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Open House

Insure Your Home; Hurricane Homework; Get Cash Fast; Giving Back

Aired September 06, 2008 - 09:30   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

GERRI WILLIS, CNN NEWS ANCHOR: Hello. I'm Gerri Willis; this is OPEN HOUSE, the show that saves you money. It's been a busy hurricane season and there is still a ways to go from protecting your home to getting cash fast, we'll take you through everything you need to know to prepare when natural disasters strike. Hurricanes have already caused billions of dollars of damage this year and there's still a good amount of time left in the 2008 hurricane season. But, you can protect your home and what's in it. Alex Soto is a former chairman of Independent Insurance Agents and Brokers of America.
Al, it's good to see you again.

ALEX SOTO, FMR CHAIRMAN, IIABA: Hello, Gerri, good to see you.

WILLIS: All right, well, let's talk for just a second about Florida because that's where you're from. Florida is an interesting state because it's the biggest writer of homeowners insurance in the state. Is Florida ready for a major catastrophe?

SOTO: Well, from a governmental standpoint of taking care of the citizens we are as ready as any state can possibly be, unfortunately we've had a lot of experience when it comes to dealing with disasters. When it comes to insurance, it depends on the size of the storm. Quite frankly, the private marketplace is pretty much ready. One of the big concerns is Citizens, which is the public entity that provides insurance, to Floridians in many cases, are they ready and do they have enough money to pay all of the claims that may come from a major storm?

WILLIS: All right, we're all praying for the best and preparing for the worst as they say. But, who will pay if Citizens doesn't have enough money on hand to make these claims good or if the backup reinsurer can't do it either?

SOTO: Well, the process is, they have a certain amount of money at the ready, then they will go to the Florida catastrophe fund and get the reinsurance money from there, continued having shortfalls and not enough money, they will float bonds. In effect, they will borrow money and at the end of the day, the payers will be the citizens of the state of Florida.

WILLIS: You know, it always comes down to the taxpayer. I want to get to some of your really great advice for folks out there when it comes to buying insurance and it's really too late for most folks out there with the kinds of conditions we have going on right now. But, if you were out there trying to buy insurance to keep your family and your home safe, what do you need to know?

SOTO: Well, No. one, you want a homeowner's policy. And the homeowner's policy, most of the time in the entire state of Florida, and the country, will provide the windstorm coverage. And on the windstorm coverage you get tornadoes and you get hurricanes. A few people who live very close to the water will have to have a separate windstorm policy that they will buy from Citizens because their homeowners will exclude it. Most everybody else will have in their homeowners the windstorm coverage.

WILLIS: All right.

SOTO: Then you also need a flood policy. The flood policy is sold through insurance agents, but the ultimate payer is the federal government. And you are absolutely right, there's a 30-day waiting period for the flood policy, so if you haven't gotten it far enough in advance of the storm, it's too late. You cannot get it.

WILLIS: All right, but people out there, maybe they're not in Florida, maybe they're further out, makes sense to check out getting that flood coverage because let me tell you, it can come in handy as so many people have found.

Let's talk a little bit about what people should be doing to prepare themselves for making the claim on their insurance. What I hear, Alex, from so many homeowners is that when they make that claim, they're never satisfied with the number they get back. What do they need to do to be prepared?

SOTO: Well, No. 1 is, you need to know what property you have. To do an inventory is very, very important. And the easiest way to do an inventory is take a movie camera and go room by room and document and do a narrative of the property that you have. You know, we had a lady, very nice, lovely lady, a few years ago, who was unhappy with the settlement because her comment was, I know I lost a lot more. I just don't know what it was. And you have to know what you have in order to -- or had in order to report it to the insurance company.

WILLIS: That's really frustrating. And you can go out and buy even a disposable camera and take pictures all over the house to make sure that you're going to be OK, right?

SOTO: Correct.

WILLIS: Easy stuff.

SOTO: And you want to make sure that the film is protected. You either have it in a vault or a safe deposit box or you have it at least in some plastic so that in case wind comes in, rain comes in, or you have a flooding, it doesn't damage your evidence.

WILLIS: All right, so document, document, document. Alex Soto, thank you for your time today, we really appreciate it.

SOTO: You're welcome. WILLIS: Now look, if your home ever suffers major damage from a storm, look out. There are dishonest service people out there that prey on disaster victims. Don't be pressured into signing a contract with any roofing or building company. Instead, collect business cards, get written estimates for the proposed work. Be weary of contractors that encourage you to spend a lot of money on temporary repairs. Investigate the track record of anybody you consider hiring and ask for references. It's also a good idea to check in with the Better Business Bureau at bbb.org. and don't hand over that deposit until you're thoroughly done with your homework.

