In May 2024, prompted by something random, I did a complete review of all my insurance policies (except for medical) and learned a lot of things about insurance which I should have learned about 10 years ago. Here I've jotted down some of what I've learned in the hopes that maybe it will prompt someone else who was similarly uninformed to learn these things.

In short: If you are American and most of the contents of this page are new to you, you are probably at risk of having your life ruined and should learn about insurance

Being underinsured is very dangerous in the US.

All of the information here is available online, but here's some rough notes on what insurances the average American might want and what they cover. Not legal advice.

• BI - bodily injury
• PD - property damage
• UM - uninsured motorist
• UIM - underinsured motorist

You could also call this the “insurance is fucking boring, give me a tl;dr” section.

I am going to make some blanket statements here that none of the websites that talk about this will make, which will certainly not be true for some people, but will likely be true for most people. Please understand that these are only my opinions and you need to fully understand your own situation to make accurate judgements. Do not believe what you read here.

• If your liability limits on your auto policy are at or below 100/200/50 for both BI/PD and you have no umbrella policy, you are likely underinsured
• If you do not understand the previous bullet point you are likely underinsured
• If you don't have an umbrella policy, you are likely underinsured
• Basically every person whose financial situation lies somewhere between “destitute” and “billionaire” should have umbrella insurance

Let's see, what else…

• Low assets does not make you are safe from huge liability. “Good luck getting blood from a stone” - wrong. Your wages can be garnished for the rest of your life turning you into a slave laborer. Imagine if you had just paid for insurance instead!

Auto insurance pays out in various situations involving motor vehicles. The main categories you will find offered by an insurance company are:

General notes:

• Which specific coverages are required and at what levels, as well as other details, varies widely state by state
• Insurance for things which are under your control is expensive. Insurance for things which are out of your control is cheap.
• To what degree a motor vehicle has to be involved in order for auto insurance to pay out depends on your specific policy, which you should read. The devil is in the details. For example, suppose you are a pedestrian and hit by an uninsured driver. What insurance is going to cover your medical costs? 🤔

Specific notes:

• Many insurers require that bodily injury liability and property damage liability have the same limits
• Medical benefit - this one kicks in before your medical insurance deductible for very specific vehicle-related situations. For example, you are standing on your car in order to clean your gutters and fall off - your medical insurance would cover the medical costs, but the medical benefit from your auto policy could pay out to cover your medical deductible.

In May 2024 I noticed my auto insurance policy had a limit of $50k USD for property damage liability coverage. That's the coverage that pays out if you are liable for damage to someone else's property (usually their car). This seemed rather low since many cars on the road are themselves worth more than $50k, and even a car worth less than $50k may be loaded with property whose value exceeds $50k. You could also hit a house or something else and cause more than $50k of damage to it and be liable for that. In all of those cases, with just $50k of coverage, you would have to pay the remaining costs out of pocket. Depending on the liability amount and your financial situation that could range from annoying to life ruining.

Renter's insurance pays for things like your apartment flooding and destroying your collection of fine paintings and your gaming computer. My understanding is that home owner's insurance is similar but different and has provisions specific to things that can happen to owned or mortgaged homes. If you own a home and are reading this to learn about homeowner's insurance, please stop.

Frankly I don't understand the fine points of renter's all that well and need to read more about it.

Prior to my grand review I did not understand umbrella insurance. Now that I understand I am of the mind that nearly everyone should have it.

In short, umbrella insurance covers you for liabilities in excess of any other policy. Suppose you crash your '99 Camry into a McLaren Artura (about $300k), totaling it, and you have $150k of PD liability coverage on your auto policy. After that pays out you are still liable for $150k. If you do not have an umbrella policy you are screwed and must come up with that $150k out of pocket. If you do have an umbrella policy, your umbrella policy kicks in after your auto policy has hit its limit and covers the excess (up to the umbrella policy's maximum), and you pay nothing out of pocket. So in this case the first $150k would pay out from your auto policy and your umbrella policy would pay the remaining $150k.

You are probably thinking, wow, that sounds very nice. It must be expensive, right? Nope! When I got quotes for them recently, an average $1M umbrella policy was around $150/yr. Relative to an unexpected 5 or 6 figure out of pocket expense, that is extremely cheap. That is why I think most people should have an umbrella policy.

Other notes:

• Umbrella policies are usually purchased in $1M increments
• They typically require that you have certain minimum coverage levels in auto and renters/homeowners policies before you can get one - these minimums can vary widely, shop around
• They only pay out when you are liable for something