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A health savings account (HSA) allows you to save money for healthcare expenses on a tax-advantaged basis. If you have multiple HSAs, it could make sense to combine them into a single account for easier financial management.

The steps to consolidate HSA accounts are fairly straightforward, though there are some tax considerations to know. Here’s an in-depth look at how to combine HSA accounts and why you might choose to do so.

Understanding HSA Consolidation

When you combine HSA accounts (which are only available to those with high-deductible health plan, or HDHP), you transfer the funds from each account into a single HSA. More specifically, you would typically open a new HSA and then arrange for the money in your existing HSAs to be moved to the new account. It’s similar to merging bank accounts if you’re combining, say, multiple high-yield savings accounts or checking accounts.

You’re not required to withdraw any money when consolidating HSAs, nor do you lose any of the tax benefits of health savings accounts by doing so. And as a refresher, HSAs offer these tax advantages:

•  Tax-deductible contributions

•  Tax-free earnings

•  Tax-free withdrawals when the money is used to pay for qualified healthcare expenses

Once you turn 65, you can use the money for anything you want, even if it’s not healthcare-related, just as you might with funds in a standard savings account. You will, however, have to pay income tax on non-medical withdrawals.

Recommended: Savings Account Calculator

Benefits of Consolidating HSA Accounts

Here are some reasons why you might want to combine multiple HSA accounts into a single entity.

•  You prefer to have fewer accounts to manage.

•  You could reduce some or all management fees by moving your HSA funds elsewhere.

•  You would like a different range of investment options for your HSA contributions.

•  You want to simplify healthcare expense tracking and year-end tax filing.

If you’ve ever struggled with managing multiple bank accounts, then you might see the advantage of combining HSAs.

Here’s one more reason to consolidate. There’s no tax penalty if you combine accounts using what’s known as a trustee-to-trustee transfer. With this arrangement, you direct the company that currently holds your HSA funds to transfer them directly to your new HSA provider.2

If you were to rollover your funds (another possible method of moving HSA money), that would mean you would take a distribution and then deposit it. This can be a taxable and reportable event if you conduct more than one check-based rollover every 12 months, which likely means they’re not a good method for consolidating multiple accounts. Also, if the funds are distributed in this way, they must be deposited in a new HSA account within 60 days of receiving the distribution. Otherwise, again, the transaction could be taxable.

Steps to Consolidate Your HSA Accounts

Combining HSA accounts is similar to completing a 401(k) rollover or combining IRA accounts. If you’ve done either of those before, you should already have an idea of what to expect.

That said, here’s how to consolidate HSA accounts in five simple steps, conducting what you may hear referred to as a trustee-to-trustee transfer. This means the funds involved never pass through your hands but move between financial institutions.

1. Review Your Current HSA Accounts

Before you can initiate a transfer, you need to know what you have. Make a list of your HSAs, including:

•  Which custodian or trustee holds them

•  Your account number

•  Your current balance

You may also want to review the fees you’re paying for each one and the returns your HSA investments are generating. That can help you decide if it makes sense to consolidate all your HSAs or just some of them.

2. Choose a Target HSA Provider

If you know which HSAs you want to consolidate, it’s time to look for a new provider. The options include banks, insurance companies, and brokerages.

As you compare HSA providers, look at:

•  Investment options, including the risk profile and historical returns

•  Fees, including investment fees such as expense ratios and separate account management fees

•  Investment minimums, if any

You may want to read reputable, verified reviews of HSA providers to learn what current or past customers do and don’t like about them. For example, a provider may offer an outstanding range of investment options but fall short when it comes to customer service.

Recommended: Does Changing Banks Impact Your Credit Score?

3. Initiate the Transfer Process

Once you’ve selected a new provider, you’ll need to open an HSA account with them. You’ll use the new account number to direct your current HSA provider on where to send the money.

Once your account is open, you can move on to the next step which is completing a transfer request form. This is one of the key steps to transfer money between banks or brokerages when moving HSA funds.

4. Complete Required Transfer Paperwork

Your new HSA provider should give you a transfer request form that you’ll fill out and send to your current custodians. Each provider’s form may vary, but typically, you’ll need to include your:

•  Name

•  Employer name, if your plan is sponsored by your employer

•  Date of birth

•  Social Security number

•  Contact information, including your address, phone number, and email address

•  Transferring custodian’s name and address

•  The account number of the HSA you’re transferring funds from

•  The account number of the HSA you’re transferring funds to

In a way, it’s similar to opening a bank account. You’re just providing a little more information.

You’ll also need to specify how much of your HSA balance you want to transfer. You can choose a full or partial amount. Finally, you’ll need to sign and date your form.

You’ll repeat this process using a form for each HSA that you want to transfer funds from. When your current providers receive the forms, they’ll cut a check to your new provider to complete the transfer.

5. Follow Up on the Transfer

How long you’ll wait for your HSAs to be consolidated will depend on the speed at which your current and new HSA providers move. It could take anywhere from two to five weeks or longer for the process to wrap up.

Your new HSA provider should send you a confirmation once the transfer is complete, but you can always reach out to ask for a status update. You’ll also need to follow up with your old custodians to make sure the account is closed and find out whether you owe any account closure fees.

