The holidays are one big party as you merrily move from one event to the next. But amid all the good cheer, the season hides a sobering number of pitfalls for your finances, and not just ones that involve overspending.
Here's a look at seven dangers that can send your season into a financial freefall, along with steps you can take to make sure the holidays are more happy than hazardous.
7 Hidden Dangers to Your Holiday Finances
You don't want to be the booze cop at your party, but if someone leaves your festivities intoxicated and ends up causing damage, injuries or deaths, it could prove expensive for you, the host.
Some 43 states have various Dram Shop Liability laws for bars and other establishments that sell and serve alcohol, but don't think you're off the hook just because you're not charging your buddies for the booze. Many states also have social host liability laws that put you on the hook if one of your guests leaves the fun and kills or injures someone, or is killed or injured themselves. You can also be liable for underage drinking in your home.
So, if the party is at your place, check your homeowners coverage and any exclusions, conditions or limitations the policy might have for this kind of risk. Policies usually provide some liquor liability coverage, but it's typically limited to between $100,000 and $300,000, which may not be enough, warns Michelle Megna, managing editor of Insurance.com, an industry-backed consumer education site.
Among your options: Hire a professional bartender with the experience to know when enough is enough for your guests, and who can politely tell them so. Have plenty of coffee and tea on hand. Offer to call a cab for anyone unfit to drive, or let them sleep at your place. Or, avoid the liability issue altogether by hosting your party at a restaurant or some other location outside your home.
A clumsy caroler or guest who wipes out and gets hurt on your icy steps or walkway is no laughing matter. While every state has different rules, homeowners' policies typically cover the liability and medical expenses related to an accident in your home. "There's no deductible in the event someone gets injured on your premises," says Megna. Still, take precautions like shoveling walkways and keeping outdoor areas lighted.
Here's a hypothetical that can get real all too quickly: You want to make a quick run to the store to replenish your supply of party goodies, but your car is parked in by all those guests. So you borrow a friend's wheels because theirs is the last in the long line of party-goers' vehicles in your driveway.
Now, what if you somehow back into the neighbor's car across the street, or have some other automotive mishap between point A and point B? Typically, the existing auto insurance policy on the borrowed vehicle would provide primary coverage in the event of a claim. But if they don't have coverage, your car insurance policy might provide it, according to the National Association of Insurance Commissioners. Considering how much traveling the average American does during the holiday season, it's worth reviewing your policy, especially if you'll be driving out of the country.
You're no Mario Batali or Bobby Flay, but your cooking doesn't usually get the attention of the CDC. Still, kitchen disasters can happen. If your delicious delicacies give your guests food poisoning, your homeowners insurance should cover you if a guest sues you or needs medical attention. And your policy's liability protection will cover you even if you were negligent in preparing the meal. Policies include a limited medical payments provision. If the extent of "loss" exceeds that coverage and you're sued, your insurer would pay for your legal defense, and your policy's bodily injury coverage kicks in, says Megna.
Each year, you vow not to overeat or drink too much during the holidays. But if your willpower fails, you aren't just putting your figure at risk -- it could cost you financially in terms of health insurance. "While employers have been offering incentives to workers to stay healthy for some time, a trend is happening -- penalizing those who don't," says Megna. "The use of penalties among employers more than doubled from 2009 to 2011, rising from 8% to 19%. It could double again next year when 38% of companies plan to have penalties in place." So if thinking about all those calories and your cholesterol isn't enough to help you just say no, it might help to think about your wallet getting thinner.
According to the U.S. Fire Administration, Christmas trees account for 250 fires annually, resulting in death, injury and more than $13.8 million in property damage. Avoid dry fresh-cut trees. Trim at least one inch from the bottom of the tree to increase its ability to absorb water. Check the water level in the tree stand regularly, and refill it often, advises Loretta Waters, vice president of the Insurance Information Institute, an industry organization.
Don't overload electrical sockets by plugging too many cords into one outlet. Unplug holiday lights when no one is home or when everyone is sleep. Use only Underwriters Laboratories (UL) approved lights. Inspect old light strands for cracks and frayed edges, says Waters. Never use indoor lights outside.
Also beware of toxic decorations. Mistletoe and holly berries may be poisonous if more than a few are swallowed. Old tinsel may contain lead. Fire salts, which produce lovely multicolored flames when thrown on burning wood, contain heavy metals, which if swallowed will cause vomiting or other gastrointestinal troubles.
If your presents are stolen from under your Christmas tree, your homeowners insurance policy may provide coverage, subject to the deductible and special sublimits for certain goods, such as electronics and jewelry. For example, if a package contained a $300 gift card to an electronics store, you might only be covered for $200. if the package contained $2,000 worth of jewelry or furs, you might only recoup $1,500. Standard condominium and renter's insurance policies provide similar coverage, according to the NAIC.