Author Topic: Auto Insurance? How much to get? How much do people have?  (Read 6122 times)

Swat

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Auto Insurance? How much to get? How much do people have?
« on: April 29, 2017, 08:34:38 AM »
Currently a medical resident and moving to a new state so I'm reevaluating my auto insurance policies and what I need on our two vehicles (both 2016 Honda CR-V). We have a sizable emergency fund. I've been doing some reading and the general recommendation is to get a lot of liability insurance, consider adding an umbrella policy, skimp on the collision/comprehensive if you have an emergency fund, and consider not purchasing rental or roadside. I was curious what numbers people currently have with their policies and if it changes once you become an attending.

-Bodily Injury

-Property Damage
-Property Protection

-Personal Injury protection

-Uninsured Motorist/Underinsured Motorist

-Collision:

-Comprehensive:

-Car Rental

-Roadside:


Future Lazy

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Re: Auto Insurance? How much to get? How much do people have?
« Reply #1 on: May 01, 2017, 01:52:44 PM »
Hi Swat,

Bummer nobody got back to you. :(

I work in property and casualty insurance in Colorado, and might be able to offer some advice. As far as car insurance goes, you don't really need to tie these values to what you do for a living. Bad accidents can happen to anyone, and they can be really bad no matter if you're unemployed, a doctor, a mom, a pastor.. you get the idea. You should tie these values to your skill as a driver, as well as your personal level of risk aversion. If you are thinking about an umbrella, consider your net worth, the worth of leveraged assets (like real estate, vehicles, etc), your yearly income, and your level of risk aversion. Remember that the advice I've given here is GENERAL, and you always, always, always want to read your policy from your carrier to know for sure exactly what they do and don't cover, so you know what you are and aren't paying for.


Bodily injury covers the driver and passengers in the other car in the case you are the at-fault driver in the accident. If you rear-end someone, and they didn't have their seatbelt on, fly through the windshield and land on their head in a busy intersection.. That's where BI kicks in. If your BI limit is $100,000 per person, and the injured party needs $250,000 in medical care, you're on the hook for $150,000. If I were writing your auto policy, I would not recommend going below $100k per person/$300k per accident on this. Remember that you never know how badly someone else might get hurt, or how many people/cars might be involved in an accident.

Property damage covers the other person's car in the case you are the at-fault driver in the accident. If you t-bone someone's 2018 Tesla Model S(uper expensive car), and it costs $100,000 to fix/replace it, but you only have $25,000 in property damage coverage, you're on the hook for $75,000. I wouldn't recommend going below $50,000 on this - most people's cars don't cost this much to fix or replace, but a lot still do.

Personal injury protection is sometimes referred to as medical payments coverage. This typically covers the passengers and driver in your vehicle, regardless of fault. This is good for covering your health insurance deductible/out of pocket maximum. $5000 will usually do it, but if you have a HDHP or high out of pocket maximum, you may want to go to $10,000 or $15,000. Likewise, if you're driving around clients, friends or children, it's good to consider raising this above the minimum. You may have good health insurance, but you never know what someone else's situation is.

Uninsured and Underinsured Motorist protection kicks in when the other driver's bodily injury limits weren't high enough. For example, if you get in an accident with another driver where they were at fault, and they have NO insurance, your UMUI will cover your bodily injury. Alternatively, if you get in an accident with another driver where they were at fault, but they only had BI coverage of $25,000 per person, but the cost to you was closer to $100,000, your UMUI coverage will kick in to cover the difference. This should match whatever your choice is for BI limits.

Collision covers damage to your car during an accident regardless of fault - although if the other driver is at fault, claim the damage on the property damage portion of their insurance before the collision part of yours. Comprehensive covers non-accident moments, such as backing into a pole, hitting a deer, car theft, broken windows, etc. These things really depend on the value of your car, and how much of that asset value needs insuring. If your vehicle is only worth $2000 (like mine), it doesn't really make sense to even have collision or comprehensive coverage with the lowest deductible. We just keep a few thousand handy in case it's new car time.  If your car is worth $50,000, maybe it does make sense. If your car is worth $50,000, and you're comfortable shelling out another $50,000 for a whole new car in the event yours is stolen, then don't get the coverage. Here is where you decide how much financial liability you can handle, and how much financial liability you want to offload to your insurance carrier. You can get good car insurance prices with Collision and Comprehensive coverage if you choose a high deductible.

Car rental typically covers a daily reimbursement for car rental costs in the event your vehicle isn't road worthy or available after an accident/incident. Some places limit the amount per day, some places limit the number of days you can get reimbursed, and some places limit both. Usually, the cost of this coverage is not very high.

Roadside assistance - similar to above, usually the cost of this coverage is not very high.

Umbrella coverage kicks in in the event that damages are higher than the underlying limits on your insurance. For example, if you have 100/300 BI on your vehicle, but a 1 million dollar umbrella, your umbrella will kick in if the bodily injury to the other driver goes over $100,000, and will pay out up to 1 million dollars. Having an umbrella with a company usually requires you to have all of your policies with that company, and usually requires you maintain moderate to high liability limits on those policies. Agents/carriers are happy to write this since it guarantees your other business, it guarantees your other business will be priced higher, and is a pretty low maintenance policy. So, it's really up to you to decide if you need this or not.

And, if you give an agent an Umbrella policy, they're going to ask you about your life insurance... Be careful. :)


In any case, while you are shopping, get written quotes that break down the costs by line item, so you can see exactly how your premium is broken down.