Considerations Before Consolidating

Before you move ahead with consolidation, ask yourself what you hope to gain. Perhaps your goal is to save money on fees (which is also a reason some people switch their traditional bank accounts to online banking). In that case, it’s important to do your research on your new provider to make sure you’ll actually pay less in fees.

Also, consider whether you’ll be able to continue making new contributions to your HSA. If you’re consolidating accounts because you’ve retired, for example, then you can’t make any new contributions to an HSA if you’re no longer enrolled in your high-deductible health plan. So if you’re on Medicare, you will not be able to contribute to your HSA funds.

Potential Challenges in HSA Consolidation

It’s possible you could hit some snags when consolidating HSAs, so it helps to be prepared. Here are some of the main issues to watch out for:

•  Transfer fees. Your current HSA provider may charge transfer fees and/or account closure fees to finalize your consolidation. If so, it helps to know what those are beforehand and how you’re expected to pay them.

•  Processing times. There’s no set timeline for HSA transfers. You can help minimize the possibility of delays by filling out your transfer request paperwork accurately and following up with your providers to make sure your documents have been received.

•  Access limitations. Your new or current custodian may direct you to hold off on tapping into your HSA funds while the transfer is in progress. That could present a logistical challenge in the short term if you need to fill prescriptions or cover other healthcare expenses. It can be wise to ask in advance about these potential access issues so you can prepare as needed.

In a way, the process for HSA consolidation is not that different from what to expect if you switch banks. You might just be waiting a little longer for the change to be finalized.

After Consolidation: Managing Your Single HSA

Once you combine HSA accounts, it should be easier to manage your savings. Here are some tips for staying on top of your newly-consolidated health savings account.

•  Keep track of withdrawals, including what you spent the money on, the amount, and the date.

•  Track your contributions if you’re still making them so you don’t exceed the annual contribution limit. The HSA contribution limits for 2025 are $4,300 for individual coverage and $8,550 for family coverage. Those 55 and older who are not enrolled in Medicare can contribute an additional $1,000. For 2026, the limits are $4,400 for self-only coverage and $8,750 for family coverage. Those 55 and older who are not enrolled in Medicare can contribute an additional $1,000.

•  Review your investments at least once a year to check their performance and the fees that you’re paying.

•  Consider talking to a financial advisor about how to make the most of your HSA for maximum tax benefits.

Recommended:Guide to Closing a Bank Account

Tax Implications of HSA Consolidation

If you’re completing a trustee-to-trustee transfer, there’s no immediate tax impact. You would, however, be subject to IRS tax rules when it’s time to make withdrawals from those accounts. Again, withdrawals for qualified medical expenses are always tax-free.

Where you can potentially owe taxes is when consolidating HSA accounts is if you choose an indirect rollover, as noted above. With an indirect rollover, your current HSA provider cuts a check to you. You then have 60 days from the date the check was issued to deposit the check into your new HSA, and you can only do this once a year.

If you don’t follow these guidelines, your funds would likely be considered a distribution, which would be taxable, with an additional penalty for those under 65 if not used for medical purposes.

The Takeaway

Consolidating HSA accounts could make sense if you’d like an easier way to keep track of your healthcare savings or if you’re looking for lower fees and better investments. Understanding what’s required can help you navigate the consolidation process with minimal hiccups.

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FAQ

How long does the HSA consolidation process typically take?

The HSA consolidation process can typically take a few or several weeks, but it may vary depending on how fast your current and new providers operate. You may need to do some strategic planning to make sure you don’t need to withdraw any funds for healthcare expenses while transfers are in progress.

Can I consolidate an HSA from a previous employer?

Yes, you can consolidate HSA accounts from one or more previous employers. It could make sense to do so if you’d like just one account to manage. You’d need to know which custodian holds your old HSAs so you can complete the process, including sending each of them transfer request forms.

Will consolidating my HSAs affect my contribution limits?

Moving existing funds between HSAs does not count toward your annual contribution limits. However, new contributions are limited to $4,300 for self-only coverage and $8,550 for family coverage in 2025. For 2026, the limits rise to $4,400 and $8,750, respectively. Those 55 and over who are not enrolled in Medicare can contribute an additional $1,000 as a catch-up contribution in both 2025 and 2026. HSA contribution limits are adjusted annually for inflation.

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Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

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*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

This content is provided for informational and educational purposes only and should not be construed as financial advice.

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With costs as low as $10, making a will doesn’t have to be expensive, but you may want to spend more to get exactly what you need.

Granted, the prospect of writing a will can feel boring, morbid, and as if it will be a big drain of time and money. While there’s no doubt that thinking about a world without you in it isn’t “fun,” the peace of mind that people can obtain from making a will, the right will, can be invaluable.

Whether you choose to go with an online template that will guide you through the how-to’s of creating a will or work with an attorney, it’s important to know your options. Let’s dive into that now and see how much making a will costs and which approach is best for you.

How Much Does It Cost to Make a Will?

The cost of a will varies from free to thousands of dollars, depending on whether you do it yourself or work with an attorney. Some people with a fairly straightforward situation (basic assets, one child) may find that an online template provides everything they need at a low cost. In general, however, people with high-net-worth or a complex personal situation, such as needing to provide for a disabled family member, may find it advantageous to work with an attorney.

