Advanced Personal Finance

Want a way to save money on auto insurance?  Now there’s a new way. 

But I would not recommend it.

Auto insurance rates are expected to rise this year, ending a streak of several years of modest decreases.  I found that a little surprising, given that miles driven by US drivers is decreasing.  In any case, if you find your bill going up, there’s a new way to bring it back down…just agree to be spied on.

Several insurers are offering drivers the option to decrease premiums by having their driving behavior tracked.  Typically what happens is you agree to have a small device added to a computer port below your dashboard.  Every so often, the insurance company downloads the information collected by the device and adjusts your premium based on how and how much you drove.  Some of the devices track miles driven, average and top speeds driven, and how hard you apply the brakes.  The idea is to pay more ‘granularly,’ based on your particular driving habits.

There are a couple of big insurers doing it:

• Progressive - their program is called MyRate
• GMAC Insurance - it coordinates with OnStar to run its program

Both companies assure you that your information is completely private.  Sure.  I would only recommend participating in these programs under one circumstance - you own an OnStar-equipped vehicle.  If you do, you’re being monitored anyway.  You might as well get a discount on your insurance for it.

The real problem I have with these programs is that right now they’re optional.  But optional, successful trials have a way of becoming mandatory real soon.  And I’m not in a hurry to have my every driving move monitored.  This from a guy who drives approximately 50 miles a month and would surely benefit from participating in the program.

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The US needs to join the rest of the developed world and institute a single-payer healthcare system.  There, I said it.

Forget the statistics on uninsured Americans.  Forget the fact that Americans, despite repeated proclamations to the contrary, do not have the ‘best medical system in the world.’  Forget the skyrocketing cost of care.

Forget all of that.

I’m a very well insured American and I want a single-payer system if for my own convenience alone.  I realize how that sounds.  But the fact is, people do not respond to logic when it comes to topics like this.  That’s why simply stating the fact that there are 47 million uninsured US citizens (many of whom are children with working parents) doesn’t move people to action.  You have to break it down to a personal level and that’s why I’m saying this.

How did it come to this?

So why am I saying this now?  The fact is, I’ve believed in the idea for some time, but recent personal events have just solidified my belief.  What happened?  We, as a family, have had to deal repeatedly with ‘the system.’  And I use that term loosely.

The back story is that my wife had minor surgery.  Now the bills have started coming.  Nothing unusual about that, you say.  The thing is, we shouldn’t be getting any bills.  Recall that we are very well insured (by which I mean we pay a modest copay and any reasonable medical expense is covered without deductible).

The parade of idiocy begins

First, when we check in for the surgery we are asked to pay a copay four times what we expected.  This despite our checking several times on the particulars of the copay, coverages, and networks.  Ok - what are we going to do, cancel the surgery?  We pay, assured we’d “get a refund if it is determined this amount was incorrect.”

Thankfully, the surgery went well and everything is fine.

The first bill to come was from the anesthesiologist.  I sort of expected this because they sometimes don’t have the insurance information to bill.  The hospital and/or surgeon doesn’t share this with them.  Ok - we call and straighten it out.

Then the surgeon sends one.  What the???  Turns out they have billed insurance, but haven’t received a response, thus the bill to us.  Is this delay (about a month) unusual?  Not at all, the doctor’s billing person tells us.  So why the bill?  They send them out (reading “Pay this amount now”) even when insurance has been billed.

Back to the anesthesiologist.  They send a bill again.  My wife calls.  “What’s up with the bill?” she asks.  Oh, the hospital hasn’t billed the insurance company yet, so they (the insurer) has no idea why an anesthesiologist is billing them.  What?  You mean people don’t just go and get put under for fun?

It’s not unusual

This sort of thing is typical in the American healthcare ’system.’  This is how it’s supposed to work!  This is ridiculous. I don’t know medical billing.  I can’t read billing codes.  I don’t know the forms and rules.  And I actually don’t entirely blame the doctors’ billing offices.  Think about it.  How are they supposed to keep track of the billing codes and regulations for dozens of medical insurance plans?

Would there be headaches in a government plan?  Absolutely.  Would it solve these problems?  Not completely.  I don’t care.  At this point, I think the positives of such a plan outweigh the negatives.  Perhaps naively, I look to the next Congress and President to do something about it.  Too bad they probably won’t. 

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If you’re sued and lose, can they take your IRA?

That was the question a reader posed on one of my older posts, Who Needs an Umbrella, about umbrella insurance policies.  Here’s the question from J. Brown:

“The majority of my assets are in retirement accounts (IRA’s, specifically). I used to have an umbrella policy, but was told that if I were sued, the money in my IRA could not be looked at to satisfy any judgment. Is this true? Where can I go to find additional info on this?”

What’s an umbrella policy?

Before I get to the answer, let me quickly review what an umbrella policy is.  An umbrella policy is an insurance policy that provides liability protection beyond that offered by other policies.  The ‘other policies’ are usually homeowners and auto insurance.  If you look at your auto policy, you’ll see a maximum liability amount.  If a judgment is entered against you beyond that amount, you’re on the hook for it (assuming you have that level of assets).

That’s kind of confusing, so let me use an example.  Let’s say I have $100/$300 coverage through my auto policy and don’t own a house.  I have assets of $150,000 and cause a serious accident that results in a lawsuit.  I lose and the plaintiff is awarded damages of $140,000.  My insurance company pays $100,000 of that award and I’m on the hook for the rest.