I hope this essay helps!
Kayla


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Re: Auto Insurance? How much to get? How much do people have?
« Reply #2 on: May 01, 2017, 02:23:01 PM »
Personal injury protection is sometimes referred to as medical payments coverage. This typically covers the passengers and driver in your vehicle, regardless of fault. This is good for covering your health insurance deductible/out of pocket maximum. $5000 will usually do it, but if you have a HDHP or high out of pocket maximum, you may want to go to $10,000 or $15,000. Likewise, if you're driving around clients, friends or children, it's good to consider raising this above the minimum. You may have good health insurance, but you never know what someone else's situation is.

I disagree with the premise that you should purchase personal injury protection to cover your own medical insurance deductibles and coinsurance. Your medical insurance deductible should be an amount that you are comfortable with paying in the event that something happens to you. Period. Car crashes are but one of a large number of things that could result in large medical expenses. You could also get cancer, a heart attack, an injury from something non-car-related, and the list goes on. Buying supplemental insurance to cover your deductible for only one of the many things that could send you to the hospital makes little sense.

But if you make a habit of giving rides to people without decent medical insurance, then go ahead and get this coverage.

Quote
Uninsured and Underinsured Motorist protection kicks in when the other driver's bodily injury limits weren't high enough. For example, if you get in an accident with another driver where they were at fault, and they have NO insurance, your UMUI will cover your bodily injury. Alternatively, if you get in an accident with another driver where they were at fault, but they only had BI coverage of $25,000 per person, but the cost to you was closer to $100,000, your UMUI coverage will kick in to cover the difference. This should match whatever your choice is for BI limits.

Why? Sure, if someone is liable for damages in a car crash I'd certainly want them (or their insurance) to cover what they legally owe. But if they just don't have the money I don't need to be paid as if they did have more insurance.

Again, this goes back to insuring yourself for things that could happen to you regardless of whether they happen in a car. If a car crash causes a bunch of medical bills, you should have medical insurance for that because there are plenty of ways to accrue medical expenses without someone else hitting you with their car. If a car crash causes you to be unable to work and you rely on that income, you should have disability insurance that will cover that because there are plenty of ways to become disabled that don't involve someone else hitting you with their car. If a car crash kills you and that would affect your family's financial health, you should have life insurance for that because there are plenty of ways to die that don't involve someone else hitting you with their car.

Once you have yourself covered in more general ways, this insurance just seems superfluous. A large portion of any payout would in many cases just go straight toward reducing the amount that your health insurance or other insurances would owe.

For me personally, I have liability-only car insurance ($250k bodily injury and $100k property damage), with an umbrella insurance policy covering amounts on top of that. The car isn't valuable enough to be worth buying comprehensive or collision insurance, but yours may be.

Future Lazy

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Re: Auto Insurance? How much to get? How much do people have?
« Reply #3 on: May 01, 2017, 02:44:46 PM »
Personal injury protection is sometimes referred to as medical payments coverage. This typically covers the passengers and driver in your vehicle, regardless of fault. This is good for covering your health insurance deductible/out of pocket maximum. $5000 will usually do it, but if you have a HDHP or high out of pocket maximum, you may want to go to $10,000 or $15,000. Likewise, if you're driving around clients, friends or children, it's good to consider raising this above the minimum. You may have good health insurance, but you never know what someone else's situation is.

I disagree with the premise that you should purchase personal injury protection to cover your own medical insurance deductibles and coinsurance. Your medical insurance deductible should be an amount that you are comfortable with paying in the event that something happens to you. Period. Car crashes are but one of a large number of things that could result in large medical expenses. You could also get cancer, a heart attack, an injury from something non-car-related, and the list goes on. Buying supplemental insurance to cover your deductible for only one of the many things that could send you to the hospital makes little sense.

But if you make a habit of giving rides to people without decent medical insurance, then go ahead and get this coverage.

Quote
Uninsured and Underinsured Motorist protection kicks in when the other driver's bodily injury limits weren't high enough. For example, if you get in an accident with another driver where they were at fault, and they have NO insurance, your UMUI will cover your bodily injury. Alternatively, if you get in an accident with another driver where they were at fault, but they only had BI coverage of $25,000 per person, but the cost to you was closer to $100,000, your UMUI coverage will kick in to cover the difference. This should match whatever your choice is for BI limits.

Why? Sure, if someone is liable for damages in a car crash I'd certainly want them (or their insurance) to cover what they legally owe. But if they just don't have the money I don't need to be paid as if they did have more insurance.

Again, this goes back to insuring yourself for things that could happen to you regardless of whether they happen in a car. If a car crash causes a bunch of medical bills, you should have medical insurance for that because there are plenty of ways to accrue medical expenses without someone else hitting you with their car. If a car crash causes you to be unable to work and you rely on that income, you should have disability insurance that will cover that because there are plenty of ways to become disabled that don't involve someone else hitting you with their car. If a car crash kills you and that would affect your family's financial health, you should have life insurance for that because there are plenty of ways to die that don't involve someone else hitting you with their car.

Once you have yourself covered in more general ways, this insurance just seems superfluous. A large portion of any payout would in many cases just go straight toward reducing the amount that your health insurance or other insurances would owe.

For me personally, I have liability-only car insurance ($250k bodily injury and $100k property damage), with an umbrella insurance policy covering amounts on top of that. The car isn't valuable enough to be worth buying comprehensive or collision insurance, but yours may be.

I generally agree with you on both of these points. However, do realize that both of these coverage are governed by state law. In Colorado, you can reject them entirely with a signature page, but in other states, they're required in minimum amounts for everyone.

