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Why you'll owe more in 2004
From insurance to taxes, from your home to your school, your bills are likely to increase.
September 17, 2003: 2:54 PM EDT

NEW YORK (CNN/Money) Make sure your wallet's in shape because it's likely to get more exercise next year in many parts of your life.

Here are just some areas where there are likely to be price hikes on tap:

Home insurance: Home insurance premiums are expected to rise 8 percent to an average $615 a year, an increase of $46 for the average homeowner, according to the Insurance Information Institute (III).

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There are a variety of culprits, said III spokesperson Alejandra Soto. Among them, an increase in water damage claims in California, a rise in mold claims in Texas, and higher costs for building materials. The sagging economy has also meant home insurers can't absorb as many losses as they did when the economy was booming.

(Not only are insurers raising premiums, they're sending out more "nonrenewal" notices canceling policies for customers who file too many claims or who inquire about a possible claim. To find out more, click here.)

Car insurance: The III projects the average auto insurance premium will rise 6 percent to $898 a year, an increase of $51 per vehicle for the average car owner.

The III blames the rising cost of medical care, vehicle repair and the rise in jury awards in liability cases. Auto theft and insurance fraud also play a part.

Health insurance: The cost of health insurance has been climbing for years, and 2003 proved no exception. Monthly premiums for employer-sponsored plans rose nearly 14 percent, the largest increase since 1990, according to a recent study by the Kaiser Family Foundation.

And when premiums and related costs rise (deductibles, copayments, prescription costs), most employers pass the increases onto their employees. According to Kaiser, the average premium employees now pay for family coverage has jumped nearly 50 percent over the past three years, to $2,412 from $1,619.

Expect more of the same in 2004. Many companies, particularly those with more than 200 employees, told Kaiser they are very likely or somewhat likely to increase employee contributions and cost-sharing in 2004.

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Heating costs: Digging for cash is one way you'll find to keep warm this winter. The price of natural gas is expected to rise to $9.29 per 1,000 cubic feet, up from $7.98, according to the Department of Energy. For Midwesterners trying to heat their homes, that jump could translate to an extra $50 a month in winter.

Electric heat users may also see higher bills, since some electric suppliers use natural gas for generation.

But what about the Northeast, where 82 percent of the nation's heating oil is consumed? Since inventories have dropped 18 percent below last year, that is likely to keep the price of heating bills at or above last year's average total of $1,084 in winter.

For tips on how to keep your heating costs down, click here.

Interest rates: Deficits and economic rebounds can cause interest rates to jump. Since the U.S. economy is experiencing both to different degrees, the likelihood that interest rates will rise in the next year are better than not.

And with the yield on the 10-year Treasury -- the benchmark to which mortgage rates are most closely tied -- at or near a one-year high, coupled with the fact that mortgage rates have climbed from record lows, it's likely that the new home you've been eyeing could cost you more in interest next year.

(See how the difference of one or two percentage points in mortgage interest can mean the difference of hundreds of dollars a month in your house payment -- not to mention tens of thousands of dollars over the life of a home loan.)

State and local taxes: With so many cities and states facing budget crises, state and local governments may turn to their citizens and businesses to cough up more in taxes to ward off revenue shortfalls.

Mortgage rates
College costs
Insurance premiums
Property tax

The good news for individuals is that so far most states have avoided raising personal income taxes, said Dan Schibley, state-tax news director at tax information provider CCH Inc.

Two notable exceptions are: New York, which increased the personal income tax rate for higher income taxpayers for tax years 2003 through 2005; and Oregon, which increased the personal income tax on a graduated basis for the same period of time.

Instead of income tax, many states and local governments are opting to increase "sin" taxes on items like cigarettes. Some states, such as Vermont, New York, and Idaho, have opted to raise their sales and use taxes, Schibley said.

Property taxes -- both residential and personal -- may take a hit as well. A survey conducted in February by the National Association of Counties found that 45 percent of counties said they'd consider tax increases if they faced a revenue shortfall. Of those, nearly half said they would increase residential property taxes.

Another survey, released in May by the National League of Cities, found 61 percent of cities are raising fees, and 25 percent are increasing property taxes.

And, of course, if your home's value has appreciated greatly you may find yourself paying more in property tax, even though the property tax rate itself hasn't actually increased. (For tips on how to trim your property tax, click here.)

College costs: College costs have been going up an average of about 6 percent a year since 1990, although costs, particularly at public universities, have been rising at higher than historical rates in recent years.

For the academic year 2002-03, the latest year for which figures are currently available, the average annual cost to attend a private four-year college was $27,677, including tuition, room and board and other expenses, according to the College Board. At a public university, the price tag was $12,841 for in-state students and $19,188 for out-of-state students.

Sandy Baum, a consultant to the College Board and a coauthor of its report "Trends in College Pricing," said it is virtually certain that college costs would continue to climb in 2004 for several reasons: State appropriations for public universities are down, compensation costs for faculty at both public and private colleges are up -- and she's not talking salaries so much as the cost of health care and pensions -- and schools need to keep current on technologies for the classroom and on campus.  Top of page

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