: #000000; .novashare-inline .novashare-button .novashare-border border-color: #000000; .novashare-inline .novashare-button .novashare-inverse color: #000000;


Additional Resources

You love the big cherry tree in your home’s front yard. Each spring, it explodes in a riot of bright pink flowers. Each summer, it drops sour fruit that perks up nicely in a sugary pie. 

Until it doesn’t. One summer day, your family comes home to find one of the cherry tree’s limbs in your living room, felled by a strong thunderstorm. The damage is extensive: two broken windows, a caved-in window sill, and serious water and impact damage to the living room floor and furniture.  

Once the initial shock wears off, you prepare to file a home insurance claim. But then, you start to ask questions. What if your insurance company denies the water damage portion of the claim? What if my home insurance premiums spike? How much will I have to pay out of pocket due to your policy’s high deductible? Should I even file this claim? 


Should I File a Home Insurance Claim?

The fact that a seemingly serious event like a tree falling through your house is such a close call teaches us an important lesson about homeowners insurance: It’s not always in your best interest to file a claim. Even when they cause short-term financial pain, some incidents aren’t worth filing over. 


Motley Fool Stock Advisor recommendations have an average return of 618%. For $79 (or just $1.52 per week), join more than 1 million members and don’t miss their upcoming stock picks. 30 day money-back guarantee. Sign Up Now

Plus, standard homeowners insurance policies exclude certain types of incidents that can cause serious financial stress for homeowners, such as floods and earthquakes. You need separate insurance policies if your home is at risk of these uncovered perils.

Pros & Cons of Filing a Homeowners Insurance Claim

If you’re considering filing a homeowners insurance claim, you’re probably facing a hefty bill for cleanup and repairs or a long list of damaged items to replace. Or perhaps you’re staring down a lawsuit brought by a guest or worker who sustained serious injuries on your property.  

In any case, you need to figure out whether it makes sense to go through with your claim — and fast. That means objectively assessing the pros and cons of doing so.

Pros of Filing a Home Insurance Claim

Depending on the circumstances, filing a home insurance claim has significant financial benefits.

  1. It Helps You Pay for Repairs. If your claim is approved, you can use the payout to offset the cost of repairs and restore your home to its previous condition. Without this financial assistance, you might find yourself cutting corners or making ill-advised financial moves to cover the cost, such as dipping into your 401(k). 
  2. It Helps You Replace Damaged or Stolen Goods. Your homeowners insurance policy could help offset the cost of replacing possessions damaged in a naturally occurring incident like a storm or fire. If your home was burglarized or vandalized, the proceeds could cover the cost of replacing stolen property as well. Depending on your policy, you could receive the items’ actual cash value or replacement cost, which is the cost of buying them new.
  3. Repairs Help Maintain Your Home’s Value. Homebuyers don’t pay top dollar for properties with fire-damaged siding, broken windows, or gaping holes in the roof. Your home insurance payout helps restore your home’s value with minimal out-of-pocket cost.

Cons of Filing a Home Insurance Claim

Filing a claim on your homeowners insurance policy isn’t always a slam dunk. The claims process has some hidden and not-so-hidden pitfalls that could leave you worse off than when you began.

  1. Your Insurance Premium May Go Up. Although this isn’t guaranteed, your homeowners insurance rates could rise after you file your claim. Exactly how much depends on the type of claim you file, the size of the claim, and your previous claims history. Generally, liability claims bump premiums more than claims related to fire, vandalism, or natural disasters.
  2. Too Many Claims Mean Your Policy May Not Be Renewed. A rate increase is unwelcome but manageable. A canceled policy is far more serious. If insurers see you as riskier than the typical homeowner, you could have trouble getting coverage on your own. Your lender might need to step in and take out a policy on your behalf — often at a much higher premium than your old policy.
  3. If You Get a Claim-Free Discount, You Could Lose It. Once you file a home insurance claim, your claims history is no longer spotless. That matters because many home insurance companies offer claim-free discounts for homeowners who never file claims.

When You SHOULD File a Home Insurance Claim

So, you’re thinking about filing a home insurance claim. How can you be sure you’re making the right call?

Use these tests to assess your would-be claim. The more that apply to you, the stronger your position.

Repair or Replacement Costs More Than Your Deductible

This is the first test your would-be claim must pass. If it doesn’t, there’s no point in filing a claim.

Your deductible is the amount you must pay out of pocket before your home insurance kicks in. Your policy documents should clearly specify this amount. It’s either expressed as a flat dollar amount or a percentage of the policy’s total coverage amount.