Do remember that much of what is standard in car insurance was pre-ACA, or in other words, came before a time when it was generally assumed everyone has some kind of health insurance coverage. Furthermore, the uninsured rate for medical insurance is still around 11% in the US - that's over 35 million people. So, this is very situational. My advice assumes the buyer has health insurance... But not everyone has health insurance, and not everyone has ideal health insurance for their situation (ex I pay $300/mo for a deductible of $6300 and an out of pocket max of $12600 because $300/mo is what I can afford, not because I prefer those deductibles). Car accidents happen all the time, to people in all kinds of situations.

It's a general rule of thumb writing policies that Uninsured Motorist should match Bodily Injury. It helps the client understand what UMUI is there for. However, an agent/carrier should be willing to write whatever the client wants for coverage. If an individual wants to mess around with this - make it less than their BI limit, or take it off entirely - that's their right. Since you're comfortable and confident in what you've purchased for health insurance coverage, it makes sense that you're comfortable forging this coverage. But, once again, not everyone has health insurance coverage on their side, and the kinds of traumatic injuries sustained in car accidents can be the devastating.

I'd love to live in a world where everyone was financially independent and insurance wasn't as integral to daily life. I'd also love to live in a world where nobody travels by car, because diving a car is frikkin dangerous! That's just not the case, and doesn't seem like it soon will be, as the world currently stands. So, we've got insurance to be there for us when we can't be there for ourselves - and some of us who have poor or no health insurance at least have car insurance to be there for us after a car accident.

Systems101

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Re: Auto Insurance? How much to get? How much do people have?
« Reply #4 on: May 01, 2017, 04:12:50 PM »
Over time my coverage has changed.  I probably had too little when I was younger (was comparing to my income/savings not my potential future earnings), but darn liability insurance in your early 20s is expensive.  I think I was at 50/100/50 for a while.  I was then at 100/250/100 for a long time.  That seemed like a lot of money :D.  I now currently carry:

300,000/300,000 on BI across the board (Liability and UIM/UIM)
100,000 on property damage ($10K on uninsured)
$1M EPLP (this is an umbrella, but is legally "Excess Personal Liability Protection" meaning my coverage is effectively 1,300,000/1,300,000 on BI)
No collision or comprehensive... if they steal it, or total it, I'll deal with it... car no longer worth enough to pay the $ (I have this early on, then usually drop this later in the life of a car... but $400/yr on a $5K car is silly)
No rental or transportation.  CC can do what I need on rental; transportation is effectively self-insured.

My total insurance (including home) is about $1K/yr


seattlecyclone

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Re: Auto Insurance? How much to get? How much do people have?
« Reply #5 on: May 01, 2017, 05:12:14 PM »
I'd love to live in a world where everyone was financially independent and insurance wasn't as integral to daily life. I'd also love to live in a world where nobody travels by car, because diving a car is frikkin dangerous! That's just not the case, and doesn't seem like it soon will be, as the world currently stands. So, we've got insurance to be there for us when we can't be there for ourselves - and some of us who have poor or no health insurance at least have car insurance to be there for us after a car accident.

Where I disagree is I think that the amount you would spend on your underinsured motorist coverage would in almost any case be better spent on getting some more general-purpose insurance. By purchasing the underinsured motorist coverage in lieu of other insurance you're saying "Instead of buying a little bit of life insurance (maybe not as much as I'd like, but as much as I can afford) to cover any cause of death, I'd rather make sure I'm well-covered if I get killed by an uninsured motorist and not covered at all if I die some other way." That seems like a strange bet to make.

Future Lazy

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Re: Auto Insurance? How much to get? How much do people have?
« Reply #6 on: May 02, 2017, 09:50:39 AM »
I'd love to live in a world where everyone was financially independent and insurance wasn't as integral to daily life. I'd also love to live in a world where nobody travels by car, because diving a car is frikkin dangerous! That's just not the case, and doesn't seem like it soon will be, as the world currently stands. So, we've got insurance to be there for us when we can't be there for ourselves - and some of us who have poor or no health insurance at least have car insurance to be there for us after a car accident.

Where I disagree is I think that the amount you would spend on your underinsured motorist coverage would in almost any case be better spent on getting some more general-purpose insurance. By purchasing the underinsured motorist coverage in lieu of other insurance you're saying "Instead of buying a little bit of life insurance (maybe not as much as I'd like, but as much as I can afford) to cover any cause of death, I'd rather make sure I'm well-covered if I get killed by an uninsured motorist and not covered at all if I die some other way." That seems like a strange bet to make.

Now you're talking about two different situations, and two different kinds of insurance. Apples to oranges (to pears, I guess, since we've got health insurance in the mix).

Health insurance costs me $300/mo - going up to $560/mo in June to cover my husband and myself, for a total of $6720 per year, yikes. This covers general overall health - from getting cancer to getting my spine crushed in an auto accident. If I'm an American that doesn't have the good fortune of health insurance, spending a much smaller amount (say $200/12 months) on my car insurance to ensure that if my spine is crushed in an auto accident with an at-fault hit and run driver, or an uninsured driver, or an underinsured driver, that there will be some money there to help my body get repaired is still better than nothing.

Life insurance, on the other hand, I can get for $15/mo or $180/yr - the price of Netflix, basically - without reviewing my medical records, simply because of my age. It wouldn't be a lot, but it would be enough to cover the cost of scraping my smashed body off the road and transporting it to an oven somewhere, and the cost of a nice jar for my husband to keep me in (if he wanted). Furthermore, if you're worried about death, life insurance is a much better deal, since it will pay out it's total amount in the event of death... Car insurance, if you died in a car accident, will only pay out the exact cost to clean up your grease spot and find a suitable place for your corpse, and no more. If you have both, you could get your death expenses paid for by UMUI, and then still get your total life insurance benefit paid out to your family.