Next on OPEN HOUSE prepare and protect your home and everything in it before a hurricane or major storm hits. And, if a disaster strikes we'll tell you how to raise cash quickly in this tight economy.

(COMMERCIAL BREAK)

WILLIS: You'd think by now folks living along the coastline would get it. A hurricane is on the way -- you board up, you leave. But that's not necessarily the case. CNN's John Zarrella reports many people are falling back into dangerous hurricane habits.

(BEGIN VIDEOTAPE)

JOHN ZARRELLA, CNN CORRESPONDENT (voice over): Neil Rubin is getting a new garage door installed at his home.

NEIL RUBIN, HOMEOWNER: This one's suppose to withstand, I think, 150 miles-an-hour wind, in that area, which is a lot better than I had. And since I have the accordion shutters, why have a weak spot on your house?

ZARRELLA: And the garage door is considered the weakest spot in a home.

JACK TROUT, ELECTRONIC DOOR LIFT: You lose the garage, you lose the roof, you loose the contents of the house, everything is gone.

ZARRELLA: But a new Mason-Dixon poll conducted for the National Hurricane Survival Initiative found a staggering 95 percent of the 1,100 adults questioned didn't know this, and 30 percent said they would not start preparing their homes until a hurricane warning is issued.

CHUCK LANZA, BROWARD CO., FL EMERGENCY MGMT: All the water is gone for the stores at 24 hours, the plywood's gone from all the larger stores. People need to make those plans early in the season.

ZARRELLA: The survey found bad habits resurfacing that existed before the devastating wake-up call season of 2005: Katrina, Rita, and Wilma. An astounding 50 percent said they had no disaster plans or survival kits. Why the complacency?

UNIDENTIFIED FEMALE: Because you've been through it so many times that, you know, most of the time it doesn't hit. ZARRELLA: Emergency managers say while many people may not be prepared for the long aftermath, they do, in most cases, enough to survive a storm.

LANZA: People still, at the last minute, usually make the right decision. The problem is if they don't have a plan in place and they haven't bought the supplies they needed.

ZARRELLA: And this may not surprise you, the high price of gas is compounding the under preparedness problem, that's because people aren't buying the supplies they need because they're spending so much money filling up their gas tanks.

(on camera): Another number coming out of the survey that you shake your head over, 85 percent of the people polled said, they had no intention of doing anything to strengthen their home against a hurricane.

John Zarrella, CNN, at the National Hurricane Center in Miami.

(END VIDEOTAPE)

WILLIS: Unbelievable. This does not have to be you, however. You can be prepared and not spend a fortune. Here to help is home improvement specialist Danny Lipford, host of the show "Today's Homeowners."

Danny, great to see you.

DANNY LIPFORD, TODAY'S HOMEOWNER: Hey, good to be here, Gerri.

WILLIS: All right, now you say year-round preparedness is the goal here. Tell me how I do that?

LIPFORD: Well, mainly one of the things you have to make sure that roof is in great shape. So, you know, periodically clean all of the valleys, clean any area that may be, you know, having some debris on it, and just visually look it over to make sure...

WILLIS: Hey, and check out those gutters too, right?

LIPFORD: Yeah, the gutters and downspouts, extremely important because when you really get that heavy rainfall, they've got to really work for you, so those need to be checked out all the time.

WILLIS: So, the roof is important. Of course there are folks out there who are procrastinators who, you know, they're not ready yet, they don't know what to do. Those last 24 hours before a storm hits, what do you do?

LIPFORD: Well mainly, get out there in the yard and get anything that could become a projectile when those high winds hit. So, get all of the patio furniture out of the way, birdhouses, anything like that needs to be put away in a storage building or like a friend of mine does sometimes, they take a rope and tie some of their patio furniture and sink it in their pool. If it's under water it's not going to blow away.

WILLIS: That's a smart idea. Even plants out there in big pots, some times you have to put those away so they don't become a projectile. Let's talk a little bit about, though, how much money all of this is going to cost. Because look at the end of the day, you're probably going to go out, get some boarding for the windows, you know, rope to tie things off. This can really add up. People are struggling out there. How much can they expect to pay just to get ready for the storm?

LIPFORD: Well, if you look at it this way, let's say $500, you take $500 in an average home, you'll be able to buy all of the plywood you need to cover your windows and doors, the water, nonperishable food, flash light, few batteries and then after hurricane season, go ahead and use some of these in your regular day-to-day life and then before the next hurricane season, buy some more. That way everything's fresh and you're not just stockpiling materials year-round. So, these are things you can use all year long, but things that are really important, $500, it's still a lot of money, but a great peace of mind when the winds start picking you.

