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Trump’s Tax Plan: Big Changes, Big Unknowns

President Donald Trump proposed big changes to the U.S. tax system on the campaign trail, but Wednesday’s announcement of the White House’s new tax plan may mark the start of where the rubber meets the road for many Americans and their tax bills.

What does it mean for you? Here’s a guide to what is (and isn’t) in the plan.

What’s in the plan

The proposed changes would affect virtually all taxpayers in some way, though the impact would depend on your individual situation.

CURRENT BRACKETS Taxable income (married filing jointly) Tax rate $0 to $18,650 10% $18,651 to $75,900 15% $75,901 to $153,100 25% $153,101 to $233,350 28% $233,351 to $416,700 33% $416,701 to $470,700 35% $470,701 and up 39.6% PROPOSED BRACKETS Taxable income Tax rate Range TBD 10% Range TBD 25% Range TBD 35%
  • Eliminate almost every individual tax deduction: Except those for mortgage interest and charitable contributions. The plan specifically preserves those. A big one here would be the elimination of the ability to deduct state and local taxes, a move that could hurt residents of high-tax states such as California and New York.
  • Double the standard deduction: The IRS offers this deduction on a no-questions-asked basis. It’s subtracted from your adjusted gross income and lowers your taxable income. The standard deduction in 2017 is currently $12,700 for joint filers and $6,350 for single filers. The new plan proposes to roughly double that amount.
  • Relief for families with child and dependent care expenses: This is notable as a plan priority. Some tax benefits already exist for child and dependent care, but during the campaign Trump proposed tax deductions for child care and elder care expenses, a child care spending rebate to low-income parents and deductible contributions to Dependent Care Savings Accounts. Specifics of the new plan have not yet been given, however.
  • Repeal the alternative minimum tax: The AMT is an alternative method of calculating federal income tax that runs parallel to the ordinary method. Currently, taxpayers have to calculate their tax liability two times, once under each method, and pay whichever amount is higher.
  • Repeal the estate tax. This tax is levied on assets passed on to your heirs upon your death. In 2017, up to $5.49 million of an estate is already exempt from federal taxation. A repeal likely would affect only people who expect to inherit large estates.
  • Repeal the Affordable Care Act net investment income tax. This is a 3.8% tax some people must pay on their investment income, introduced to help pay for President Obama’s health care law. Couples with combined incomes above $250,000 could get a reprieve here.
  • Reduce the corporate tax rate to 15% and extend it to certain small and medium-sized businesses. Freelancers, the self-employed and other companies could get a tax break, though the details will determine how much.

» Read the White House’s full proposal

What details weren’t provided?

Lots of them.

Without knowing the size of the tax brackets, for example, it’s hard to determine which taxpayers will come out ahead in the shuffle between losing certain itemized deductions and moving to a lower tax bracket.

It’s unclear what would happen to the tax treatment on retirement contributions, such as to a 401(k) or individual retirement account, although National Economic Council Director Gary Cohn — who along with Treasury Secretary Steve Mnuchin announced the plan at a press briefing — said “retirement savings will be protected.”

It’s also impossible to know what sorts of new or different tax breaks will be available for child care or elder care.

» MORE: Calculate your tax burden

What’s next?

The White House said it plans to move quickly, working with the House and Senate to flesh out the fine print and draw up a bill. Any change in tax policy or rates must be approved by Congress.

Tina Orem is a staff writer at NerdWallet, a personal finance website. Email:

Student Loan Holders Catch a Home-Buying Break

For many of the 44 million Americans with student loan debt looking to buy a home, qualifying for a mortgage just got a bit easier. Housing giant Fannie Mae this week issued new guidelines about how lenders should evaluate mortgage applicants who have student loans — particularly borrowers on income-driven repayment plans.

The changes are a response to anxiety among student loan borrowers that having student debt takes homeownership off the table, says Jonathan Lawless, vice president of product development and affordable housing at Fannie Mae.

Of student loan borrowers in repayment who aren’t homeowners, 71% believe their student debt has delayed their purchase of a home, according to an April 2016 survey by the National Association of Realtors and American Student Assistance, a nonprofit that helps students pay for college and repay student loans.