In other words, fixing a broken but alive person is much, much more expensive than doing something with a dead person.

And, I'll argue again, much of what is standard in car insurance is reactive to many decades of a pre-ACA world. We can talk about how the uninsured rate for health insurance has dropped drastically, but is still very high... But we can also talk about how health insurance coverage used to have a total limit. For example, if you didn't pay for the best health coverage in 2008, maybe your cap was $300,000. If it cost more than $300,000 to keep you in the hospital for months and months, run tons of x-rays, have multiple surgeries to reassemble your spine, put you through months or years of physical therapy, pain management, in-home or hospice care.. Maybe it cost $500,000, or a million dollars. That cost falls back onto on you, and you might be grateful that the hospitals and doctors that helped you reached for BI or UMUI coverage before they reached for your health insurance coverage. Having a total cap on health insurance coverage has only been illegal less than a decade (maybe even less than 5 years?). It's going to take time for the insurance world - a bureaucratic beast of an industry - it catch up with itself on this. Probably via lawsuits, Geico Vs. Anthem, or however.

Also legit thank you for this refreshingly morbid conversation. :)

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Re: Auto Insurance? How much to get? How much do people have?
« Reply #7 on: May 02, 2017, 10:06:14 AM »
My personal take on auto insurance is:  Get an umbrella policy for your approximate net worth, then let that policy dictate what your liability coverage is on your auto insurance.  Most umbrellas have specific requirements for liability.

And personally, I just don't buy collision/comprehensive.  I self insure.  We buy used cars that are not worth a lot of money.  We have enough cash to replace them entirely if we have to.  I came to this conclusion the hard way.  Many, many years ago I did carry comprehensive.  I totaled a car.  The insurance pay out was MUCH less than the car was worth and no amount of arguing would change that.  I went back and figured how much extra I had paid for the coverage as a young male driver and... I felt seriously ripped off.

I haven't purchased collision/comprehensive since then.

I also mildly disagree with the previous comment that you shouldn't tie your coverage to what you do for a living.  As a doctor, you will be perceived to be a smug, rich bastard -- even if you're not.  In the case of an accident, some folks out there definitely will see you as a target.  If it were me, I would definitely not skimp on the umbrella/liability.

merula

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Re: Auto Insurance? How much to get? How much do people have?
« Reply #8 on: May 03, 2017, 01:32:09 PM »
Hi! I also work in property/casualty insurance, and I agree with Future Lazy's post wholeheartedly.

I buy $300,000 in liability limits, same for UM/UIM, comp/coll because it's required by the auto loan, and the highest deductible I can afford.

I would like to add a differing perspective on Umbrella insurance. Insurance carriers, as a whole, make A TON of money selling Umbrellas. As in, 2-3x as much profit on Umbrella as on Auto coverage, generally, and even more right now because of recent declining trends in Auto profitability.

So, should you buy a financial product that makes someone else a TON of money? Well, for me, that's a strike in the "NO" column, but it depends on your risk appetite. One suggestion up-thread is to buy your net worth's value in insurance. You can certainly do that, but keep in mind that certain assets are protected from creditors and, in a worst-case scenario, wouldn't be available to pay a judgment against you. Assets in 401(k)s are protected under federal law, IRAs are generally protected up to $1M, and in many states your home is protected if you own it.

So, what is your net worth excluding your home if you own it, your 401(k) and the first $1M in your IRA? If you live in my state, that's the amount that a plaintiff could reasonably expect to sue you for.

On UM/UIM, I always recommend buying the same amount as your liability limit because the UM/UIM protects YOU, and not some stranger. Unless you're completely FIRE and then some and could afford the cost of never working again and paying for full-time medical care. Then, do what you want.

seattlecyclone

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Re: Auto Insurance? How much to get? How much do people have?
« Reply #9 on: May 03, 2017, 02:51:05 PM »
I would like to add a differing perspective on Umbrella insurance. Insurance carriers, as a whole, make A TON of money selling Umbrellas. As in, 2-3x as much profit on Umbrella as on Auto coverage, generally, and even more right now because of recent declining trends in Auto profitability.

So, should you buy a financial product that makes someone else a TON of money? Well, for me, that's a strike in the "NO" column, but it depends on your risk appetite. One suggestion up-thread is to buy your net worth's value in insurance. You can certainly do that, but keep in mind that certain assets are protected from creditors and, in a worst-case scenario, wouldn't be available to pay a judgment against you. Assets in 401(k)s are protected under federal law, IRAs are generally protected up to $1M, and in many states your home is protected if you own it.

So, what is your net worth excluding your home if you own it, your 401(k) and the first $1M in your IRA? If you live in my state, that's the amount that a plaintiff could reasonably expect to sue you for.

All insurance is designed to make profit for the insurance company, which is a good reason to avoid buying any insurance that you don't need. But umbrella insurance does make a lot of sense for a lot of people. In my state, IRAs and 401(k)s are protected from creditors, but not taxable brokerage accounts, and only the first $40,000 of a home's value. My family would be in pretty bad shape if someone cleared out our taxable account and took more than 90% of our house, so we buy an umbrella policy even though I know we're unlikely to collect a cent from it.

On UM/UIM, I always recommend buying the same amount as your liability limit because the UM/UIM protects YOU, and not some stranger. Unless you're completely FIRE and then some and could afford the cost of never working again and paying for full-time medical care. Then, do what you want.

