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Tips on saving your assets from disaster

August 8, 2007

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Consumer Reports has compiled advice to help you keep the assets you've worked hard to accumulate, should any of these financial disasters occur.

During your working life, you're more likely to suffer a disabling illness or injury than you are to die. Later in life, a debilitating illness could send you to a nursing home, forcing you to spend most of your savings on long-term care. The government might lend a hand, but only under very specific circumstances. Even if you are too sick to work, it's hard to get Social Security benefits. You qualify only if you're unable to do any type of work, and your disability must last at least 12 months or doctors must expect it to continue the rest of your life.

If you work for a big company, you might have long-term-disability coverage through your employer. You can buy coverage on your own, but you'll have to pass a medical exam and pay up to 10 times the cost of a group policy, which averaged $215 a year in 2005.

As for long-term-care insurance, Consumer Reports thinks policies are too risky and expensive for most people. Some of the insurers who sell such policies are financially weak, and premiums sometimes increase considerably, forcing policyholders to drop coverage before they ever have a chance to use it.

To protect yourself from investment fraud, conduct a thorough background check on any financial adviser who wants your business. Start at the Web site of the North American Securities Administrators Association, www.nasaa.org, where you can get the phone number of your state securities regulator. Call that office to verify that the adviser has licenses to sell the investments he or she is pitching to you. Also check the National Association of Securities Dealers at (800) 289-9999 or go to its Web site, www.nasdbrokercheck.com.

Federal and state laws give you some protection if you're slapped with a lawsuit. State laws vary, but some protect your home, life insurance policies, annuities and other assets. Consult a lawyer on how to keep your assets.

Meanwhile, CR advises that you increase the liability coverage on your auto and homeowners policies to about the level of your assets. If the value of your assets exceeds the amount of liability coverage you can get, buy an umbrella policy that will kick in after you've exhausted the limits of your insurance. Typical cost: $150 to $300 a year for a $1 million policy.

If you own a business, you should protect your personal assets from lawsuits that arise from your work. To do so, you can form a corporation or a limited liability company. In addition, you should buy a business insurance policy.

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