Owing student loan debt can impair your ability to qualify for a mortgage, says Jerry Kaplan, senior vice president of capital markets at Colorado-based Cherry Creek Mortgage Co. Student loans increase your debt-to-income ratio —  the amount of total debt you owe relative to your income — and you won’t qualify if that percentage is too high.

Still, student loan borrowers can get mortgages, and the new policies give those borrowers more choices, Kaplan says. Fannie Mae backs one-third of all homes in America, Fannie Mae spokeswoman Alicia Jones says.

Fannie Mae’s changes are already in effect, although some lenders might take time to ramp up, Lawless says. Here’s what student loan borrowers need to know about the updates.

Income-driven plans and homeownership

Under the new guidelines, lenders issuing Fannie Mae-backed mortgages can calculate your debt-to-income ratio using your monthly student loan payment on an income-driven repayment plan, Lawless says. Income-driven plans cap your monthly payments at a percentage of your income.

Previously, lenders had to calculate a higher monthly student loan payment for mortgage applicants on income-driven repayment plans, Lawless says. That meant mortgage lenders were evaluating those borrowers based on a higher debt-to-income ratio than they actually had. At the time, Fannie Mae felt that lending to borrowers on an income-driven plan was riskier, Lawless says. “We’ve gotten to understand these programs better,” Lawless says, citing that better understanding as the reason for the policy change.

Fannie Mae-backed lenders still have to calculate a monthly student loan payment to use in determining your debt-to-income ratio if you’re in a deferment or forbearance. That monthly amount will be 1% of your outstanding student loan balance or the amount needed to be on track to pay off the loan within the remaining loan term.

Help for co-signers and those not paying on loans

If someone such as a parent or employer is paying your student loans, or you’re a co-signer on a loan that the primary borrower is paying, you now have a better shot at qualifying for a Fannie Mae-backed mortgage, Lawless says. The student loan payment won’t count toward your debt-to-income ratio if you can provide paperwork, such as bank statements or voided checks, to prove that someone else has been making the monthly payments for the last 12 consecutive months.

Refinancing for homeowners with student debt

Fannie Mae began piloting what it calls a student loan cash-out refinance in late 2016 with SoFi, an online mortgage and student loan refinance lender. Now, any Fannie-Mae-backed lender can offer it.

Here’s how it works: You take out a new, bigger mortgage that’s equal to your existing mortgage plus some or all of your outstanding student debt. Your mortgage lender will pay off your lender or student loan servicer and waive a risk-adjustment fee that’s applied to traditional mortgage cash-out refinances. With mortgage rates still low, a student loan cash-out refinance can be an appealing way to lower your student loan interest rate.

But there are risks in using your mortgage to refinance student debt. You’ll be trading an unsecured debt (student loans) for a secured debt (your mortgage) and increasing what you owe on your home. If you can’t make the higher mortgage payment, you could lose your house. You’ll also likely pay more in interest over time because mortgages terms tend to be longer that those on student loans.

Alternatively, consider refinancing your student loans with a private student lender to get a lower rate and shorter loan term while keeping your student and home debt separate. However, there are risks there too. For instance, you’ll lose access to income-driven repayment plans when you refinance federal student loans.

Before you take out a new mortgage or refinance an existing one, talk to a financial advisor or tax professional to get personalized guidance, Kaplan says. You should also compare mortgage lenders to find the lowest rate you qualify for based on your financial situation.

Teddy Nykiel is a staff writer at NerdWallet, a personal finance website. Email: Twitter: @teddynykiel.

How to Manage Money in Your 30s

Your 30s can be an exciting but challenging decade. While you may be advancing your career and earning more money, you’re also likely juggling more financial responsibilities.

Many in this age group are married, given the median age at first marriage is in the late 20s, according to the U.S. Census Bureau. Parenthood may also be a reality, since the average age for women having their first baby is around 26, the Centers for Disease Control and Prevention reports. And don’t forget the house — the median age for first-time home buyers is 32, according to the National Association of Realtors.

How to handle all of this financially can be a bit overwhelming, says Brian McCann, founder of Bootstrap Capital LLC in San Jose, California.

“The bigger the life challenge, the more likely that we have not been trained for it,” says McCann, a certified financial planner who works primarily with clients in their 30s and 40s.