WILLIS: Amen to that. Well, we should say you should get out early as you can to do this because those lines start to form at the local Home Depot, other places as well, you want to get in front of those lines for gas, also the ATMs, that's a good idea, too. But Danny, an important question here, because a lot of people not in the direct path of the hurricane, they think they're off the hook and that's not necessarily true.

LIPFORD: No, not at all. I'll tell you, we're hearing more about floods in all different parts of the country. So, it's important to think about your house in the most extreme weather possible. So, make sure all of the ground around your house is sloping significantly away from the house and also, it's good to remind any of the people, the city workers and so forth and the public works directors, to really make sure those ditches and drainage ways are cleaned real well because when you get the heavy rainfall, they're going to be tested like no other time. So, those are very important issues there, to make sure that everything is flowing away from your house.

WILLIS: Flowing away from your house. And of course, we want to make sure that people remember to do this as early as possible, right Danny? I mean, putting it off is a disaster and you have to be worried even if you're not living along the coastline.

LIPFORD: Well, very, very much so and you never know when one of those storms will roll in and there will be other things that you need to do other than prepare for these last few minute things. So, getting a head start, making sure that you're prepared well ahead of time, again, great peace of mind and then when it starts raining you can relax a little bit and hope the waters just don't rise.

WILLIS: Well Danny, you are our peace of mind, today. Thanks for the help, we appreciate it.

LIPFORD: OK, thanks, Gerri. WILLIS: Whether it's due to a hurricane or other family emergency, we will show you the very best and the very worst ways to get your hands on some cash fast. Plus, find out how to contribute to hurricane relief efforts and avoid scam artists.

(COMMERCIAL BREAK)

WILLIS: Well, as you probably know the credit crunch is making it harder to find money when unexpected expenses hit. So, how can you raise cash fast when the economy is slowing down? Stephen Gandel is senior writer at "Money" and co-host of "Money" magazine's "Tips for Couples" which airs on the Fine Living Network, you can see it on Sundays.

Stephen, great to see you.

STEPHEN GANDEL, SR WRITER, MONEY: Thanks for having me on, because this is a problem are lot of people will have in a down economy and...

WILLIS: Absolutely. OK, so let's start with the first of this. You know, obviously you've taken into consideration some important things, here. Taxes, penalties, you name it. You've thought about the long- term consequences of some of these fast cash options...

GANDEL: Even if your psyche.

WILLIS: You start with emergency fund.

GANDEL: That's right, I mean, that's what an emergency fund is there for, so it's No. 1. It's not the most interesting thing. We all kind of know it's there. But listen, we couldn't avoid it, it's the No. 1 way to get money quick, that's what it's there for.

WILLIS: Yeah, three to six months what we typically recommend. Obviously, you probably already know if you have an emergency funds, but might not think about selling some investments if you have them.

GANDEL: Right, most people think, OK, here is my debt and here is my savings and I don't want to mix them. I won't use this long-term asset, but truth is, if you don't use your long-term asset you could put yourself in long-term problems. So, take some money out of there if you have an emergency rather than plunging further into some high- interest debt.

WILLIS: Now Stephen, I know a lot of our viewers think about, boy I want to my home equity, that's what they're really interested in HELOC have been a typical, you know, a typical place for people to go, but now of those are getting frozen. Are there other ways of, you know, getting some money out of your house?

GANDEL: Well, in our list of 17 things, we started off with what kind of assets you can go for, friends and family, your stock assets, but then we decided, we got to figure out, we got to rank these things of how to borrow it. And No. 1 way to borrow is still from your house. It's harder to do, but it's the No. 1 way to do it. You have can get HELCO, that's going to be the lowest rate, if you can't get a HELOC, then you're going to have refinance your house, it's going to be a slightly higher rate, and you got the big closing fees, but, you know, that's the environment we're in.

WILLIS: Cash out refi became very controversial in the mortgage meltdown a lot of people got in trouble with those loans. But you think they're OK now?

GANDEL: Well listen, we're doing a story about how to find money now if you need it quick. Right? So, there's a lot of -- none of these are great choices, it's all about if your in a bad situation, how to get out of it with the least amount of long-term financial trouble for yourself. And so, going borrowing from your house is much better than going, say, to a payday lender or using a credit card.

WILLIS: OK. Another way to tap your house, obviously, if you're 62 or older, the reverse mortgage, are you in favor of those loans? Good place to go?

GANDEL: Again, it's not the highest on our list, but it's on our list. It's nice because the interest is deferred, you get the money now, you don't have to pay the interest until when you move out. And so, it's a nice thing to do, but they're costly. Right? And there's a limit to how much you can borrow.

