Two rules to know

Q.What’s the“wash sale” rule? — R.S., Washington, Pennsylvania

A.

It’s something you need to pay attention to if you’re selling an investment and plan to buy into it again soon — perhaps when you want to sell a stock to write off the loss on your taxes before the end of the year.

The IRS won’t permit you to claim such a loss, though, if you replace it with the same or a “substantially identical” security within 30 calendar days before or after such a sale. (It also won’t work if you sell a stock in your own account and then your spouse buys it in theirs during the same period.)

Here’s a silver lining: If you can’t take a loss because of the wash sale rule, you may be able to claim it later when you sell your new stock.

Q. What’s the “Rule of 72”? — T.L., Mesa, Arizona

A.

It’s a fun math trick that shows how long it will take to double a number. For example, if you expect an investment to grow by, say, 8% annually, divide 72 by eight and you’ll get nine — meaning that it will take nine years to double your money at that rate. It works in reverse, too. If you want to double your money in, say, six years, divide 72 by six and you’ll get 12 — meaning that 12% is the growth rate you’ll need.

The rule is most accurate with rates between 6% and 10%, but is useful a bit beyond that, too. For example, if inflation is averaging 3% annually (as it has, historically), divide 72 by three and you’ll see that prices are likely to double in about 24 years.

Sufficient homeowners insurance

If you own a home, you need to be carrying homeowners insurance. But that’s not all: You need to be carrying enough insurance. If your coverage is insufficient, you might pay lower premiums, but you might also end up in hot water should disaster strike.

It’s a good idea to review your policy every now and then to make sure it does enough for you. For starters, it should cover the cost to rebuild the home, not just what you paid for the home — construction costs can go up significantly over time. Call your insurer and review your policy with them.

Your policy should cover your personal possessions, as well. It’s smart to inventory them in detail; you might want to walk around and take photos or video. Focus on high-value items, such as jewelry, electronics and expensive collections. You may need more than what a basic policy covers, so check with your insurer.

Most policies will offer at least $100,000 in liability coverage, which comes into play if you get sued. It’s often best to get at least $300,000 to $500,000 in coverage, though — and perhaps more if you have substantial assets and a lot to lose.

Another good idea for those with substantial assets is umbrella insurance. It’s a separate policy, often surprisingly inexpensive, that can provide additional coverage beyond the limits of your other policies.

Depending on where you live, you might want extra coverage to protect you from various disasters such as flooding, wildfires, sinkholes and earthquakes. Standard homeowners insurance policies often don’t cover such events.

Ideally, you’ll also want your insurer to cover some or all of your living expenses if you aren’t able to live in your home for a while.

It’s smart to shop around to find the best coverage you can afford from wellrated insurers at least every few years. Having sufficient coverage can save you a lot of heartache as well as money.