Beyond building a budget for yourself or your family, experts recommend 30-somethings take these steps to successfully manage their money.

Invest beyond your 401(k)

Save for retirement. You hear it over and over because it’s really important. And with the benefit of compound interest, the earlier you start, the better. You may also have heard that if your employer offers a retirement plan, you should take advantage of it. But beyond that?

“The majority of my younger clients know contributing to their 401(k) or company-sponsored plan to at least receive the company match is a great idea,” says Sam Farrington, a financial planner in Omaha, Nebraska, who writes about money and minimalism at the blog Add By Subtraction. “But many are unsure of what to do after that. Should you completely max out your 401(k) or instead invest a portion in a Roth IRA?”

Farrington advises investing in some combination of 401(k), traditional IRA and Roth IRA accounts. Money put into the latter is after taxes.

One approach Farrington recommends is to first ensure you receive the full company match on your 401(k), and then contribute as much as you can to a Roth IRA. The annual maximum is $5,500 for those who fall within the income limits — currently $118,000 for those who file as single and $186,000 for married couples filing jointly. If you are over the IRA limit, divert your contributions back to the 401(k).

» MORE: Are you on track for retirement? Use this calculator to find out

This approach assumes you have a company-sponsored plan at your disposal. If you’re among those without one, open an IRA on your own via an online broker. Robo-advisors like Betterment and Wealthfront use an algorithm to build and manage your account, automatically investing for you based on your age, retirement goals and risk tolerance. That tolerance should be high in your 30s, when you’re still a few decades off from retirement.

Regardless of your plan, contribute what you can afford and bump up the amount as your income increases — adding a percent or two each time you get a raise — with a goal of setting 10% to 15% of your annual income aside for retirement.

As you earn more, set priorities

In addition to increasing your retirement savings as you make more money, be sure to keep your spending in check.

The average monthly budget for those 35 to 44 years old is $5,445, compared with $4,339 for those 25 to 34, according to an analysis of Bureau of Labor Statistics data by Bank of America.

Don’t fall into the trap of spending more just because you earn more. Instead, be intentional about your spending. Work with your partner, if you have one, to determine what is important to you and your family.

“Come up with five or six things that are really important,” McCann says. “That makes setting up your finances easier. There will inevitably be trade-offs, and you can always bounce them off your values.”

A certified financial planner can help you set up a plan that takes into account your financial priorities.

Savings should be among those priorities. If you don’t have an emergency fund, start there.

It can take a while to fully stock your emergency fund, so work in increments. Aim for $500, then $2,000 and eventually build it to cover three to six months of living expenses.

This will help you focus on other goals, like saving for the down payment on a new house or for college if you have kids. You should do this while also saving for retirement.

“When you get into your 30s and 40s you need to juggle multiple financial goals, and that’s really tough to get your head around,” McCann says.

He recommends using separate accounts for each goal. So an online savings account for your down payment or home repair fund, another for a new car and a third for your dream vacation.

“You can measure progress against a specific goal,” McCann says. “It’s great positive reinforcement.”

Try to kick college savings into gear as soon as you have kids, using a 529 plan or other tax-advantaged plan. With an IRA, for example, you can take out money for qualified education expenses without penalty.

Like retirement savings, the sooner you start the more time your money has to grow. So contribute what you can, without sacrificing retirement savings, to get the most mileage out of your savings. Remember: Your kids can fall back on student loans if necessary; your retirement can’t.

Evaluate your insurance coverage

No one wants to think about the worst-case scenario, but planning for it can make life a little easier should it occur. That’s where insurance comes in.

“I think the biggest thing is the disability insurance for someone in their 30s,” says Tracy St. John, a financial advisor and founder of Financial Avenues LLC in Kansas City, Missouri.

Most disability insurance offered by employers pays 60% of your base salary if you are too sick or injured to work. For many people, that’s not enough.

To figure out what you need, St. John suggests evaluating current income and future financial goals. Then, look at what your current disability plan would pay. If there’s a gap, consider purchasing additional coverage now.

“As you get older it’s going to cost you more,” she says.

Purchase only what fits within your budget, but choose a plan that allows you to adjust coverage as your income increases.