Yes, it protects you, but only for one specific thing. That's the problem. Most everyone who works would be in a lot of trouble if they couldn't work anymore, so insurance to provide a sufficient amount of income in the case of a disability is a great idea! But when general-purpose disability insurance is available, why does it make any sense at all to buy insurance that only protects against disabilities that arise due to being hit by an uninsured driver? You would then be out of luck if you become disabled due to a car crash where you're at fault, or a skiing accident, or a chronic illness, or any number of other things. For things that you do need to insure against, you should buy the most broad-based insurance possible for that circumstance.

merula

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Re: Auto Insurance? How much to get? How much do people have?
« Reply #10 on: May 04, 2017, 07:08:41 AM »
All insurance is designed to make profit for the insurance company, which is a good reason to avoid buying any insurance that you don't need. But umbrella insurance does make a lot of sense for a lot of people. In my state, IRAs and 401(k)s are protected from creditors, but not taxable brokerage accounts, and only the first $40,000 of a home's value. My family would be in pretty bad shape if someone cleared out our taxable account and took more than 90% of our house, so we buy an umbrella policy even though I know we're unlikely to collect a cent from it.

I agree that an umbrella makes sense for some people, but I don't think most people have unprotected assets in excess of a primary auto policy limit. Your state is on the low end of home protection, so in your case and with your risk appetite, an umbrella makes sense. I'm just saying that blanket statements like "get an umbrella equal to your total net worth" or "always get an umbrella" are misleading people on what protection they actually need.

Yes, it protects you, but only for one specific thing. That's the problem. Most everyone who works would be in a lot of trouble if they couldn't work anymore, so insurance to provide a sufficient amount of income in the case of a disability is a great idea! But when general-purpose disability insurance is available, why does it make any sense at all to buy insurance that only protects against disabilities that arise due to being hit by an uninsured driver? You would then be out of luck if you become disabled due to a car crash where you're at fault, or a skiing accident, or a chronic illness, or any number of other things. For things that you do need to insure against, you should buy the most broad-based insurance possible for that circumstance.

UM/UIM is significantly cheaper than disability insurance, and you're right that there is that overlap, but UM/UIM would also pay for medical bills, spousal loss of companionship, adding a wheelchair ramp to your home, etc. etc. My point is only that if I'm going to pay for a $300k limit for someone else to get all those things in a worst-case scenario that I cause, I also want to get those things for myself in MY worst-case scenario, since it's relatively cheap to do so.

Aggie1999

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Re: Auto Insurance? How much to get? How much do people have?
« Reply #11 on: May 04, 2017, 09:31:13 AM »
I would like to add a differing perspective on Umbrella insurance. Insurance carriers, as a whole, make A TON of money selling Umbrellas. As in, 2-3x as much profit on Umbrella as on Auto coverage, generally, and even more right now because of recent declining trends in Auto profitability.

So, should you buy a financial product that makes someone else a TON of money? Well, for me, that's a strike in the "NO" column, but it depends on your risk appetite. One suggestion up-thread is to buy your net worth's value in insurance. You can certainly do that, but keep in mind that certain assets are protected from creditors and, in a worst-case scenario, wouldn't be available to pay a judgment against you. Assets in 401(k)s are protected under federal law, IRAs are generally protected up to $1M, and in many states your home is protected if you own it.

So, what is your net worth excluding your home if you own it, your 401(k) and the first $1M in your IRA? If you live in my state, that's the amount that a plaintiff could reasonably expect to sue you for.

All insurance is designed to make profit for the insurance company, which is a good reason to avoid buying any insurance that you don't need. But umbrella insurance does make a lot of sense for a lot of people. In my state, IRAs and 401(k)s are protected from creditors, but not taxable brokerage accounts, and only the first $40,000 of a home's value. My family would be in pretty bad shape if someone cleared out our taxable account and took more than 90% of our house, so we buy an umbrella policy even though I know we're unlikely to collect a cent from it.

On UM/UIM, I always recommend buying the same amount as your liability limit because the UM/UIM protects YOU, and not some stranger. Unless you're completely FIRE and then some and could afford the cost of never working again and paying for full-time medical care. Then, do what you want.

Yes, it protects you, but only for one specific thing. That's the problem. Most everyone who works would be in a lot of trouble if they couldn't work anymore, so insurance to provide a sufficient amount of income in the case of a disability is a great idea! But when general-purpose disability insurance is available, why does it make any sense at all to buy insurance that only protects against disabilities that arise due to being hit by an uninsured driver? You would then be out of luck if you become disabled due to a car crash where you're at fault, or a skiing accident, or a chronic illness, or any number of other things. For things that you do need to insure against, you should buy the most broad-based insurance possible for that circumstance.

On the UM/UIM part, what about passengers in your car? You may have plenty of health insurance, disability insurance, etc but what happens when a passenger in your car is injured by a wreck caused by the other driver that has no insurance? Wouldn't your UM/UIM portion cover your passengers?

Aggie1999

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Re: Auto Insurance? How much to get? How much do people have?
« Reply #12 on: May 04, 2017, 09:35:38 AM »
Future Lazy: Thanks for the very detailed explanation of the auto insurance categories. Helped me out a lot as I never have really understood the coverage completely. One question. What part of auto-insurance covers yourself and your passengers when you are at fault? Seems like the only thing listed in your description is Personal Injury which is a very low amount. For me it's only $2500.

Laura33

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Re: Auto Insurance? How much to get? How much do people have?
« Reply #13 on: May 04, 2017, 10:05:55 AM »
My personal take on auto insurance is:  Get an umbrella policy for your approximate net worth, then let that policy dictate what your liability coverage is on your auto insurance.  Most umbrellas have specific requirements for liability.