Now if I had an umbrella policy, I wouldn’t be writing that $40,000 check.  For a few hundred bucks a year, an umbrella ups your liability coverage to $500,000 and up.  You can get millions of dollars of coverage if you want.  But remember you only need an umbrella if you have a lot of assets - enough to warrant the coverage.

So can they get my IRA?

So this brings us to the question.  Is your IRA included in your assets?  In my example, what if all of my $150,000 in assets is in an IRA.  Can it be seized?

The answer, as with everything law, is “it depends.”

It depends on where you live.  State law determines whether these assets are included or not.  That’s not very helpful, so here’s a great resource that gives the answer for all 50 states and DC.  Look for ‘IRA and Pension Plans.’ 

I didn’t look at all 50 states, but in every case I checked, the answer was, No - IRAs are not counted and cannot be taken in a lawsuit.  If you live in California, hire an attorney - I couldn’t figure out the answer.

Now let’s all hope this never comes up for us.

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I’m learning all kinds of marginally-useful stuff since we’re selling one house, buying another in a different state, and moving all of our stuff there.  It’s that last one I’m going to write about in this post.  Specifically, I’m going to tell you what you need to know about making sure your possessions are properly insured during a move.

Insurance during our move was one among the 1,237 things to think about during a move that I didn’t think about.  Besides the fact that insurance in general is about as exciting as watching geriatric water ballet, it’s often byzantine in its details.  So here’s what I’ve learned.

Your possessions are most likely not covered during transit by your homeowners insurance.  This makes sense if you think about it.  You aren’t insuring your old place any more.  The stuff isn’t actually located in either house.  For a short period of time, it’s quite possible you don’t actually own a house at all if you haven’t closed on the new house prior to closing on the old.

The mover is only responsible for certain situations and only up to a point.  The standard amount a mover is on the hook for is $0.60 per pound (it’s called ‘valuation’).  Except for your angelfood cake collection, nothing you own can be replaced at sixty cents on the pound.  Besides that, the liability of the mover is limited to certain situations.  For example, if the truck is broken into, you may not be covered at all.

In many cases, you need to buy third-party moving insurance.  Often the mover will offer this through a third party, but pay attention to cost and exclusions.  Your homeowners insurance company may very well offer to sell you an inexpensive policy to cover the gap between house coverages.  Make sure you get replacement cost coverage if at all possible.

So before a move, do some homework and find out if your insurance covers your stuff during a move and, if so, how well.  It might make the difference between a minor inconvenience and an unmitigated disaster.

Additional resources:

Bankrate article on moving insurance

Explanation of types of moving insurance

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Homeowners insurance policies specifically exclude flood.  All of them.  Yours, too.  That’s something a lot of people don’t know and find out the hard way.  You don’t have to live on the coast to be the victim of a flood, either.  My wife has a pretty tragic story from her childhood about flooding.  It’s served as something of a lesson for us as we buy the new house.

When my wife was little, her family lived somewhat near (within a mile) a river.  Thing is, to look at the river, you’d never even consider the possibility of it overflowing its banks.  The water is way down a drop-off - probably 15-20 feet below the level of the town.  Her parents actually inquired about flood insurance, but were told that the area was in a hundred year flood plain and they couldn’t buy flood insurance.

I guess it was the hundredth year because the unthinkable happened and after a particularly heavy rain storm, the river rose and didn’t stop until half the town was underwater.  My wife’s childhood home was ruined.  When the water receeded, the first floor was buried in mud.

Her parents’ homeowners insurance, of course, did not cover the damage.  Homeowners insurance policies - all of them - specifically exclude flood.  Yours, too.

Her family got through the ordeal through a combination of very hard work, luck, and generosity, but it was a lesson my wife never forgot. 

Flash-forward to our recent home-buying. 

Our new house is within several hundred feet of an intermittent stream.  Right now the area’s in a drought, so there’s nothing there.  But it doesn’t take a lot of imagination to picture that ‘little stream’ growing into a rapidly-expanding lake.  In fact, the area is peppered with lakes of various sizes.  Not only that, but being on the eastern part of the country, we’re within reach of hurricanes.

Flood insurance basics

Here’s what I learned when I inquired about getting flood insurance for the new house.

• Flood insurance is federally regulated.  That means the government sets the rates - everybody charges the same thing for the same level of coverage.  Here’s the FEMA website for flood insurance.
• Your home has a 26% chance of being damaged in a flood over the course of a 30 year mortgage compared with a 9% chance of damage by fire.
• One third of claims paid last year were in ‘low risk’ areas.
• There are three categories of risk -  low to moderate, high, and high-coastal.
• There is no place that can’t be insured against flood.
• The maximum insurance you can buy through FEMA is $250,000 dwelling and $100,000 possessions.  If you want more, you go to independent insurers for what’s called “excess coverage.”
• There’s a 30 day waiting period for coverage to begin.  It can be waived if you haven’t closed on your house yet.
• Homeowners and renters both can buy coverage.

We got the maximum coverage and it was pretty reasonably priced - $352/year - since we’re in a low/moderate risk area.  The same coverage for a coastal dwelling is a whopping $5,358.  There’s a great reason to reconsider that beachfront property, huh?

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