You may wonder if you need a template at all. Can’t you just take pen to paper to share your wishes? In some states, the answer is yes: A handwritten will is legal. But there are good reasons to not write up a will on a piece of notebook paper. Not only can these take longer to go through probate — a legal process that vets the validity of a will — but a template may help make sure all bases are covered and legally valid.

There are templates online that are free, but some that are state-specific and go into greater depth (say, by guiding you through more questions about your situation) can cost upwards of $100 or more.

If you work with an attorney, you may pay $1,000 or more to create a will. But working with an attorney may be beneficial if you have a complex situation. For example, an attorney can help you create a trust, which can be one way to avoid probate and may provide tax advantages for your heirs. They may also have recommendations for the most tax-advantageous way to set up a will and can also answer any questions that may come up as you make the will.

Regardless of how you create a will, it’s also important to ensure that your will is legal in your state. This may mean having the will notarized or witnessed when you sign. It can also be a good idea to make several copies of the will, and let your executor know where the will can be found.

You also may need to update your will. You can do this via a codicil (this is akin to a PS to your will), but in many cases, it may make sense to create an entirely new will to avoid confusion. You may consider updating or redrafting your will whenever a major life event occurs, such as marriage, divorce, or the birth of a new child. If you’re working with a lawyer, ask them how they will handle potential changes and how much they will charge.

The Cost to Have a Lawyer Write a Will

Having a lawyer write a will may be the most expensive option at $1,000 or more, depending on where you live and the complexity of the will. However, this path can have its benefits.

Creating an Estate Plan

Working with a lawyer can ensure you cover all bases and potentially create an estate plan. This can maximize tax-savings opportunities for your heirs. As part of this, a lawyer can be helpful in setting up a trust. A trust can be a tax-advantageous way to distribute assets upon your death and help avoid the possibly long and winding process of probate.

Negotiating a Large or Complicated Estate

You also may want a lawyer if you have a large or complicated estate, with a variety of assets, which could be investments, real estate, and the like. Also, if you have a complicated family situation, a lawyer can be very helpful in creating a will that addresses these situations. In this case, scenarios include divorce, remarriage, step-children, or complex (possibly contentious) relationships.

Developing End-of-Life Documents

When drawing up a will, a lawyer also can make sure that you have all end-of-life documents in place. While “will” can be used as a catchall term for end-of-life documents and directives, other important documents can include:

•   A medical power of attorney

•   A living will or advanced healthcare directive

•   Do-not-resuscitate orders

All of the above documents reflect what would happen if you were no longer able to advocate for yourself and needed someone to make medical decisions for you.

Before you work with a lawyer, make sure you’re clear on the fee structure: Will they charge by the hour? How much will it cost to update things in the future? Is there anything you can do on your own to help save money?

Recommended: What Happens If You Die Without a Will?

Cost of Writing a Will Yourself

Online templates range from free to several hundred dollars, depending on the complexity and the range of documents provided. Online templates can help guide you through itemizing your assets and can be simple to update if necessary. Here are some details to note:

Online Templates Can Offer a Speed Advantage

Online templates may advertise that wills can be completed in 15 minutes or less. This can be true as long as you have relevant information at your fingertips. Prior to beginning a will (either online or with a pro), it can be helpful to itemize assets and discuss guardianship and executor plans with the people you hope to name prior to starting. This will make the process run more smoothly.

Online Templates May Need Witnessing

Once an online template is filled out, it will likely need to be signed and witnessed to be made legal. Keep this in mind: If you are thinking you can complete your will 100% online and don’t need to leave your home, you may be in for a surprise.

Some online services offer attorney services for an additional cost. This can be a hybrid option that allows you to have a lawyer answer any specific questions while doing the majority of the work yourself.

What’s the Difference Between a Trust and a Will?

You may see the terms trust and will used interchangeably. That’s wrong; a trust is not a will! A trust is a customized estate planning tool that can be helpful to heirs in addition to a will. If you hold assets such as real estate or have a positive net worth, a trust may make sense.

Recommended: What is a Trust Fund?

A trust can help your heirs:

•   Avoid probate, the legal (and sometimes lengthy) process in which property is distributed

•   Potentially limit tax implication of any gifts or inheritances

Trusts can be complex, but a fairly simple trust can be created through online templates. Having a trust can help ensure that your assets not only go to the people you intend them to go to, but that your heirs are provided for exactly in the way you intended. The time spent making the trust can pay off in peace of mind, both for you right now and for your heirs in the future.

Does a Will Need to be Notarized?

You’ve taken the time, created a will, and printed it out. You’re done, right? Not so fast! A will usually does need to be signed and watched by a witness.

What’s more, while a will does not always need to be notarized to be valid, it may be in you and your beneficiaries’ best interests to do so. When a will is notarized, it is considered “self-proving,” which helps confirm that you had the mental capacity to create the will and were not under any duress. It proves the validity of the document and therefore can help avoid probate. Notarizing a will is typically a fairly minor expense of up to $25.

While it can be tempting to put off the notarization process (we know, it can be a hassle to find a notary nearby), getting it done immediately ensures that there are no loose ends if the worst were to happen unexpectedly. It can also be a good idea to make sure the will is printed out and put in a safe place, like a bank safe, and that your executor knows where to find it.

What Should You Never Put in a Will?

There are some things you want to sidestep when creating a will. Here are some considerations that can make the probate process more difficult.

