Going South? Your Insurance Won’t Cover You If You Do This: Don’t Risk Losing Your House!

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Many homeowners like to take a trip to the sunny, and hopefully warmer, south in the winter. They lock up well, set timers on lights, and get a neighbour to pick up the flyers and keep the driveway shoveled. If they don’t also do this, though, they risk losing their home insurance coverage leaving their home vulnerable in the case of fire, theft or burst pipes.

You May Need to Turn Off Your Water Supply to Your Home Before Leaving In Winter

Here’s a direct quote from a TD Meloche Monnex insurance policy supplement:

“If you go away for more than seven consecutive days during [the] heating season, it is mandatory to turn off the main water supply or arrange for someone to ensure that the house is adequately heated, to maintain your insurance coverage.”

This person is supposed to ensure that the furnace has not gone off which could cause pipes to freeze and burst and then leak.

Knowing how some insurance companies try to avoid paying out claims, I think you’d better have some type of proof that you’ve turned off the water and/or arranged for someone to come into your home.

And remember that you must be careful if you plan to turn off the water supply for the entire home: Some hot water tanks have special procedures if you are going to turn off the water; Fire prevention and other sprinkler systems may also need to be properly serviced before shut off.

You May Need to Have Someone Enter Your Home to Check the Furnace and Power While You Are Away

Depending on your insurance policy, you may need to have someone actually come inside your home while you are away in winter. They are supposed to check that the furnace is running properly and that the home is well above the freezing point. If not, and the pipes freeze, your insurance company may not pay out to repair the damage.

They are also supposed to check that the electricity is working so that the fridge and freezer are keeping their contents safe.

Check Your Own Homeowner’s Insurance Policy

These are just some of the clauses to watch out for in your policy. There may be other rules regarding valuables left in a home while the owner is away for an extended period. For example, you may need to put jewellery in a safe deposit box at the bank before taking that month-long trip backpacking.

If in doubt, call your agency or your broker and ask what is required before travelling.

Then enjoy your trip!

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Have you ever come back from a relaxing trip to discover a major headache waiting for you? Did your homeowner insurance ever deny your claim? Please share your tips and experiences with a comment.

Is Someone with an Income of $2 000 a Month Rich? What’s My Rich Ratio?

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I’m reading a book called “You Can Retire Sooner than You Think: The 5 Money Secrets of the Happiest Retirees.” I picked it up at the library because I’ve been trying to convince my husband that it’s ok to retire whenever he wants. (I doubt he’s interested yet.) This friendly short book has some interesting ideas, one of which is a new-to-me definition of what is “rich.” According to this book, someone with an income of just $2 000 per month could be rich.

What is Wes Moss’ definition of a Rich Ratio?

The author, who works with financial planning and in radio, wanted a simple way for people to decide if they were rich or poor, so he invented one. He came up with the following formula

Have = Rich Ratio
Need

  • What you Have is your after-tax income.
  • What you Need is the amount of money you want to spend each month to live the lifestyle you want.

He further explains the idea with two examples:

  • If you have an after-tax income of $4 000 a month, but you can meet your lifestyle desires with only $2 000 then you are rich.
    You have a Rich Ratio of 2.00.
  • If you have an income of $1 million a month, but you need $2 million, then you are poor.
    You have a Rich Ratio of 0.500.

Are You Ready to Retire Happily?

His theory is that to retire happily you need a Rich Ratio of over 1.

Which makes sense: if you need more money a month to live the way you want than you are able to receive in income from your pension, social assistance, CPP, OAS, investments, rental income, and any other sources of money, then you are not going to be happy.

What Is Our Predicted Rich Ratio for Retirement?

I’m having a bit of trouble with this one. To figure out the ratio, I need to have a number for our retirement income. For that I have a reasonable estimate.

It’s harder for me to estimate our “Need” value for a happy retirement.

I know what we are spending now, including how much we like to have for a significant family vacation and to save for home repairs and new cars.

But that number is too large, I think, because it includes what we need for our entire family. When – if?—the children ever grow up and move on, will we need less? Or will we be in some way financially active in their lives and still need the same?

Also, I’m a bit uncertain about our hobbies budget. Our current number includes what we are spending now. But some of that spending I know for a fact is “comfort spending.” That’s the extra that gets spent as a “reward” for too much (unpaid) over-time and stress. So it’s quite possible our hobby spending will decline a bit in retirement. But maybe not!

Right now, our retirement Rich Ratio is about 0.95. So we could have a happy retirement provided we had a small additional source of income. If the children ever left home and were financially independent, the ratio would immediately jump over 1.00.

Since we’ve always expected to continue to generate small streams of work-related income in retirement, I know even if our spending doesn’t decrease as the children age, we still are good for a ratio of 1.00 or higher.

What Is Our Rich Ratio Now?

We currently have a Rich Ratio much higher than 1.00. Which is good because that is why we can save money for our retirement, our children’s education and other aspirations.

How did we get a ratio over 1.00?

Partly, we got there by getting a good education and continuing to upgrade our skills. Some luck, of course, is also involved any time one gets a job that pays well.

The other part of the ratio, though, is just as important. By keeping our Need number low, our Rich Ratio bounces well above 1.00.

We don’t have extravagant tastes and we do tend to conserve money on things that don’t matter to us so that we have it to splurge on the things that bring us joy.

For example, I don’t have marble or granite kitchen countertops. Instead I invested the money that could have been spent on that upgrade. From the income that I earn each month from that investment, I had the cash handy to invite our visiting relatives out for dim sum for lunch today. And we can treat others next month.

So I guess we’re rich! (but I already knew that.)

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What about you? Do you think your Rich Ratio is high enough to ensure a happy retirement? Is it high enough to feel rich right now? Please share your views with a comment.