Adding life insurance can also be a smart move in your 30s, even if you have coverage through your employer, St. John says. Like other policies, life insurance gets only more expensive with age.

Kelsey Sheehy is a staff writer at NerdWallet, a personal finance website. Email: Twitter: @KelseyLSheehy.

Millennials, Take This Savings Lesson From Retirees

Many have mulled this question; few have been lucky enough to answer it: Take lottery winnings as a lump sum or annuity?

As with any financial decision, there are pros and cons to both sides. But the pro to a lump sum is often the same as the con: You get to take that money and run. For some that means investing it; for others, it means wallpapering their house with $100 bills.

A recent MetLife survey highlighted how this choice shakes out when it comes to retirement: One in five retirees who took their pension or defined contribution plan, such as a 401(k), as a lump sum depleted it in an average of 5 ½ years.

The lesson for millennials and those still saving: When in doubt, keep money you’ve set aside for retirement, or money you want to set aside for retirement, out of your hands.

There are a lot of ways to do that, but here are five.

1. Lock that money up

The goal is to make retirement savings as inaccessible as possible until you need them. You can accomplish that by putting them in an individual retirement account or a 401(k).

Both generally penalize users who tap money before age 59 ½. A Roth IRA is most flexible: You can get your hands on contributions, but not earnings, at any time. But if you take an early distribution from your traditional IRA or 401(k), you’ll almost always pay a 10% penalty. The list of exceptions is short.

That might sound like a bummer, but the IRS is doing you a favor — retirement money should be for retirement. And you might think twice about an early distribution if it means peeling off a chunk of that cash for the IRS.

2. Give your 401(k) a raise

If you’ve ever gotten a raise and immediately felt like you didn’t, you understand the concept of lifestyle inflation. Extra money can quickly turn into extra expenses rather than savings or breathing room in your budget.

Of course, extra money can also make a budget livable or help pay down debt. But if you’re on solid financial footing and suspect your daily expenses will slowly creep up to the level of that raise, sign in to your 401(k) provider’s website and adjust your contribution upward so most of the raise goes directly there.

3. Direct deposit a windfall

We’re coming out of tax refund season, but it’s possible that won’t be your last windfall this year. Bonuses and inheritances happen, and you never know when that scratch-off ticket is going to be the one.

There are a lot of ways to invest extra money, but if you want to ensure that cash actually gets set aside, bypass your checking account.

If a tax refund is still coming to you, ask the IRS to direct deposit it; Uncle Sam will even generously split it among up to three accounts. (Too late? You know for next year.) Most companies allow employees to send a portion of their bonuses to a 401(k), and you can have an inheritance deposited to an IRA, assuming you have enough taxable compensation to cover the contribution and you stay under the IRA contribution limit.

4. Do a direct 401(k) rollover

When you leave a job, there are generally a few ways you can handle the money you’ve accumulated in a 401(k): You can leave it where it is, cash it out or roll it over to a new account; either an IRA or your new employer’s plan, if it accepts transfers.

Cashing out sounds like fun until you consider the cost: You’ll pay a 10% penalty if it’s an early distribution, plus income taxes. A $10,000 401(k) balance can quickly become $6,000 or $7,000. That penalty and tax hit might also apply if you intend to roll the money over into an IRA or new 401(k), but miss the IRS’s 60-day deadline for doing so.

Bottom line: We’ve all had good intentions but failed to follow through. Do yourself a favor — both the self who pays taxes today and the self who wants to retire later — and ask your 401(k) provider to do a direct rollover. This moves the money into the new account without it touching your wallet.

5. Save at the beginning of the month

You don’t have to be a formal, Excel-spreadsheets-and-counting-pennies budgeter to follow this advice: Put aside the amount you want to save each month after your first paycheck. This sets you up to save before you spend, rather than saving whatever you have leftover — which is often nothing. It’s a quick trick that leads to a much bigger account balance.

Arielle O’Shea is a staff writer at NerdWallet, a personal finance website. Email: Twitter: @arioshea.

This article was written by NerdWallet and was originally published by Forbes.

Get to Work on Building Your Unemployment Fund

As if being laid off weren’t stressful enough, most Americans don’t have enough money saved to pay monthly bills if they’re jobless for more than a few weeks.