•   Certain types of property, including property owned jointly, life insurance, or other accounts with a beneficiary already named.

•   Specific funeral or end-of-life wishes. The will may not be read until weeks or months after death.

•   “Rules” about who gets what. A will is not the place to put limitations on gifts, such as money only being available if someone were to marry or turn a certain age.

•   Providing money to pets. However, you can set up a trust to ensure that a pet is provided for.

•   Provisions for taking care of a dependent beneficiary. These kinds of long-term care needs can also best be set up in a trust.

In short, a will can’t cover all the what-ifs, but in many cases, a trust can do so. If you’re not sure how to appropriately manage your estate, consider consulting with a lawyer.

The Takeaway

Creating a will does not need to be expensive or time-consuming to be valid. While a trust may make sense for complex needs or if you have a positive net worth, having a will drawn up in the short term can cover your bases, ensure guardianship wishes are met if you have kids, and provide peace of mind now and in the future. Whether you spend $10 or over $1,000 creating one, if you have assets and/or dependents, now is a good time to act!

When you want to make things easier on your loved ones in the future, SoFi can help. We partnered with Trust & Will, the leading online estate planning platform, to give our members 20% off their trust, will, or guardianship. The forms are fast, secure, and easy to use.

Create a complete and customized estate plan in as little as 15 minutes.

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Photo credit: iStock/fizkes

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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According to the latest data, the average cost of homeowners insurance in the United States is $2,927. That said, insurance premiums can vary widely by geography depending on how prone your area is to storms, wildfires, or other natural disasters, as well as factors like the crime rate.

If you’re buying a home, it’s a good idea to buy homeowners insurance coverage to ensure that you and your assets are covered in the event of a worst-case situation. They do happen! Many financial advisors suggest that anywhere from 25% to 30% of your net worth could be tied up in your home, and for some, that proportion can reach as high as 70%.

Let’s pause for a minute and think about what this could mean. Taking an uninsured or underinsured loss on 25% to 70% of your net worth is a hit that few Americans can afford. So it makes sense to protect yourself and shop for the right homeowners insurance policy. Here’s a look at how much you can expect to pay in your area, and why.

Average Cost of Homeowners Insurance by State

Here’s an alphabetical list of the average cost of home insurance premiums by state, per a 2025 MarketWatch analysis of home insurance premiums. It will give you a good ballpark of what you might pay for your annual homeowners insurance premium.

State	Annual premium	Monthly premium
Alabama	$3,539	$295
Alaska	$1,702	$142
Arizona	$2,450	$204
Arkansas	$4,752	$396
California	$1,842	$153
Colorado	$3,937	$328
Connecticut	$2,514	$209
Delaware	$1,250	$104
Florida	$3,692	$308
Georgia	$2,765	$230
Hawaii	$850	$71
Idaho	$2,033	$169
Illinois	$3,689	$307
Indiana	$2,757	$230
Iowa	$2,843	$237
Kansas	$4,375	$365
Kentucky	$4,209	$351
Louisiana	$3,484	$290
Maine	$1,761	$147
Maryland	$2,355	$196
Massachusetts	$2,672	$223
Michigan	$2,652	$221
Minnesota	$2,946	$245
Mississippi	$4,298	$358
Missouri	$3,663	$305
Montana	$3,062	$255
Nebraska	$5,605	$467
Nevada	$1,500	$125
New Hampshire	$1,536	$128
New Jersey	$1,929	$161
New Mexico	$2,559	$213
New York	$2,071	$173
North Carolina	$3,237	$270
North Dakota	$3,287	$274
Ohio	$2,078	$173
Oklahoma	$6,352	$529
Oregon	$1,437	$120
Pennsylvania	$2,143	$179
Rhode Island	$2,682	$223
South Carolina	$2,513	$209
South Dakota	$4,392	$366
Tennessee	$3,727	$311
Texas	$4,912	$409
Utah	$1,729	$144
Vermont	$1,377	$115
Virginia	$1,787	$149
Washington	$1,827	$152
West Virginia	$2,023	$169
Wisconsin	$2,075	$173
Wyoming	$2,427	$202
United States Average	$2,927	$244

Source: MarketWatch

You may notice that geography and climate play a role in rates. The states in what is known as Tornado Alley, where storms are more likely, have higher rates. You’ll see that Nebraska, Arkansas, and Kansas, for instance, have higher-priced premiums, reflecting the elevated risk of damage to a home there. Those with homes in coastal areas can also expect higher premiums.

Conversely, those who live in states and towns with low risk of punishing storms will likely enjoy lower rates for their homeowners insurance.

Average Cost of Homeowners Insurance by City

Those who choose to live in the city may find their rates differ from those of their suburban or rural neighbors. Take a look at the average rates for homeowners insurance policies for 18 U.S. cities. Here’s how the average premiums stack up:

City	Average annual premium	Average monthly premium
Nashville	$2,581	$215
Washington, D.C.	$1,498	$125
Chicago	$2,586	$215
Dallas	$4,145	$345
Denver	$3,680	$207
Detroit	$4,724	$394
Houston	$5,391	$449
Los Angeles	$2,111	$176
Charlotte	$1,586	$132
Indianapolis	$1,876	$156
Baltimore	$1,899	$158
Oklahoma City	$5,437	$453
Phoenix	$2,827	$236
Las Vegas	$1,103	$92
Portland, OR	$1,042	$87
Seattle	$1,490	$124
Columbus, OH	$1,426	$119
Austin	$2,580	$215

Source: Quadrant Information Services via Bankrate

As you see, there is a wide variation in prices, with Portland, Ore., coming in at $1,042 at the low end, and Oklahoma City at $5,437 at the high end. Various factors, from weather patterns to crime rate, impact these figures.

