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posted: 7/1/2011 12:01 AM

About Real Estate: Some household possessions need extra insurance coverage

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A standard homeowner's insurance policy covers items such as jewelry and antiques, but additional protection may be needed if the items are unusually valuable.

Q. I have heard conflicting information about how things like jewelry and antiques are covered under a typical homeowner's policy. One friend says my rings and other valuables are automatically covered, but another says they aren't. Who's right?

A. Both of your friends are sort of right, but also sort of wrong.

A standard homeowner's policy covers things like jewelry and antiques, just as it covers other personal possessions, like furniture and clothes. But coverage for most personal possessions typically is limited to no more than 50 percent or 75 percent of the coverage you have arranged to repair or rebuild the dwelling itself: If you have $100,000 in dwelling coverage and the home is destroyed, you wouldn't be able to collect a total of more than an additional $50,000 or $75,000 to replace a lost diamond ring and other personal items.

Such rules aren't a major concern for most homeowners, because relatively few of us could say that the ragged couch in the living room and old TV in the bedroom are worth more than half of the home's rebuilding cost. But if you have a Rembrandt in the dining room or the Hope Diamond in the den, you need to purchase extra insurance coverage for such valuable items, because their worth won't nearly be covered by a typical policy if they are destroyed, damaged or stolen.

Figure on adding at least a buck or two to your annual policy premiums for each $1,000 of coverage to protect your most expensive items. That means that if you want to insure Grandma's tea set that's valued at $20,000, you may have to pay up to $400 extra each year.

Insurance premiums for jewelry can be even higher, in part because wedding and engagement rings seem to mysteriously disappear rather frequently. "Gee," my insurance agent says, "I just can't figure out this 'phenomenon.'"

Q. We would like to give our son and daughter-in-law about $12,000 to make a down payment on their first home. If we do, would we be responsible for making the future monthly mortgage payments?

A. No. Parents who simply give their offspring part or all of a down payment for a home cannot be held financially liable for making the mortgage's future monthly payments.

You and your spouse would be responsible only for the monthly payments if you also cosign the original loan application.

Q. We often drive to Las Vegas and always pass by a highway off ramp for a small town called Zzyzx in the middle of the Mojave Desert. A guy at the nearest gas station, about 10 miles away, says it's basically a ghost town. What is its history?

A. The oddly named town (pronounced ZY-zicks, rhyming with Issac's) was the home of dinosaurs more than a million years ago. But it wasn't formally titled until controversial radio evangelist Curtis Howe Springer moved into the area in the 1940s and turned the land into a health spa that touted the alleged therapeutic benefits of its hot mineral springs.

He named the area Zzyzx as "the last word in health care," and it is still the last word in most dictionaries. Everything went fine for about 25 years, until the federal Bureau of Land Management finally determined that he was simply running a business on land that he didn't own and the prestigious American Medical Association labeled him "the biggest quack of all time."

Springer died several months after he was sentenced for fraud and other felonies in the mid-1970s. But Zzyzx, the tiny town he founded, still has a use: It was taken back by the feds and then given to the California State University System, where several colleges now jointly operate a center to study desert wildlife.

Q. If I form the type of living trust that you have written about, would I have to designate only one person to inherit my home and other possessions, or could I leave my assets to multiple people?

A. Much like a will, there is no limit on the number of beneficiaries you would like the trust's assets to go to after you die. For example, you could require your home be given to your daughter and that your other investments be passed to your son. Or, you could simply include a clause in the trust that requires all of the trust's assets be sold upon your death and the proceeds divided equally among any number of heirs that you designate.

As I have written before, the most important benefit of creating an inexpensive trust is that -- unlike a traditional will -- the trust's assets can pass quickly to your heirs rather than be subjected to the long and costly probate process.

Although most people who create a trust choose to leave their property to their kids or other loved ones, some designate that their assets be given to a nonprofit organization, university or other institution after they die.

• For the booklet "Straight Talk About Living Trusts," send $4 and a self-addressed, stamped envelope to David Myers/Trust, P.O. Box 2960, Culver City, CA 90231-2960.

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