Homeowners who live in areas affected by hurricanes know that the damage incurred by such storms can be devastating. Reviewing your current insurance coverage on your home and valuables can help you have the proper coverage in place long before a storm hits. Protecting your property is of utmost concern, since the cost of replacing items or repairing damage can be extremely high. For financial security many homeowners rely on their homeowners policies to insure their property against such loss.

A Look at Homeowners Insurance

Although homeowners insurance does generally cover wind damage that arises from hurricanes, this is not the case in some coastal locations where wind damage insurance must be purchased separately from the state. In addition, separate policies must be purchased for flooding, which is not covered by the average homeowners policy. The National Flood Insurance Program (NFIP) offers flood insurance, which is especially important for those who live in coastal or storm-prone areas.

The limitations of a homeowners policy relating to storm damage and flood insurance must be understood long before insurance protection becomes an immediate need. For example, if hurricane winds tear a hole in the side of your house, and water damage from rain ensues, then your homeowners policy would cover the losses because the damage occurred as a result of wind. However, if a hurricane causes nearby bodies of water to rise, and flooding and water damage to your home results, your homeowners policy will not provide coverage.

The deductibles of homeowners policies have changed in some cases over the past several years because insurance companies have lost significant sums of money paying for billions of dollars of destruction caused by hurricanes. Many companies are now requiring a percentage deductible rather than, for example, a flat deductible amount of $500. These percentages may range from 1% to 5%.

Safety Tips

Apart from obtaining insurance coverage, there are several steps you can take to prevent or help minimize damage to your property and yourself during a storm, such as:

• Map an escape route long before it is needed and arrange a specified meeting place with family members.
  
• Store extra supplies of bottled water, canned food, medications, flashlights, and batteries.
  
• Photograph or videotape the belongings inside your house for your records. Keep the pictures or videos in a safe deposit box—preferably at a location outside your home.
  
• Reinforce windows with diagonal tape, storm shutters, or boards.
  
• Make sure all outside property is firmly secured, such as lawn furniture, grills, etc.
  
• Boat owners should put their boats in the safest place possible and make sure that mooring lines are tight and secure.
  

Hurricanes are one of nature’s most powerful forces, but you are not powerless against them. Give us a call. We will help you obtain the insurance coverage necessary to protect your home and valuables. Storms may be unpredictable and severe, but if you take the necessary steps, you can be prepared.

Automobile leasing is more popular than ever, but many people still hesitate to enter into a lease. Why? Maybe because there are so many factors to consider that it seems easier to buy. Under the right circumstances, leasing an auto can save you considerable money and even taxes. No one can tell you which option is better without knowing your particular situation, but these are some of the factors which might impact your decision.

How Does Leasing Work?

When you lease an automobile, you only pay for the portion of it that you use, or the amount by which it depreciates. Many people hesitate because at the end of the lease they don’t own anything. But that’s exactly why lease payments are lower than loan payments. You’re not buying the leftover value in the car—you’re buying only what you use.

A lease payment consists of a depreciation charge and a finance charge. The finance charge is much like the interest you would pay on a car loan. The depreciation charge is determined by dividing the value of the car that you use up by the number of months in the lease. Without considering the tax effects, the short-term cost of leasing compared to buying is about the same. This assumes that you sell your car after the loan is paid off for its full market value. But as you well know, this is often not the case, especially if the car is used as a trade-in. If you are apt to keep your car for 10 years, then buying will always be your best option. What about the tax effects? Ultimately, the tax cost of leasing versus buying should be about the same. However, the timing of when you get the deductions can be greatly impacted by your decision.

Claiming Tax Deductions on Leases

Because you do not own a car you lease, you are not allowed to depreciate it. You can, however, deduct at least some of the cost of operating a car leased primarily for business purposes. Keep in mind that you are only allowed to deduct the business portion of the costs of a lease if the car is also used for personal purposes, such as commuting.