Recommended: A Comprehensive Guide to Homeowners Insurance

What Factors Influence Cost of Homeowners Insurance?

The price of a homeowners insurance policy isn’t just a matter of “location, location, location,” as they say in the real estate business. There are a variety of other factors that influence your home insurance costs. These include features of the property and residence itself, and your insurance history and choices when it comes to coverage. We break down the most commonly cited factors below.

Location: Yes, this is one of the biggest influencers on the price of your policy. Actuaries, the insurance company employees who calculate rates, use complex tables that factor in a variety of risks, including crime, fire, and weather records for a given zip code.

Age and condition of home: The age of your property and its construction quality play big roles in determining what it might cost to repair or replace your home in the event of a covered loss.

Roof condition: An insurance company will likely want to be prepared for repair or replacement costs if, say, a tree branch goes flying during a storm and damages your roof. These repairs can get fairly expensive for certain roof types, such as slate or shale. As a result, your insurance company will take special interest in the type, age, and condition of your existing roof when pricing your policy.

Recommended: Does Homeowners Insurance Cover Roof Leaks?

Added features: Adding a swimming pool, trampoline, or the like can certainly make a home more fun, but it can also increase the possibility of personal liability claims. Consequently, these “attractive nuisances” as they are known in the legal field may increase the cost of your premiums.

Coverage limits: When buying a policy, you will have choices that impact the policy price. The more you insure the contents of your home for, the more expensive the price is likely to be. Also, you will decide whether to base your coverage on replacement cost or what’s called actual cash value.

The former will pay the cost of “making you whole” with a payment for a new and comparable feature that was damaged or lost. It is more expensive. With the actual cash value option, though, the policy will deduct depreciation when calculating cash payouts. If you paid $1,000 for your oven a number of years ago, and it’s destroyed in a kitchen fire that’s a covered claim, actual cash value might only pay you back its current value of, say, $250, leaving you without adequate funding to replace it.

Deductible: Your deductible is the amount you must pay out of pocket before insurance will pay out in the event of a covered claim. The amount you choose determines how much risk you’re willing to share with your insurer. A higher deductible generally means a lower-cost home insurance price.

Claims history: Insurance companies view your claims history as an indicator of your likelihood to file future claims. The more claims you’ve filed in the past, the higher your insurance premium is likely to be.

Intended use: Whether you intend to use your home as a primary residence or as an investment property can impact your homeowners insurance rate. Homeowners who choose to use their homes for a business or rent their property out as a landlord are viewed as higher risk and are charged higher home insurance premiums.

Pets: While we consider pets to be part of our families, the truth is that insurance companies charge higher rates for certain pets, particularly breeds viewed as overly aggressive. Why? The insurance company is typically providing coverage if your animal were to injure someone who was visiting. Some insurance companies may even outright reject insurance coverage for certain dogs and exotic animals. However, a number of states have banned these practices of breed discrimination. What’s more, even if you live in a state where this kind of discrimination isn’t banned, you may find that not all insurers restrict coverage or raise premiums for what are considered more aggressive pets. So it can pay to shop around.

What’s Included in a Home Insurance Policy?

If you’re wondering what exactly you get when you purchase a homeowners insurance policy, allow us to spell it out. Here are the six typical coverages offered under most homeowners insurance policies. While some of these may be optional, dwelling, personal property, and personal liability coverage are usually included under most policies.

Dwelling coverage: This pays for covered damages to your home’s structure and attached structures, such as your roof, an attached garage, or built-in appliances.

Recommended: Does Homeowners Insurance Cover Water Damage?

Other structures coverage: This pays for covered damages to structures on your property that are not attached to your home, such as sheds, fences, or a detached garage.

Recommended: Does Homeowners Insurance Cover Storage Units?

Personal liability coverage: This kind of coverage pays for injuries or damages to others’ property that you’re legally liable for, as well as legal fees incurred as a result of a covered incident.

Personal property coverage: This is the aspect of your policy that covers damages, losses, and theft of personal property due to a covered incident. This usually includes most belongings like furniture, electronics, and clothing. Worth noting: Certain items are subject to coverage caps, and additional coverage may be needed to ensure fully cover high value items like jewelry, artwork, or antiques.

Loss of use coverage: What if your home were to have fire damage that forced you to live in a hotel while repairs were made? That’s the kind of situation in which loss of use coverage swoops in. It pays for reasonable living expenses if you’re displaced from your home as a result of a covered claim.

Recommended: What Does Homeowners Insurance Cover?

Do You Need Homeowners Insurance?

While you’re not legally required to purchase homeowners insurance, home insurance coverage is typically mandated as part of your contract with your mortgage lender. You will generally have to purchase homeowners insurance in order to close on your home if you’re buying the property using borrowed funds.The lender wants to know that their investment in your home is well protected.