And personally, I just don't buy collision/comprehensive.  I self insure.  We buy used cars that are not worth a lot of money.  We have enough cash to replace them entirely if we have to.  I came to this conclusion the hard way.  Many, many years ago I did carry comprehensive.  I totaled a car.  The insurance pay out was MUCH less than the car was worth and no amount of arguing would change that.  I went back and figured how much extra I had paid for the coverage as a young male driver and... I felt seriously ripped off.

I haven't purchased collision/comprehensive since then.

I also mildly disagree with the previous comment that you shouldn't tie your coverage to what you do for a living.  As a doctor, you will be perceived to be a smug, rich bastard -- even if you're not.  In the case of an accident, some folks out there definitely will see you as a target.  If it were me, I would definitely not skimp on the umbrella/liability.

This, especially the bolded parts.  I am a lawyer, which means I am a target for lawsuits.  It also means that my job  has given me first-hand experience with certain facts: (i) you don't have to be in the wrong to get sued; (ii) people generally go after the deep pockets moreso than the one who was the most "wrong"; and (iii) the damages can mount quickly -- as can the legal fees.  And we're all human; I mean, I try to pay attention, and knock on wood I haven't been in an accident in 30 years, but all of that could change the very next time I get in the car.  Or a tree from my yard could fall on someone, or a contractor could fall off a roof, or whatever.  So knowing I am protected in the event that shit happens -- and knowing the insurance company also has lawyers to manage those claims so I don't need to pay one -- is totally worth it.

So I also got the umbrella policy first, and then got the auto insurance limits that were required for my umbrella policy.  I really have no strong desire to try to nickel and dime this -- it's just not worth it in my situation.

Aggie1999

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Re: Auto Insurance? How much to get? How much do people have?
« Reply #14 on: May 04, 2017, 10:19:37 AM »
On the umbrella policy, that applies to all types of claims (i.e. someone injures themselves on your property, someone is injured in your car, etc) correct? An umbrella policy is not tied to just one side of the insurance (i.e. auto) correct?

Spork

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Re: Auto Insurance? How much to get? How much do people have?
« Reply #15 on: May 04, 2017, 10:42:57 AM »
On the umbrella policy, that applies to all types of claims (i.e. someone injures themselves on your property, someone is injured in your car, etc) correct? An umbrella policy is not tied to just one side of the insurance (i.e. auto) correct?

Mine applies to all types.  I can't speak for all of them.  My policy has minimum liability requirements for home and auto, then has a "bolt on" over and above that.  Because of that (for me) it is easier to get everything from one agent.

The other unmentioned bonus of umbrellas I have heard (and can't really verify... so take with a grain of salt) is that without an umbrella, they'll toss a lawyer at your liability to try to protect your liability limits.  Meh.  WITH an umbrella, there is much higher attention paid to a lawsuit.  A higher tier team of lawyers is hired to protect a much higher bag of cash.  In short: you get better/more complete representation.

Future Lazy

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Re: Auto Insurance? How much to get? How much do people have?
« Reply #16 on: May 04, 2017, 11:50:27 AM »
I would like to add a differing perspective on Umbrella insurance. Insurance carriers, as a whole, make A TON of money selling Umbrellas. As in, 2-3x as much profit on Umbrella as on Auto coverage, generally, and even more right now because of recent declining trends in Auto profitability.

So, should you buy a financial product that makes someone else a TON of money? Well, for me, that's a strike in the "NO" column, but it depends on your risk appetite. One suggestion up-thread is to buy your net worth's value in insurance. You can certainly do that, but keep in mind that certain assets are protected from creditors and, in a worst-case scenario, wouldn't be available to pay a judgment against you. Assets in 401(k)s are protected under federal law, IRAs are generally protected up to $1M, and in many states your home is protected if you own it.

So, what is your net worth excluding your home if you own it, your 401(k) and the first $1M in your IRA? If you live in my state, that's the amount that a plaintiff could reasonably expect to sue you for.

All insurance is designed to make profit for the insurance company, which is a good reason to avoid buying any insurance that you don't need. But umbrella insurance does make a lot of sense for a lot of people. In my state, IRAs and 401(k)s are protected from creditors, but not taxable brokerage accounts, and only the first $40,000 of a home's value. My family would be in pretty bad shape if someone cleared out our taxable account and took more than 90% of our house, so we buy an umbrella policy even though I know we're unlikely to collect a cent from it.

On UM/UIM, I always recommend buying the same amount as your liability limit because the UM/UIM protects YOU, and not some stranger. Unless you're completely FIRE and then some and could afford the cost of never working again and paying for full-time medical care. Then, do what you want.

Yes, it protects you, but only for one specific thing. That's the problem. Most everyone who works would be in a lot of trouble if they couldn't work anymore, so insurance to provide a sufficient amount of income in the case of a disability is a great idea! But when general-purpose disability insurance is available, why does it make any sense at all to buy insurance that only protects against disabilities that arise due to being hit by an uninsured driver? You would then be out of luck if you become disabled due to a car crash where you're at fault, or a skiing accident, or a chronic illness, or any number of other things. For things that you do need to insure against, you should buy the most broad-based insurance possible for that circumstance.

On the UM/UIM part, what about passengers in your car? You may have plenty of health insurance, disability insurance, etc but what happens when a passenger in your car is injured by a wreck caused by the other driver that has no insurance? Wouldn't your UM/UIM portion cover your passengers?

