How Much Will I Save on My Home Insurance If I Replace My Roof?

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Earlier this year, I called my insurance agent when the renewal notice came for our home owner’s insurance. The premium had gone up again and the coverage had gone down. By phoning in, I was able to reduce our costs considerably. One question they asked was when we last replaced the shingles on our roof. They hinted that a new roof would drop our insurance rate. Today, I’m phoning in to find out how much we’ll save on our home owner’s insurance rate because we have just replaced our 17-year-old roof.

Why Do I Need a New Roof After 17-Year When I Bought 30-Year Shingles?

I’ve discussed our roof before when he had some leaking only about 10 years after the pricey 30-year shingles went on. We discovered that the roofers had made a mistake and put too small vents into too large holes which left a gap for the rain to sneak into the house. It was easily fixed and the years passed by drily.

This spring, however, we noticed over the winter one section of our roof facing the heat and sun had lost a lot of its granules. Sure enough during a heavy, 24-hour long rain, water began to come in. The cardboard backing for the shingles had soaked up water like a sponge and eventually it started to work through them.

So it was time for a new roof. When we spoke with a variety of roofers, I discovered that 10-12 years is all they really expect 25- or 30-year shingles to last. So much for the accuracy of the names!

So What’s the Benefit of Getting the New Roof—Did I Save a Lot on My Insurance?

Now the new roof is on, I phoned our insurance company to ask them to update their file. And guess what? Our annual savings are: $23.

Yep. Just twenty-three dollars a year.

Sigh.

It’s going to take a LONG time to pay off the roof with that cost savings!

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Canadian Interest Rates Are Rising: Should I Sell My PH&N Bond Fund Units in My Pension Plan?

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The Bank of Canada has raised its prime rate a couple of times so far in 2017. It might continue to keep raising the rate or it might keep it at 1% or it might lower it. If only I was psychic I would know what to expect ! Why does it matter? Because I still hold part of a defined contribution pension in the PH&N Bond Fund. Despite years of being told to dump it in case interest rates rise, I’ve held on. It means, though, that each year I end up asking myself the same question: Is it time to sell by holdings in the PH&N Bond Fund?

Why Does an Increase in the Bank of Canada Prime Rate Threaten my Bond Fund?

At first, it sounds like an interest-rate hike would be a good thing for bonds. If the rates go up, you should get more, right?

And that is true if you were buying a newly-issued bond that is offering a newly-increased rate.

The problem is that I own units in a fund that already owns bonds. The rates on those bonds will not increase–it was agreed on at the time they were purchased. That means that the highest interest rate I can earn with my bond money is already fixed, unless the fund sells some of the bonds it holds and buys some others.

So why don’t they just dump the lower-interest bonds they own and buy new ones with higher yields?

Because they would need someone who wanted to buy the lower yield bonds. Those buyers, though, could also buy some of the newly-issued higher yield bonds. The only way to encourage someone to buy the old bonds is to drop the actual price of buying the principal portion of the bond and the required price drop is calculated to make the overall yield on the deal equal the same as buying a new bond with a higher interest rate.

So my bond fund is essentially stuck holding existing bonds with lower interest rates or selling them for a loss of principal.

Can’t I Just Hold On to my Bond Fund Units at the Lower Yield? Why Do I Need to Sell?

If I’m ok with the lower yield of my bond fund units versus what a fund consisting of newer higher-yield bonds could offer, I don’t need to sell my units, do I?

Well, sort of. It is a “fund” not individual bonds that I hold. So if the other investors in the PH&N Bond Fund start to sell off their units, the fund managers may have to start selling off some of the actual bond holdings to generate the cash to pay them out. And that could mean dropping the performance of the remaining units in the fund, if they have to sell some of their better-performing assets.

In other words, if there is a run on redeeming units in the Bond Fund, I could watch my unit values drop quickly.

Will I Sell My Bond Fund Units in 2017?

I’ve been dithering about what to do with these units since 2013. I have not invested any new money in the fund since then. In fact, each year, I pull out in cash the growth experienced by that fund. In fact, over 5 years, I’ve pulled out cash equivalent to 25% of the amount I had in the Bond Fund in 2013. And the fund units I’m holding still have the same dollar value as they did then.

In other words, if I had $100 000 in the fund on January 1, 2013, I still have $100 000 in the fund now on October 14, 2017, but I also have taken out $25 000 and re-invested it elsewhere during that time.

(I do realize that $100 000 today does not have the same buying power as it did in 2013.)

I’m still not sure whether to start liquidating my bond fund units or not. I need a high percentage of our pension savings in fixed income as we are close to retirement: Picking where to keep that fixed income money is getting confusing !

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