WILLIS: Let's talk about the no list. No to payday lenders, obviously terrible way to get money fast because you pay so much in interest. You know,100 percent, 200 percent, it's just exorbitant, the rates of interest you pay. There are a couple of other things you talk about not doing. Do not liquidate your 401(k) you say.

GANDEL: That's right, because you're going to need that. All you're doing is you're taking money now that you're going to really need later. So you want to try to again, under the worst situation, maybe you'll have to do it, but we really had it way down on the list. You really want to those retirement fund there. Borrow from them maybe, but try to keep then intact.

WILLIS: Cash advance on the credit card is so easy, it comes in the mail. I mean, for goodness sakes, I can stroke a check. Why wouldn't I do that?

GANDEL: Well most people think it's good -- they do because they tell you, well, zero percent for the first three months, or first six months or two percent, but the but the problem is you miss just one of those payments, you're going up to 25 percent, 30 percent, and then you're going to be stuck in that revolving credit card debt problem for a long time.

WILLIS: Absolutely. Well Stephen Gandel, thank you for that great information, we appreciate it.

GANDEL: Thanks very much for having me on.

WILLIS: If you're feeling charitable this hurricane season, we'll show you the best ways to donate your time and money while making sure it all goes to the right place. (COMMERCIAL BREAK)

WILLIS: After seeing devastating images of hurricane damage, you may consider doing something to help others. But beware, there are lots of scams out there. Art Taylor is with the Better Business Bureau's Wise Giving Alliance.

Art, great to see you.

ART TAYLOR, BBB WISE GIVING ALLIANCE: Thanks, great to be here.

WILLIS: Let's talk a bit about the best charities to give to when you're really trying to help hurricane victims. Art, what do you do?

TAYLOR: Well, first of all, in the immediate days and weeks following a disaster, it's better to give to well established charities that have a proven track record for delivering relief under difficult circumstances. In the weeks following the immediate needs, newer organizations will come up and some of them will have -- be effective in delivering services, as well. But, generally it takes a while for newly created organization to be effective. So, in the early days, you should contribute to well establish organizations.

WILLIS: Older is better and wiser, I guess. Let's talk about specific steps, though, when you want to donate. Are there things to do, things not do when you are getting ready to stroke that check?

TAYLOR: Sure, the first thing I would do is check out an organization's Web site so I could find out exactly how they propose to deliver relief. Many organizations will say they're providing relief, but you want to know specifically what the organization intends to do whether that's food, shelter, providing clothing, blankets, etc., you will want to know specifically how the organization proposes to help and you can find that out on their Web site.

Secondly, you'll want to go to sites likes ours at bbb.org/charity where you can find out whether they meet important standards for how charities should conduct their affairs.

Thirdly, you'll want to give over the Internet, it's an easier way to give over the Internet, but make sure you give to a secure site.

WILLIS: How do I know that?

TAYLOR: Well, you can usually check to see that they are services that are making sure that your contribution, your credit card contribution is being handled properly. And I think that's the best way to do that.

And fourth, we are asking people to make sure they check out how the charity will use the money if the needs for that particular disaster have been met and the charity has excess funds. You'll want to know what the charity proposes to do after that. Those are some immediate things to think about. WILLIS: Well Art, what's better? If I'm not giving over the Internet and let's say I'm mailing something in, do I pay by credit card? Do I pay by check? What's better?

TAYLOR: Oh certainly, you can do credit card or check, but check is an appropriate way. Well established charities will certainly accept your checks as well as your credit card. So, don't feel that one method is better than another. It's just that in a case of a disaster you want to make sure the charity gets the money as soon as possible and usually a credit card is a quicker way to get the money to the organization.

WILLIS: All right, if you give us one or two red flags that scam artists will give you when they're trying to take your money, what would it be?

TAYLOR: Well, I would be careful when I receive an unsolicited email from an organization purporting to do disaster relief. Sure, if you've business with the organization before, you can get a comfort level, but remember, charities don't generally blanket the world soliciting money over the Internet in e-mails.

WILLIS: Art, I want to thank you for your time today, great job and great information.

TAYLOR: Thank you.

WILLIS: You can hear much more about the impact of this week's news on your money on YOUR MONEY with Christine Romans and Ali Velshi Saturdays at 1:00 p.m. Eastern and Sundays at 3:00, right here on CNN. As always, we thank you for spending part of your Saturday with us. OPEN HOUSE will be next week right here on CNN. And you can catch us on HEADLINE NEWS every Saturday and Sunday at 3:30 p.m. Eastern Time.

Don't go anywhere, your top stories are next in the CNN NEWSROOM. Have a great weekend.