Aggie - You're definitely on the right track. If you were driving with four passengers in the car and were hit by an at-fault, uninsured driver, this should kick in to cover liability for the whole accident. Limits on Bodily Injury and UMUI usually look like "100/300" - which would mean $100,000 per person, or $300,000 per accident. In the four person scenario, there would be $300,000 to divide between everyone.  In Colorado, you can choose BI and UMUI limits as low as $25,000 per person, $50,000 per accident. If you were hit by an under insured driver, who only paid for $50,000 per accident in BI limits, your UMUI should kick in to cover liability and personal injury/damages above the other driver's $50,000 limit. 

Future Lazy: Thanks for the very detailed explanation of the auto insurance categories. Helped me out a lot as I never have really understood the coverage completely. One question. What part of auto-insurance covers yourself and your passengers when you are at fault? Seems like the only thing listed in your description is Personal Injury which is a very low amount. For me it's only $2500.

You're on the right track here as well. Medical Payments isn't typically tied to the at-fault status of the accident. The insurance carrier I work for goes up to $25,000 per person. Carrier offerings vary. Medical Payments/Personal Injury is usually there as a first line of defense - the ambulance ride, the emergency room costs, the trauma surgery. Medical Payments/Personal Injury limits are typically per passenger - so if you have 4 passengers, your $2500 limit would pay out $10,000 (or up to the cost of their immediate medical care following the accident). That's part of why the limits are pretty low compared to the limits you can get on bodily injury. After the police sort out the accident and assign fault, the majority (or usually all) the financial responsibility shifts to the at-fault driver, typically.  Then the four passengers move to claiming their physical therapy costs, or chiropractic costs, or costs of installing a wheelchair ramp, on the liability of the at fault driver.

I want to reemphasize, though, that every insurance carrier writes different policy. If you don't know exactly what situations are covered for you, get a copy of your policy documentation from your carrier and read through it. If you have questions about it, find an agent or broker to go over it with you. Accidents are situational, and policies aren't always completely standard. Also, standards change, so if your policy is "grandfathered", you might be more or less well protected than you would be with a more current policy. Insurance coverage can't just be cookie cutter from person to person. Clients need to understand what they are and aren't paying for, and it's really not something you just want to trust someone else with. Most people in the industry are tied to quotas, sales pitches and the success of a particular company, which makes it hard to get an unbiased opinion or a correctly written policy.


All insurance is designed to make profit for the insurance company, which is a good reason to avoid buying any insurance that you don't need.

You can absolutely think of insurance as gambling. Where a casino takes advantage of a population that loves risk, insurance takes advantage of a population that's afraid of risk. People often overbuy out of fear - for an umbrella, fear of lawsuits and bankruptcy. Insurance carriers are usually trying to keep 60-70% of the premium they collect, and only pay out 30-40% of the premium they collect, yearly. Most insurers get re-insurance to help with the really, really, really big disasters - think hurricane Katrina, or upcoming climate change disasters.

An Umbrella policy really gives away insurance company strategies - for example, having an umbrella might also require you to raise your auto liability limits to at least $100/$300. This is because the "house" - the insurance carrier - knows that, statistically, auto liability claims don't often go over the 100/300 limit. This is how they can offer umbrellas at crazy cheap prices, like $200/yr for 2 million dollars in coverage, without breaking their banks on claims - the limits on the underlying policies catch most of the claims, and the umbrella stays claim free and profitable. 


On the umbrella policy, that applies to all types of claims (i.e. someone injures themselves on your property, someone is injured in your car, etc) correct? An umbrella policy is not tied to just one side of the insurance (i.e. auto) correct?

Umbrellas offer extended liability coverage for any underlying policy. In other words, it's a higher liability limit for whichever policies you declare within the umbrella. This is generally other specific liability policies, like auto, homeowner's, dwelling rented to others, general liability (for a business), etc.  If you don't maintain what you've declared, it won't be covered by the umbrella. In other words, if you have your auto and your umbrella with State Farm, but then move your auto to Geico, and don't update your umbrella with State Farm, your auto liability is now outside of your umbrella. Many umbrellas have a "self insured retention", which is like a deductible that kicks in if the underlying insurance doesn't have a deductible. Like most policies, exactly what an umbrella does and doesn't do for you varies from carrier to carrier, so you always want to read your policy documentation.

Aggie1999

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Re: Auto Insurance? How much to get? How much do people have?
« Reply #17 on: May 04, 2017, 12:57:28 PM »
Future Lazy and others: Thanks for the reply. I guess I am still confused on how passengers are covered in the car that was at fault. I understand that Personal Injury Protection and Medical Payments cover them. Overall though that is a very small amount compared to the amounts you can get for Bodily Injury. If the driver is at fault and a driver's passenger sues the driver for say $200k, what part of the auto insurance will protect the driver against the passenger claims? Thanks.

Aggie1999

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Re: Auto Insurance? How much to get? How much do people have?
« Reply #18 on: May 04, 2017, 01:48:24 PM »
Thanks to this thread I finally got me motivated to get an umbrella policy. I have been thinking about it for a while. I now have a $2M umbrella policy. It cost me $350 per year. How does that rate compare with others? A $1M umbrella policy would have been $219.

Side note: While looking over my policy I saw I still had comprehensive with a $1k deductible on my two 14 year old cars! That was costing me $190 a year. Dropped that. Also found out I can take a "Driver Improvement Course" online through The National Safety Council which will save me an additional 10% on the auto policy. Will be doing that tonight!

birdman2003

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Re: Auto Insurance? How much to get? How much do people have?
« Reply #19 on: May 04, 2017, 02:05:45 PM »
Would a resident need an umbrella policy if their net worth was negative due to student loans?  I definitely see the need for a doctor without student loans to be protected by an umbrella policy.

merula

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Re: Auto Insurance? How much to get? How much do people have?
« Reply #20 on: May 04, 2017, 03:00:33 PM »
Future Lazy and others: Thanks for the reply. I guess I am still confused on how passengers are covered in the car that was at fault. I understand that Personal Injury Protection and Medical Payments cover them. Overall though that is a very small amount compared to the amounts you can get for Bodily Injury. If the driver is at fault and a driver's passenger sues the driver for say $200k, what part of the auto insurance will protect the driver against the passenger claims? Thanks.