You have two options for figuring your deductible expense on a business vehicle leased for more than 30 days: the standard mileage rate allowance or actual expenses method. The standard mileage rate allowance is easier to calculate, but it may provide less tax relief than the actual expenses method if you do not drive a large number of miles, or if your car is relatively expensive.

The standard mileage allowance is a cents-per-mile allowance that takes the place of deductions for lease payments, vehicle registration fees; and the expenditures on gas, oil, insurance, maintenance and repairs. The standard mileage allowance rate for business use of a car—leased or owned—is 40.5 cents a mile in 2005. To figure out your deduction, you simply multiply the rate by the number of miles driven.

The actual expenses method generally allows you to deduct all out-of-pocket expenses for operating your car for business, from lease payments to repair costs. If the car you have leased has a fair market value in excess of around $17,500—which makes it a luxury vehicle in the eyes of the IRS—your deduction is reduced by a so-called "inclusion amount," which is added to your gross income. This additional sum brings your deduction roughly in line with the depreciation you would have been able to claim as the car’s owner.

Inclusion amount tables in IRS Publication 463 will help you determine the inclusion amount that applies in your case. Because the inclusion amounts increase from year to year in the course of a lease, you may want to consider taking out a lease with a term of no more than two years.

Any advance payments on the lease must be deducted over the entire lease period. If you take out a lease with an option to buy, you can deduct the payments if the arrangement is set up as a lease. If, however, the arrangement amounts to a purchase agreement, the payments are not deductible.

Leases—Hidden Traps

Despite the limits on deductions for luxury vehicles, the available tax breaks for business owners are generous enough to make leasing an attractive alternative to buying—especially if you want to change cars frequently. But before you sign on the dotted line, consider the potential pitfalls involved in leasing:

Mileage limits: All leases have mileage limits, usually 12,000 or 15,000 miles. If it’s probable that you’ll rack up more miles, you’ll face costly penalties. Try to negotiate the mileage limit up in exchange for higher lease payments. Or, buy the car.

Open-end leases: In an open-end lease, the residual value is re-determined at the end of the lease. If the residual value is lower than initially projected, you have to make up the difference. Closed-end leases avoid this problem, but your payments may be higher.

Early termination: When leasing, be sure to keep the car for the entire lease period. Penalties for early termination are severe and are usually difficult to get out of. If you’re not sure how long you’ll keep the car, consider a shorter lease term or purchase the car.

While law changes in recent years require dealers to disclose more information on leases, key information can be buried in the fine print or omitted completely, like the interest rate that you are being charged. Be sure you completely understand the terms before signing on the dotted line. Leasing your next automobile can make a lot of sense. It also can be a big mistake. Your tax professional can help you consider all factors and make the right choice.

As much fun as recreational vehicles are, they come with their own set of motor vehicle insurance issues. For many, there are no standard insurance coverages. Here are some of the concerns you might encounter:

All-Terrain Vehicles (ATVs), Snowmobiles, and Go-Carts. These vehicles are not covered under your automobile insurance policy. You may be able to obtain separate liability coverage if a vehicle is registered for public road use and scheduled on a policy. Or, your homeowners policy may provide liability coverage if your vehicle is used on your property. However, property damage (to the vehicle) is usually not included in either of the coverage possibilities. Most likely, if you are a frequent snowmobiler, or use off-road vehicles, such as ATVs or go-carts, you will want to inquire about a separate policy to help protect you from the property and liability exposures these vehicles present.

Towable Camper Trailers. All trailers require considerable skill to tow, usually because of their size. If an insured passenger vehicle tows the trailer, your personal liability is usually covered automatically. However, you may want to add comprehensive or collision coverage to cover your trailer's value.

Motorized RVs. In some states, policies insure only new vehicles, while others require a surcharge on older models. Original, permanently installed furnishings may be covered, but this is usually restricted to collision and fire damage, and not theft. If you lease your motor home as a means to recoup your investment, a higher rate may apply.

Recreational vehicles can be fun, but they can also pose unique risks. Protect your property and personal liability before an accident or injury occurs. Remember these coverages can vary by state. Give us a call and we’ll be happy to discuss your needs.