Recommended: Is Homeowners Insurance Required to Buy a Home?

If you do not maintain adequate homeowners insurance while your mortgage remains outstanding, your lender will typically purchase homeowners insurance on your behalf (often at unfavorable rates) and charge you the premiums as part of your monthly mortgage payments. It’s therefore, in your best interest to shop for and maintain your own home insurance policy.

Even if you’re an all cash buyer, having an active homeowners insurance policy is highly recommended. Real estate is where the majority of wealth is concentrated for the vast majority of American households, and it is vital to ensuring that your assets are protected in the event of a disaster. No one wants to imagine it, but bad things do happen every day, from storm damage to home burglaries. It’s important to be prepared.

There are a lot of incentives to buy homeowners insurance, as you see. That’s because it’s a key way to make sure that your home base is well protected, even when worst case situations occur.

The Takeaway

The average price of homeowners insurance is $2,927 per year, but your particular cost will vary based on your location, climate patterns, crime rates, the type of home you live in, your deductible, and many other factors. What doesn’t vary is the fact that homeowners insurance is often a requirement. Even if not, it’s an excellent way to protect what is probably your biggest asset and give you peace of mind.

If you’re a new homebuyer, SoFi Protect can help you look into your insurance options. SoFi and Lemonade offer homeowners insurance that requires no brokers and no paperwork. Secure the coverage that works best for you and your home.

Find affordable homeowners insurance options with SoFi Protect.

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Photo credit: iStock/svetikd

Auto Insurance: Must have a valid driver’s license. Not available in all states.
Home and Renters Insurance: Insurance not available in all states.
Experian is a registered trademark of Experian.
SoFi Insurance Agency, LLC. (“”SoFi””) is compensated by Experian for each customer who purchases a policy through the SoFi-Experian partnership.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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Estate planning and creating a will both involve an uncomfortable topic – thinking about what will happen to your money when you die – but they are separate concepts. Broadly speaking, a will is a specific legal document stipulating exactly how your assets will be distributed on your death and who will care for any dependents. Creating that document is what you may hear referred to as will planning.

Estate planning, on the other hand, is an umbrella term that covers all aspects of end of life documentation and decision making, which can include a will. Estate planning also allows you to say how you want your assets divided after your death and can help you transfer those assets in the most tax-advantageous way possible for your loved ones.

Estate planning documents, including power of attorney and living will forms, are often created as part of the estate planning process. These help ensure that your wishes are followed, even if you are medically incapacitated. (You can also access these as part of will planning; we’ll cover that in a minute.)

Creating a will and estate planning may sound complicated, but in some cases, they can be done relatively quickly, often using online templates. In other cases, it may be advisable to have an attorney manage the process.

What Is Will Planning?

Writing a will usually refers to a very specific task: A will details where you want your assets to go at your death, and who you would like to serve as guardian of your minor children. If you have pets, it may also spell out who will care for them and how. Additionally, a will names an executor. This is the person you are putting in charge of distributing your assets to the right individuals or charities.

In most cases, you’ll be creating what is called a testamentary will, which is signed in the presence of witnesses. This is often considered a good way to protect your decision against challenges from family members and/or business colleagues after you’re gone. While you can write this kind of will yourself, you may want to have it prepared by an attorney who specializes in trusts and estates, to ensure that it complies with your state’s laws. Or look for an online business that customizes its work to your location.

When you are creating a will, you may look into preparing other related documents that are usually part of estate planning. For example, you may be able to add a power of attorney form and a medical directive or living will.

Together, these documents spell out who can handle matters on your behalf if you were to come mentally or physically incapacitated. If you aren’t planning on pursuing estate planning, these are important documents to complete when creating your will. (Even young people have sudden illnesses and accidents, so these forms are an important part of adulthood.)

Many online will templates provide for these additional documents, so that your bases are covered if the worst were to happen. Creating a legal will can cost anywhere from $0 to hundreds or thousands of dollars, depending on whether you do it yourself or if you work with an attorney.

Recommended: How Much Does Estate Planning Cost?

Even if you die with a will in place, it’s likely that the document will go through probate — the legal process in which an executor to the will is formally named and assets are distributed to the beneficiaries you have named in your will. Yes, there are nightmare stories about the probate process, but don’t get too stressed about it. In general, if an executor (an individual appointed to administer the last will and testament of a deceased person) is named in your will and your will is legally valid, the probate process can be relatively streamlined.

Recommended: What Happens If You Die Without a Will?

What Is Estate Planning?

Estate planning can be the umbrella term for all end-of-life decision making, but it’s more often used to describe your plan for how you want your property divided when you die and the financial implications of those decisions. It can involve creating the following:

•   Will/trusts to smooth the transfer of assets/property

•   Durable and healthcare power of attorney

•   Beneficiary designations

•   Guardianship designations

Estate planning aims to make sure that your loved ones receive the maximum proceeds possible from your estate.

Often, estate planning is done with the oversight of an attorney, who can provide strategies for how to minimize tax burdens for your beneficiaries when you die.

Recommended: What Is Estate Planning? A Comprehensive Guide

Who Needs an Estate Plan?