Dollar amount deductibles typically range from $500 to $2,500, with $1,000 being a common value. Some policies have more than one deductible, depending on the type of property damage. Separate “wind and hail” deductibles are common, for example — and often higher than the standard deductible.

If your home sustained significant damage or loss, your claim value should easily exceed your deductible. For example, if you expect repairs to cost $20,000 and your deductible is $2,000, your insurance company covers $18,000 — 90% of the total cost.

On the other hand, if you expect repairs to cost $3,000, your insurance company only covers $1,000 — 33% of the total cost. That’s a closer call because filing a claim could result in higher home insurance premiums that eventually offset your payout. 

The Event Is Covered by Your Policy

Your homeowners insurance company isn’t obligated to provide reimbursement for every type of damage or loss to your home. In fact, while your policy covers a lot, it probably excludes specific events, known as exclusions.

Common exclusions include but aren’t limited to:

  • Earthquake
  • Flood
  • Damage and liability issues caused by poor maintenance 
  • Insect infestations
  • Mold
  • Personal property losses and liability issues caused by power outages or power surges
  • Intentional damage caused by a resident
  • Damage caused by war or nuclear fallout
  • Injuries caused by aggressive dogs
  • Issues related to or caused by home-based businesses
  • Costs related to building code violations

You may need to purchase separate insurance policies to cover some of these perils. For example, your lender may require you to carry flood insurance if you live in a recognized flood zone. 

Other add-on policies are optional but often a good idea. For example, if you run a business out of your home, you should consider carrying business insurance to protect against inventory or equipment losses or damage to your workspace.

You’ve Suffered Significant Loss or Damage

Often, it’s not a close call. If your home is seriously damaged or destroyed in an event that’s covered by your policy, you absolutely should file a homeowners insurance claim. Otherwise, you’ll be on the hook for tens or hundreds of thousands of dollars in repair or replacement costs.

If you have any doubts about the extent of the damage to your home, get a few repair quotes from building contractors in your area. You can also talk to your insurance agent or ask your home insurance company to send out an insurance claims adjuster before you file.

You Haven’t Made a Claim in the Past 5 Years

Approved homeowners insurance claims typically remain on your insurance record for five years after they’re made. 

This record is known as the Comprehensive Loss Underwriting Exchange (CLUE) database. When you make a claim, your insurer checks its own records and the CLUE database to see whether you’ve made any other claims in the past five years.

If you have made a claim in the past five years, expect your insurance premiums to spike after your second claim is approved. 

For fire, theft, and general liability claims, the increase could amount to 50% or more of your previous premium. A weather-related claim won’t increase your premium quite as much, but you’ll still notice a jump.


When You Should NOT File a Home Insurance Claim

It’s not always worth it to file a home insurance claim. 

Certain situations, such as minor damage that costs less to repair than your insurance deductible, all but rule out a claim. Others, such as an active claim history, bring an elevated risk of a denied claim.

If any of these situations apply to you, think twice about filing a home insurance claim.

Repair or Replacement Costs Less Than Your Deductible

If the damage or loss is relatively minor, your deductible could be too high to bother filing a claim. There’s no point in filing a claim — and potentially increasing your policy premiums — if you won’t even receive a payout.

Even if it’s a close call, be mindful of the potential for your premiums to go up after a successful claim. A claim worth $20,000 probably makes sense, but a claim worth $3,000 or $4,000 might actually set you back.

Damage Was Caused by Lack of Maintenance or Normal Wear & Tear

An event that appears to be covered by your policy might not be if the insurance adjuster can argue that it was caused by neglect, poor maintenance, or even normal wear and tear.

For example, let’s say your home loses heat during the winter, causing a water pipe to burst in your ceiling. Homeowners insurance policies generally cover this type of event — if the burst pipe was in good condition to begin with. If the pipe was already heavily corroded, your insurer might blame you for not replacing it sooner. They could deny the claim altogether.

The Event Isn’t Covered by Your Policy

It’s often quite easy to figure out whether a particular event is eligible for home insurance coverage. If your home collapses in an earthquake and your policy specifically rules out claims for earthquake damage, you’re out of luck. Hopefully, you have earthquake insurance.

But closer calls are more common than you’d think. If your resident termite colony worsens an existing foundation issue that eventually spurs a costly repair, your insurer could argue that the entire claim falls under the insect damage exclusion. 

When in doubt, it’s worthwhile to begin the claims process anyway. If you don’t like what the insurance adjuster has to say, you can drop the claim without increasing your insurance rates. 

Or you can hire a public adjuster — an independent insurance adjuster who can make a stronger case to your insurance company. Public adjusters usually work on contingency, so they only get paid if your claim is successful.