Insurance companies try to limit their payments to passengers to just the PIP/Med Pay. (My personal theory on this is that most people are hesitant to sue their friends and family.) But passengers have definitely been able to collect from the driver's insurance in many cases, although some policies have provisions that say that if you're named as an insured by the policy, you can't. (Meaning that your friends could collect but your spouse probably couldn't.)

Thanks to this thread I finally got me motivated to get an umbrella policy. I have been thinking about it for a while. I now have a $2M umbrella policy. It cost me $350 per year. How does that rate compare with others? A $1M umbrella policy would have been $219.

Side note: While looking over my policy I saw I still had comprehensive with a $1k deductible on my two 14 year old cars! That was costing me $190 a year. Dropped that. Also found out I can take a "Driver Improvement Course" online through The National Safety Council which will save me an additional 10% on the auto policy. Will be doing that tonight!

That doesn't seem unreasonable, but I'd definitely urge you to shop around anyway.
« Last Edit: May 04, 2017, 03:05:32 PM by merula »

Future Lazy

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Re: Auto Insurance? How much to get? How much do people have?
« Reply #21 on: May 04, 2017, 03:12:47 PM »
Would a resident need an umbrella policy if their net worth was negative due to student loans?  I definitely see the need for a doctor without student loans to be protected by an umbrella policy.

If you're getting the umbrella because you're concerned about lawsuits, yes. People can still sue you when you don't have money, or when you have debt. If you don't have assets to pay out, this can usually mean wage garnishment. If someone sues you and the judge awards a million dollars, they may garnish your wages for $15,000 per year. You'll have your wages garnished for 66 years to pay off 1 million dollars. Just a back of the envelope example.

merula

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Re: Auto Insurance? How much to get? How much do people have?
« Reply #22 on: May 04, 2017, 03:18:24 PM »
Would a resident need an umbrella policy if their net worth was negative due to student loans?  I definitely see the need for a doctor without student loans to be protected by an umbrella policy.

If you're getting the umbrella because you're concerned about lawsuits, yes. People can still sue you when you don't have money, or when you have debt. If you don't have assets to pay out, this can usually mean wage garnishment. If someone sues you and the judge awards a million dollars, they may garnish your wages for $15,000 per year. You'll have your wages garnished for 66 years to pay off 1 million dollars. Just a back of the envelope example.

Or you can declare bankruptcy. 

Future Lazy

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Re: Auto Insurance? How much to get? How much do people have?
« Reply #23 on: May 04, 2017, 03:28:06 PM »
Would a resident need an umbrella policy if their net worth was negative due to student loans?  I definitely see the need for a doctor without student loans to be protected by an umbrella policy.

If you're getting the umbrella because you're concerned about lawsuits, yes. People can still sue you when you don't have money, or when you have debt. If you don't have assets to pay out, this can usually mean wage garnishment. If someone sues you and the judge awards a million dollars, they may garnish your wages for $15,000 per year. You'll have your wages garnished for 66 years to pay off 1 million dollars. Just a back of the envelope example.

Or you can declare bankruptcy.

Honestly that's probably the smarter option. Digging bad credit out of a bankruptcy is a much shorter time horizon. :)

Aggie1999

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Re: Auto Insurance? How much to get? How much do people have?
« Reply #24 on: May 05, 2017, 08:25:20 AM »
Liability coverages:
Bodily Injury $250k/$500k
Prop Damage  $50k

UIM / UnderIM
Bodily Injury $100k/$300k

Roadside Assistance

Part of the selection criteria are due to umbrella policy requirements.
Part because I occasionally have nieces/nephews in my vehicle.
I don't want to change my own tire on a busy highway - sorry, that risk is worth $0.90 per month to avoid.

For UIM/UnderIM it costs me $4.25 per month for peace of mind.  Already been hit by an uninsured motorist in the past.

Lastly, the $1M umbrella policy is $11.50 per month.  I am a landlord and want the extra protection and the price is low.

Sounds like your umbrella policy is a decent bit less than the $219 for $1M that MetLife quoted me. Mind saying what Insurance company you use?

Spork

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Re: Auto Insurance? How much to get? How much do people have?
« Reply #25 on: May 05, 2017, 08:48:30 AM »
Liability coverages:
Bodily Injury $250k/$500k
Prop Damage  $50k

UIM / UnderIM
Bodily Injury $100k/$300k

Roadside Assistance

Part of the selection criteria are due to umbrella policy requirements.
Part because I occasionally have nieces/nephews in my vehicle.
I don't want to change my own tire on a busy highway - sorry, that risk is worth $0.90 per month to avoid.

For UIM/UnderIM it costs me $4.25 per month for peace of mind.  Already been hit by an uninsured motorist in the past.

Lastly, the $1M umbrella policy is $11.50 per month.  I am a landlord and want the extra protection and the price is low.

Sounds like your umbrella policy is a decent bit less than the $219 for $1M that MetLife quoted me. Mind saying what Insurance company you use?

If it helps, my Allstate policy is a bit more than your quote.  But I've had difficulty getting insurance on my home from other companies.  (Long story.)