When people talk about estate planning, they may be referring to the decision to create a trust. Trusts can be especially beneficial for high-net-worth individuals who may be worried about tax implications of their heirs inheriting their belongings. But they also have a role in less wealthy families. If your clan has a beloved lake house that you want to stay in the family, for future generations, a trust might be a possibility to investigate.

Recommended: New Parent Estate Planning

These arrangements allow a third party, or trustee, to hold assets on behalf of a beneficiary or beneficiaries and can help avoid the time-consuming process of probate. Trusts may also be beneficial for people who have dependents in their care, as well as those who may worry about how their beneficiaries will spend the money bequeathed to them.

There are two other scenarios in which a trust can be very helpful:

•   People with a pet who have a specific plan of how they wish the pet to be cared for after their death. (Pets can’t own property, so leaving money to pets in a will can cause a legal headache. This can be sidestepped by creating a trust for Fluffy’s care.)

•   Those who want to minimize ambiguity in who gets what, which could be helpful in the case of people who have had multiple marriages.

The most common type of trust within an estate plan is called a revocable living trust. This may also be called a living trust because, while you are alive, you can name yourself a trustee and have flexibility to make changes. These can often be created online, although an attorney can certainly be involved, guiding the process and answering any questions.

In setting up a trust, you will name a trustee. This is a person in charge of overseeing the trust according to the parameters you state. Unlike a will, where an executor will ensure beneficiaries get the property stated, a trust allows the creator to put guardrails around gifts — and for the trustee to ensure the guardrails are followed.

For example, you can specify in a trust that certain assets do not go to a beneficiary until they reach a certain age or milestone.

Recommended: Do I Need a Trust?

Taking the Next Step in Will Writing and Estate Planning

There’s a lot of overlap between “creating a will” and “creating an estate plan,” and that ambiguity can lead to difficulty beginning the process. But creating a legal will, including guardianship documents for minor children, can be a good first step. Also, make sure you have power of attorney forms in place and any advanced directives. These can guide decision-making on your behalf if you were ever mentally or physically incapacitated.

Then, you can have peace of mind and can “ladder up” to creating a more complex plan that encompasses more what-ifs. Estate planning, with the possibility of trusts and transfers, can complete your end-of-life planning.

The Takeaway

Creating a will and an estate plan are two different ways to address your end of life wishes. A will is a document that says who inherits what and how you want minors, dependents, and even pets cared for. It may have additional documents that spell out your wishes if you become incapacitated.

An estate plan, however, is a more comprehensive way to spell out the allocation of your assets after you die. It typically includes finding ways to make the process run more smoothly, quickly, and with lower tax payments for your beneficiaries. Starting the process now, whether with online templates or by consulting with an attorney, is important. While no one likes to think about worst-case scenarios, the sooner you get the paperwork done, the better protected your loved ones will be.

When you want to make things easier on your loved ones in the future, SoFi can help. We partnered with Trust & Will, the leading online estate planning platform, to give our members 20% off their trust, will, or guardianship. The forms are fast, secure, and easy to use.

Create a complete and customized estate plan in as little as 15 minutes.

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Photo credit: iStock/AnnaStills

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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When life insurance policy types are listed and described, the focus is usually on two of them: term life and whole life policies. There are more types than those two, though, and they’re typically more complex. They include universal life insurance — and, as a subset, indexed universal life insurance, or IUL. This is an advanced type of policy, where interest on the cash value component is linked to a market index.

Here’s a look at what IUL is, how it works, its pros and cons, and more.

Definition of Indexed Universal Life Insurance (IUL)

First, let’s define universal life insurance. Universal life insurance is a permanent policy, which means that it doesn’t have a set term (say, for 10 or 20 years), and it comes with a cash value. A universal life insurance policy allows policyholders to flexibly adjust premiums and death benefits, though this can have an adverse effect on the policy.

Now, what is IUL? Indexed universal life insurance adds another twist to the equation. This is a type of universal life insurance that doesn’t come with a fixed interest rate. Instead, its growth is tied to a market index. (More about the index soon.)

How Does IUL Work?

After someone buys an IUL policy, they pay premiums, which is similar to other types of life insurance policy structures. Part of that premium covers the insurance costs that, like with other types of life insurance, are based on the insured’s demographics. Remaining fees paid go towards the cash value of policy. Interest paid is calculated in ways that are based on an index (or indexes).

This may sound similar to investing in the stock market, but there’s a key difference. The part of the premium that goes towards the cash value of the policy doesn’t get directly invested in stocks. Instead, the market index(es) is how the interest rate and amount is determined, with a minimum fixed interest rate usually guaranteed.

IULs typically offer policyholders a choice of indexes and allow them to divide the cash value portions of their premiums between fixed and indexed account options.

Explaining the “Index” Feature

A market index represents a broad portfolio of investments that use a weighted average to come up with an index figure. This figure is used to calculate the returns of an indexed product. The three most commonly used market indexes in the United States are the Dow Jones, the S&P 500, and the Nasdaq Composite.

Note that funds invested for the cash portion of the insurance policy do not need to be invested in the index used to calculate the interest. Many times, insurers invest these dollars in bonds rather than stocks.

Benefits and Drawbacks of IUL Insurance

Like other types of life insurance policies, indexed universal life insurance comes with pros and cons. Here is an overview of the benefits and drawbacks of IUL.