You’ve Made Multiple Claims in the Past 5 Years

The more homeowners insurance claims you make in a five-year period, the more your insurance rates increase after a successful new claim. 

Make too many claims in too short a period, and your insurance company could drop you altogether. If you’re unable to find replacement coverage, your lender could take out a policy on your behalf. Expect this lender policy to cost a lot more than your old policy.

All that said, you shouldn’t automatically rule out a new homeowners insurance claim just because you recently got an insurance payout or two. If your home is seriously damaged or destroyed by a covered event, it’s probably still worth it to file. Just be ready to pay higher premiums on the back end.


Final Word

Some say the best way to save money on homeowners insurance is not to file a claim at all. There’s a grain of truth to that, but don’t take it too literally. 

If your home is seriously damaged in an event that’s covered by your policy, a home insurance claim is absolutely warranted. Taking the time to file could save you tens or hundreds of thousands of dollars in out-of-pocket expenses, keeping you on track to reach your long-term financial goals.

Still, it’s always a good idea to take stock of the situation before filing a claim. If your home sustains damage due to an event not covered by your policy or the cost of repairs doesn’t exceed your policy’s deductible, a claim isn’t in the cards. And even if filing a claim would be profitable on paper, it’s worth considering the long-term costs — in the form of higher premiums for years to come.

.kb-table-of-content-nav.kb-table-of-content-id_0d0fb5-39 .kb-table-of-content-wrappadding:30px 30px 30px 30px;background-color:#f9fafa;border-color:#cacaca;border-width:1px 1px 1px 1px;.kb-table-of-content-nav.kb-table-of-content-id_0d0fb5-39 .kb-table-of-contents-titlefont-size:14px;line-height:18px;letter-spacing:0.06px;font-family:-apple-system,BlinkMacSystemFont,”Segoe UI”,Roboto,Oxygen-Sans,Ubuntu,Cantarell,”Helvetica Neue”,sans-serif, “Apple Color Emoji”, “Segoe UI Emoji”, “Segoe UI Symbol”;font-weight:inherit;text-transform:uppercase;.kb-table-of-content-nav.kb-table-of-content-id_0d0fb5-39 .kb-table-of-content-wrap .kb-table-of-content-listcolor:#001c29;font-size:14px;line-height:21px;letter-spacing:0.01px;font-family:-apple-system,BlinkMacSystemFont,”Segoe UI”,Roboto,Oxygen-Sans,Ubuntu,Cantarell,”Helvetica Neue”,sans-serif, “Apple Color Emoji”, “Segoe UI Emoji”, “Segoe UI Symbol”;font-weight:inherit;.kb-table-of-content-nav.kb-table-of-content-id_0d0fb5-39 .kb-table-of-content-wrap .kb-table-of-content-list .kb-table-of-contents__entry:hovercolor:#16928d;.kb-table-of-content-nav.kb-table-of-content-id_0d0fb5-39 .kb-table-of-content-list limargin-bottom:7px;.kb-table-of-content-nav.kb-table-of-content-id_0d0fb5-39 .kb-table-of-content-list li .kb-table-of-contents-list-submargin-top:7px;.kb-table-of-content-nav.kb-table-of-content-id_0d0fb5-39 .kb-toggle-icon-style-basiccircle .kb-table-of-contents-icon-trigger:after, .kb-table-of-content-nav.kb-table-of-content-id_0d0fb5-39 .kb-toggle-icon-style-basiccircle .kb-table-of-contents-icon-trigger:before, .kb-table-of-content-nav.kb-table-of-content-id_0d0fb5-39 .kb-toggle-icon-style-arrowcircle .kb-table-of-contents-icon-trigger:after, .kb-table-of-content-nav.kb-table-of-content-id_0d0fb5-39 .kb-toggle-icon-style-arrowcircle .kb-table-of-contents-icon-trigger:before, .kb-table-of-content-nav.kb-table-of-content-id_0d0fb5-39 .kb-toggle-icon-style-xclosecircle .kb-table-of-contents-icon-trigger:after, .kb-table-of-content-nav.kb-table-of-content-id_0d0fb5-39 .kb-toggle-icon-style-xclosecircle .kb-table-of-contents-icon-trigger:beforebackground-color:#f9fafa;

GME is so 2021. Fine art is forever. And its 5-year returns are a heck of a lot better than this week’s meme stock. Invest in something real. Invest with Masterworks.

Brian Martucci writes about credit cards, banking, insurance, travel, and more. When he’s not investigating time- and money-saving strategies for Money Crashers readers, you can find him exploring his favorite trails or sampling a new cuisine. Reach him on Twitter @Brian_Martucci.

Source: moneycrashers.com