Household finance issues that can snag your budget

Recession or no recession, the relentless extra costs of owning or even renting a home can be budget-wreckers. Sometimes it's just not possible to meet the rule of thumb that your housing costs shouldn't exceed 30 percent of your gross income.

Perhaps you have managed to keep a spotless monthly payment record for your mortgage or rent payments, but things are so tight that you realize a large out-of-the-blue expense could ruin it. Planning for contingencies now so you can cope with the unexpected later is always a good idea.

Here are questions in areas that could foul up your household finances.

Q:I'm having a hard time affording the rent on my own at the moment. What's the best way to find a roommate quickly and safely?

Answer: Start with people you know who might be looking for a roommate. Follow the rule of opting for compatibility over likability. If you don't know anyone who might make a suitable roommate, go online.

There are two main ways to find good roommate candidates on the Web, according to Ron Leshnower, who writes about apartment living and rental matters (http://apartments.about.com) on About.com, a part of The New York Times Co.

You can browse roommate listings and post your own ad on bulletin boards such as Craiglist. Or you can take advantage of fairly new online roommate-matching services, such as EasyRoommate.com or Roommates.com. For a small fee, these services help pair you with compatible people in your area.

As with any online matter, keep your guard up for scams. If something seems too good to be true, it probably is. If a potential roommate match asks for a large sum of money upfront or presses you early on for personal details, take such behavior as a red flag.

Even though you might be in need, try not to rush the process and settle for anyone with a checkbook or you might wind up in a bigger jam. It can be difficult to get out of a lease with a roommate who's not compatible or, worse, skips out and leaves you to pay the remainder of the rent.

Q:What if my dog bites someone on my property or elsewhere -- does homeowners or renters insurance protect me?

Answer: Typically, yes. But you'd better hope your dog doesn't bite someone who files huge lawsuits. Most policies provide $100,000 to $300,000 in liability coverage. If the claim exceeds that limit, the dog owner is personally responsible for all damages above that amount.

Claims filed for dog bites are more common than many might think. Dog bites account for a third of all homeowners insurance liability claims, costing $387 million in 2008, according to the Insurance Information Institute. And the cost of claims has risen nearly 28 percent since 2003, averaging $24,511 in 2007.

While that's well within most policies' coverage limits, a single lawsuit -- even if won -- can cost hundreds of thousands of dollars. The greater your assets, the more potentially is at risk.

If you feel uneasy being vulnerable to such a potentially large financial blow, you may want to consider umbrella liability insurance -- so dubbed because it acts like an umbrella, poised above a buyer's auto and homeowners liability policies to provide extra protection. If you are sued and a settlement or court judgment finds you liable for $500,000 or $1 million or more, the umbrella takes care of the difference.

The extra coverage isn't hugely expensive. A typical $1 million personal umbrella liability policy might cost $150 to $300 annually, with each additional $1 million in coverage going for $50 more.

Q:I just moved to an area where I expect a lot of snow this winter. If my basement floods from the melting snow, does my homeowners policy cover it?

Answer: The short answer is almost certainly no. Melting snow is considered surface water, which is listed with other exclusions in a standard homeowners insurance policy.

That's why it's important for someone moving into an area that has a large amount of snow to carry flood insurance, according to the Insurance Information Institute. The federal government's National Flood Insurance Program is designed to cover water damage from rain or melting snow and is available through insurance agents. NFIP policies must be in place for 30 days before coverage takes effect. More details are at http://www.floodsmart.gov.

A policy can cost hundreds of dollars a year. A more cost-effective approach might be simply to buy a sump pump for your basement. Prices start at about $100, although you might want to invest in a backup system, too, so expired batteries don't foil you.

A standard homeowners policy does at least cover a related area: damage from roofs that collapse under heavy snow, as well as ceilings and interior walls ruined by water leaking because of gutters blocked with ice. To prevent such ice dams from occurring, homeowners need to clean their gutters in the fall.