But you can you avoid that added stress: Create an emergency fund now for potential unemployment.

A recent NerdWallet study found that Americans don’t save enough to weather several common emergencies, the most expensive being unemployment. Even factoring in state unemployment benefits and average annual savings, most people come up thousands of dollars short.

Among those who lose their jobs in the U.S., the average length of time spent unemployed is 26 weeks. Coincidentally, most states’ unemployment benefits are paid out for up to 26 weeks. Even the most generous state benefits aren’t very high and won’t cover most Americans’ bills.

An $8,500 shortfall

The study shows that Americans save on average 5.85% of their income, or approximately $2,540 per year, based on an average disposable income of $43,408 for 2016. This amount of savings plus unemployment benefits — which average $444 per week — would still leave Americans who are unemployed for 26 weeks around $8,500 short of their usual income.

That gap is even greater for those who live in states with lower than average unemployment benefits, such as Arizona, Louisiana and Mississippi, or a high cost of living. And while being frugal can help, cutting back $8,500 over 26 weeks — more than $1,400 per month — poses significant constraints for many people.

How much to save for unemployment

The best time to save money is when you don’t need it; in other words, you should save while you’re employed. Having an emergency fund means you won’t have to turn to debt to get through a rainy day — or 26 rainy weeks.

Experts recommend saving enough to cover three to six months of basic expenses. Whether you save closer to three or six months depends on factors including the unemployment benefit offered by your state. Maximum state unemployment benefits range from $235 to $742 per week, for 12 to 30 weeks. Search your state’s unemployment benefits to see how much you could expect.

Also consider your life circumstances. If you live in a dual-income household and you don’t own a home, which means extra costs for maintenance, three months’ savings might be enough. However, if you’re self-employed or work in a volatile industry where layoffs are common, you need to save more.

Remember, you’re saving three to six months of expenses, not income. So if you can eliminate some expenses while you’re unemployed, you can lower your monthly savings amount. In other words, if your current monthly expenses are $3,000 but you can cut $500 when you’re not working, then your monthly emergency savings would be $2,500.

How to save an unemployment fund

Saving a three- to six-month cushion could take months or even years. But don’t get discouraged; your efforts will add up. To free up cash for emergencies, you need to spend less, earn more, or both. Save consistently and contribute at least part of any windfall, such as tax refunds, bonuses or inheritances, to your emergency fund.

You can increase your income and decrease your expenses in small and significant ways, from cutting out cable and selling things at a yard sale to getting a cheaper place and asking for a raise. It’s also a good idea to set up an automatic transfer from your checking to a high-yield savings account, whether you transfer $50 or $500 a month.

Saving thousands or tens of thousands of dollars for an emergency and unemployment fund may seem overwhelming, but even small amounts now will add up over time and — if you lose a job — help reduce some of the stress.

Erin El Issa is a staff writer at NerdWallet, a personal finance website. Email: Twitter: @Erin_El_Issa.

 This article was written by NerdWallet and was originally published by U.S. News & World Report.

IVF: How to Pay for an Expensive and Emotional Process

After struggling to get pregnant, Nikki and Mike McDermott of Lake Worth, Florida, were determined to do whatever it took to have a family. She took the fertility medication Clomid, underwent $500 in diagnostic tests and tried intrauterine insemination, all without success.

McDermott is far from alone. According to data from the Centers for Disease Control and Prevention’s National Survey of Family Growth (2011-2013), 11.3% of women ages 15 to 44 — that’s 6.9 million women — have received fertility services.

It’s an expensive and emotional path, and success is not guaranteed.

“At that point emotionally, I was like, I can’t keep doing this up and down rollercoaster,” Nikki McDermott says. “We wanted something that had a higher success rate, so we did in vitro fertilization.”

Yet even a single cycle of IVF can be out of reach for many couples.

The high — and typically uncovered — cost of IVF

The McDermotts were quoted $14,000 for an IVF package including medications and procedures. At the time, McDermott was on her husband’s employer’s insurance plan, which offered no fertility coverage. To cover the bulk of treatment, the McDermotts took out a $10,000 fertility loan from a lender partnered with her doctor’s office at a sizable interest rate of just under 22%.