Benefits of IUL Insurance

Benefits include:

•  There’s a death benefit for beneficiaries, as well as the cash value of the policy.

•  Withdrawals can be tax-free up to the amount of premiums paid.

•  Premiums are flexible. You can pay different amounts each month as long as it’s enough to cover fees and doesn’t go beyond an IRS limit.

•  Gains are locked in each year, which means you can’t lose the previous years’ gains. However, if the market is down the following year, it can decrease, unless the policy has a built-in floor.

•  Because of the annual reset feature, you never need to make up any losses from prior years.

•  No mandatory distributions exist.

•  You can explore your tax benefits with your accountant or other financial advisor, and they may be significant for your situation.

•  You can borrow against this policy and, if you do, you typically won’t face negative tax consequences.

Recommended: Life Insurance Definitions

Cons of IUL Insurance

Challenges include:

•  An IUL is complicated. To get the most benefits from this policy, you’ll need to understand how to maximize its value.

•  Although you can pay a minimal premium amount when you want, this can have a negative overall effect on the policy’s cash value.

•  Because the cost for the insurance portion depends on your rating, how much is insured, and your age, the cost will likely go up over the years as you get older.

•  Although the rate is based on an index, policies come with a cap. So, during high index years, you likely won’t realize the full benefit because of this cap. On the flipside, many policies also have built-in floors to help protect you from losses when the market is down.

•  Fees can take a big chunk out of the policy, causing you to lose much of its value.

•  If you don’t keep the policy in force, you may lose the death benefit (which is true of other types of policies), along with the extra money paid into the premiums.

Alternatives to IUL Insurance

Whether you’re not sold on IUL insurance or simply want to know what your other life insurance options are, here are some of the alternatives to indexed universal life insurance:

•  Adjustable life insurance: This combines aspects of term life insurance with whole life and provides policyholders with the flexibility to adjust the policy’s amount, term premiums, and more. Adjustable life policies also come with a cash value component. A key benefit of adjustable life insurance is that you can make adjustments to your policy without the need to cancel the current policy or buy a new one.

Recommended: Life Insurance Calculator

•  Variable universal life insurance: Variable universal life is similar to IUL, as it is a permanent life insurance policy that has a cash value and flexible premiums. The investment portion comes with subaccounts and can resemble investing in mutual funds. When the market is doing well, this can benefit the policyholder, but when it’s not, significant losses can occur.

•  Standard universal life insurance: Then, of course, there are universal life insurance policies. These come with a fixed interest rate rather than one tied to an index.

•  Whole life insurance: Additionally, there’s the more basic whole life insurance policy with standard premiums. There is also a guaranteed death benefit and a cash value component.

•  Term life insurance: Term life insurance is life insurance at its simplest. These policies are generally the most affordable option, offering a straightforward death benefit to beneficiaries for a specific term (perhaps 10 to 20 years) without any cash value component.

•  Current assumption whole life insurance: Another type of cash value insurance is called current assumption whole life (CAWL), and it has similarities to universal life insurance policies. Premiums are fixed for a certain period of time and, on predetermined dates, premiums are recalculated (and perhaps the death benefit is as well). Interest is handled in a way that’s similar to universal life.

Recommended: How to Buy Life Insurance

Is IUL Insurance Right for Me?

By comparing this overview of indexed universal life insurance with, say, term or whole life insurance, you can see that IUL insurance is quite complex. If, though, you’re earning a high income or want to explore long-term investment opportunities, it can make sense to consider whether the tax benefits associated with an IUL would be worthwhile.

For those who do consider moving forward with exploring indexed universal life insurance, it’s important to compare its pros or cons against those of other types of life insurance. Also take the time to research and compare different life insurance policies.

Recommended: A Comprehensive Guide to Life Insurance

The Takeaway

Although the question of “What is IUL?” is quite short, the answer isn’t. If this type of policy interests you, consider exploring it in more depth to ensure that you’re clear about its complexities.

SoFi has partnered with Ladder to offer competitive term life insurance policies that are quick to set up and easy to understand. Apply in just minutes and get an instant decision. As your circumstances change, you can update or cancel your policy with no fees and no hassles.

Explore your life insurance options with SoFi Protect.

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Photo credit: iStock/DragonImages

Coverage and pricing is subject to eligibility and underwriting criteria.
Ladder Insurance Services, LLC (CA license # OK22568; AR license # 3000140372) distributes term life insurance products issued by multiple insurers- for further details see ladderlife.com. All insurance products are governed by the terms set forth in the applicable insurance policy. Each insurer has financial responsibility for its own products.
Ladder, SoFi and SoFi Agency are separate, independent entities and are not responsible for the financial condition, business, or legal obligations of the other, SoFi Technologies, Inc. (SoFi) and SoFi Insurance Agency, LLC (SoFi Agency) do not issue, underwrite insurance or pay claims under LadderlifeTM policies. SoFi is compensated by Ladder for each issued term life policy.
Ladder offers coverage to people who are between the ages of 20 and 60 as of their nearest birthday. Your current age plus the term length cannot exceed 70 years.
All services from Ladder Insurance Services, LLC are their own. Once you reach Ladder, SoFi is not involved and has no control over the products or services involved. The Ladder service is limited to documents and does not provide legal advice. Individual circumstances are unique and using documents provided is not a substitute for obtaining legal advice.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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