The first IVF cycle was successful for the McDermotts.  Having her son, Mikey, now a toddler, was worth the emotional and financial stress, McDermott says. “At the end of the day, we pay the monthly fee for the loan, and we just joke around that he can’t go to college,” she says.

According to data collected on 3,192 IVF patients and provided to NerdWallet by FertilityIQ, an online resource for those seeking fertility treatments, the national average cost for one IVF cycle, including drugs and the procedure, is $19,857. Some doctors offer packages or bundles at a discount, but the costs are still significant.

Some states mandate that health insurance cover fertility treatment, but the majority do not. According to the study by FertilityIQ, which involved more than 3,000 patients who received 7,141 IVF cycles in total, 28% had 76%-100% of treatment costs covered by insurance. But 56% of surveyed users had zero coverage, and the remainder of patients had only partial coverage. (Disclosure: NerdWallet CEO Tim Chen is an investor in FertilityIQ.) See the methodology below.

Making financial tradeoffs and saving for IVF is the best case scenario, says Shane Sullivan, a certified financial planner with United Capital in Austin, Texas. But for those eager to move forward without adequate savings, financing may be the answer. For the McDermotts, that answer was a fertility loan. Other IVF funding options, summarized below, include loans from credit unions, online lenders and credit cards.

Paying for IVF

If you’re seeking IVF treatments, whether you plan to buy a package or pay as you go, your credit history plays a large role in determining which financing options are available to you.

» MORE: Check your credit score


Lenders that focus specifically on fertility financing typically partner with doctor’s offices, and you can usually use this type of financing only if your provider offers it. Fertility-specific lenders may have higher interest rates, but the doctor’s office typically coordinates with the lender and receives the funds directly, removing some headache for patients. One of the most well-known fertility lenders is CapexMD, which offers loans through participating fertility clinics.


These personal installment loans have fixed rates with monthly payments. Credit unions are often the best choice for personal loans, as they usually have the lowest interest rates available, often starting as low as 7%, and can be open to lending to members with less-than-stellar credit. Federal credit unions are required to cap their interest rates at 18%. Credit union loans usually require a lot of paperwork and documentation, and they can take longer the online loans to be approved and funded.


If you’re in a hurry to pay for IVF treatment, online installment loans are approved and funded faster than loans from credit unions, sometimes within one day. They may also have more options when it comes to term length and amount. Interest rates are fixed and can be low for those with excellent credit.

Popular lenders for fertility treatments include Prosper, Lending Club and LightStream. Numerous other online lenders offer generic personal loans you can use for fertility treatment. NerdWallet recommends comparing offers from multiple lenders. The easiest way to compare actual rates is to pre-qualify online, which entails a soft credit check that won’t affect your credit score.


If you qualify, zero-interest credit cards can be an ideal way to fund at least some of your fertility treatment — the few thousand dollars needed to meet an insurance deductible, for instance. Credit cards typically have lower credit limits than the amount you could borrow with a loan, and you won’t know your credit limit until you are approved.

Emily Starbuck Crone is a staff writer at NerdWallet, a personal finance website. Email:

FertilityIQ Methodology: FertilityIQ’s data was collected between July 10, 2015 and February 19, 2017 via a survey of 3,192 patients who underwent at least one complete IVF cycle in the United States. The total number of IVF cycles completed by all patients was 7,141.

How to Build Credit in (Exactly) 250 Words

What credit is: Your credit reports are records of how you have repaid debt in the past. Credit scores are three-digit numbers that estimate how likely you are to repay a lender or card issuer as agreed in the future. A “credit check” may look at either or both.

Why it matters: Good credit gives you a better shot at borrowing money at a favorable interest rate. It can also mean lower car insurance bills and lower or no utility deposits.

How to begin: Start using credit, which is easier said than done. See if you can get a credit card, perhaps a secured credit card to start. Becoming an authorized user on someone else’s card may help. Student loans, car loans and credit-builder loans also build credit history.

Do I have to go into debt? No. One of the best ways to build credit is using a credit card lightly and paying the balance in full every month.

Understand your score: Most credit scores are on a scale from 300 to 850. It’s smart to monitor your score; you can get a free credit score from some credit card issuers or personal finance websites, like NerdWallet.

Know what affects your score: The biggest things you can do to boost your credit are:

  • Pay bills on time, without exception
  • Use little of your credit limit (under 30%, and under 10% is better)

Other things help, too:

  • Have both credit cards and loans
  • Keep older accounts open
  • Limit applications for credit

Bev O’Shea is a staff writer at NerdWallet, a personal finance website. Email: Twitter: @BeverlyOShea.

Wedding Gone Wrong? Insurance Could Help Set Things Right

When Dan Gerecht bought a wedding insurance policy for his daughter Yvonne’s big day last year, he did it because the event was scheduled during hurricane season and he was worried that weather might force them to cancel.

But it turned out the Gerechts needed the policy for a different reason: The venue, the Winery at Elk Manor in North East, Maryland, shut down just two months before Yvonne’s 2016 Labor Day wedding, Gerecht says. They found themselves scrambling for a new location — and out the $30,000 Gerecht had already paid to Elk Manor.

Vendors who can’t fulfill contracts are the most common cause of wedding insurance claims. Here’s how insurance can help.

Wedding disaster No. 1: Vendor fails

Vendor issues, like the venue going out of business, make up 30% of wedding insurance claim dollars — the largest share — paid by Travelers Insurance. Wedding insurance policies will often reimburse you if you have to book a last-minute vendor or reschedule the wedding if a vendor backs out.

Gerecht says he was tipped off that something was awry when the caterer emailed and told him the venue hadn’t paid as promised. Fortunately, the $355 policy he’d bought from Travelers covered the venue closing.

Wedding insurance “is such a small cost compared to what you could lose if something goes wrong,” says Anne Chertoff, wedding trends expert at WeddingWire.

The Gerechts were lucky; they found another venue for the same day. “Some families sued [the venue], but thankfully we didn’t have to” because we had wedding insurance, Gerecht says.

Wedding disaster No. 2: Someone gets injured

Weddings are fun. Often they’re so much fun that someone gets hurt. If there’s an injury at your wedding, you could be held liable — and that’s what wedding liability insurance is for. Wedding liability insurance is typically a separate policy from cancellation insurance, though they can be purchased in a bundle.

“As you might expect, we do see many injuries that occur on the dance floor,” says Steve Lauro, vice president at Aon Affinity, parent company of WedSafe, a seller of wedding insurance. Among claims to WedSafe, 28% are for injuries or accidents that occur at weddings.

In some cases, you could also be held liable if someone drinks too much and causes an accident. Liquor liability coverage may be sold as add-on coverage for wedding liability policies or included at no charge.

» MORE: Life Insurance for married couples

Wedding disaster No. 3: Extreme weather

When you’re booking the venue months beforehand, you cross your fingers and hope for good weather. Of wedding claims to Travelers, 16% of dollars paid out are due to extreme weather.

Coverage typically doesn’t include a rain shower or a blustery day that might ruin your party’s updos, because the wedding can still go on. But if there’s a tornado, hurricane or other destructive weather that prevents guests or vendors from arriving, a cancellation policy pays for costs to reschedule.

Wedding disaster No. 4: Medical emergency in the family

If someone close to you gets sick or injured right before your wedding, the last thing you want to worry about is the money lost canceling or rescheduling the event.

If the bride, groom, their parents or someone in the wedding party is sick or injured shortly before the wedding and can’t make it, cancellation policies typically cover the costs to reschedule. These represented about 6% of wedding cancellation claims to WedSafe in 2016, Lauro says.

» MORE: Cost of raising a child tops $260,000 — just for basics

Wedding disaster No. 5: Lost or ruined attire

Attire represents just 2% of wedding claim dollars paid by Travelers. However, tuxes and gowns are such an important part of weddings that they are commonly included in wedding cancellation policies.

Avoiding vendor issues

Chertoff recommends getting references from recent weddings that vendor has done and asking the references what their experiences were like.

Lauro recommends that you get all agreements in writing, read contracts thoroughly and check vendors on the Better Business Bureau.

Gerecht says the wedding insurance policy “was a great investment.” And he’s already purchased another one: He has another daughter getting married this year.

This article was written by NerdWallet and was originally published by USA Today. Lacie Glover is a staff writer at NerdWallet, a personal finance website. Email: Twitter: @LacieWrites.

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