Personal umbrella insurance is additional liability insurance, designed to pay out on top of your existing auto and homeowner’s/renter’s insurance policies. For example, you may only have $300,000 in liability coverage on your car insurance. If you are hit with a claim of $1,000,000, you would be on the hook for $700,000 yourself unless you had an adequate umbrella insurance policy. Here is a diagram explaining this from MSN Money:

This was taken from a previous post of reasons why I have umbrella insurance, which included some examples from news clippings. I won’t expand too much further here.

In a recent Bogleheads post, forum member Quasimodo shared an informative CBS Marketwatch article that included several more real-life examples where umbrella insurance coverage kicked in to save the day. Read it for the actual stories, but here are a few example scenarios:

• You are an car accident with multiple people with serious injuries, and the medical bills are astronomical.
• You are in a car accident on the freeway involving a semi-truck carrying $750,000 of cargo.
• An acquaintance gets injured at your house.
• You are a chaperone on a field trip and one of the kids hurts themselves.
• You host a party, someone else brings alcohol, and someone underage gets hurt or DUIs.
• Your son or daughter borrows a friend’s car, and wrecks the car or injures someone.

The article also presents some good questions to ask about coverage details and possible exclusions, which I will need to follow-up on. Mrs. MMB and I pay about $300 a year for $2 million of umbrella insurance covering two cars and a homeowner’s policy. We find it a good value for the peace of mind it gives.

You can get a third-part insurer to be the umbrella over differing auto and/or homeowner’s insurers, as long as you have the required liability amounts underneath. I wouldn’t fall for the argument that if you don’t have significant assets – especially as compared to your current liability limits – then you don’t need umbrella insurance. If you have $100,000 and are covered for $100,000, what if you are found liable for $200,000? You’d still be completely broke – and how long did it take you to accumulate that in the first place?

Here is a chart of average auto insurance rates by state, via AARP.com, shaded by overage ranges. Click for an interactive map with more details and a ranking.

I wonder why rates in Louisiana are so high. $2,500 per year? Is it fear of flooding? Laws that encourage suing other drivers?

From the site: “Rates were calculated for more than 2,400 vehicles for model year 2010; based on a 40-year-old single male driver who commutes 12 miles to work; includes $500 deductible on collision and comprehensive coverage.” I wish they also shared how much liability coverage they chose, as that is the largest component of my premium.

The US Department of Labor estimates that about 1 in 7 claims to employer health insurance plans are initially denied. A patient advocate says that she wins 80% of appeals. Yet only 4% of denials are appealed. These stats are taken from the AARP article The Health Claim Game. Are insurance companies relying on the “hassle factor” to help their bottom line? (…reminds me of The Incredibles and Insuricare)

Whether you think so or not, dealing with health insurance claims can be a nightmare. At the end of this article, a handy flowchart is provided which walks you through the “claim game”. Here’s the text:

To Make Insurers Pay

WHEN YOUR CLAIM IS DENIED…

1. Don’t pay the bill.
2. Get a reason for the denial in writing.
3. Review and follow your plan’s rules.

…Make the easy fixes…
• Missing information? Fill it in.
• Coding mistake? Have your doctor fix it.

…And assess other reasons for the denial.
Health care reformers want to end these exceptions, but for now they are hard to overcome:
• Preexisting condition
• Lifetime-benefit cap
• Change of employer, so coverage was delayed

These may be worth challenging:
• No network facility or physician was available
• Drug wasn’t FDA-approved for your illness
• Treatment was deemed unnecessary or unproven

WHEN PREPARING AN APPEAL…

1. Check the back of your denial notice to see how long you have to file—it’s usually 180 days.
2. Gather objective evidence of medical necessity, such as test results and prior failed treatments.
3. Gather journal articles showing the treatment is safe, effective.
4. File the request in writing (certified mail, return receipt).

IF YOU WANT HELP, SEEK OUT…

• A nonprofit patient advocate (your state’s insurance regulator or a disease association can suggest names)
• A lawyer if there’s a large sum of money at stake and you might end up in court.

IF YOUR INSURER STANDS FIRM, YOU CAN SEEK AN INDEPENDENT REVIEW…

If yours is a fully insured plan—that is, the insurer pays the claims. (Though insurers administer all kinds of health plans, roughly half are self-funded, meaning your employer pays the claims.) You have a fully insured policy if you buy insurance on your own.

To appeal a final rejection by a fully insured plan…
Go to your state insurance regulator.

To appeal a final rejection by a self-funded plan…
You will likely need to go to court, though your state insurance regulator can sometimes jawbone on your behalf.

The article also mentions a few potentially helpful groups to ask for further assistance – the Medicare Rights Center, the Patient Advocate Foundation, and Advocacy for Patients with Chronic Illness.

After reading about the recent flooding in the Nashville area, I again find myself reminding people to consider optional flood insurance. First, some background. Most homes that are in 100-year flood plains are required to buy flood insurance. This is because the banks know that this designation means that you have a 26% chance of a 100-year level flood within a 30 year span.

However, even if you are outside these areas, you may still be in danger of a serious flood. Often these areas are shown on flood maps as 500-year flood plains. Many people read this and think something like “…last flood was in 1909, we’re good for another 400 years!” Actually, having a 0.2% chance of a flood each and every year works out to a 6% chance of occurring at least once over a span of 30 years, or 1-in-17. According to an article from from CNM News:

The flooding in Nashville has been deemed a “500 year” flood, as the Cumberland River rose to over 51 feet (floods occur at 40 feet). The flood waters took over portions of Downtown Nashville, as well as the Opryland area.

What if it happens to you? Most homeowner’s insurance policies don’t cover flood damage. More from BusinessInsurance.com:

The National Flood Insurance Program, which is run by the Federal Emergency Management Agency, may cover some losses experienced by businesses and homeowners that purchased the coverage. However, Mr. Costner and other insurance experts said flooding reached areas that are not federally designated flood zones. According to FEMA, Nashville and Davidson County, Tenn., had 4,100 NFIP policies in force as of March.

All of Nashville only had 4,100 policies? This means that not very many people were even required to buy it. This USA Today piece tells the stories of several riverfront homes that weren’t covered.

Tiffany Wiggers says she doesn’t have flood insurance and, in fact, she paid $15,000 extra to be closer to the river. “Everybody on this side of the street, we paid lot premiums to be near the river: $15,000. You have to laugh to keep from crying,” […] She says she and her husband questioned the real estate agent, builder, lender and an insurance agent about flood insurance, but all said it wasn’t necessary. “They all said, ‘You’re not in a flood plain, so you don’t need it,’ ” recalled Wiggers for USA Today, who was taken from her home via rescue boat. “I was like, ‘FEMA and the bank said we won’t need it, so we’re in the clear.’

If you haven’t already, take some time and check if you are in a flood plain here. But it could be that the any flood maps are outdated or inaccurate. Add in some common sense if you are near a body of water. In the end, you may consider buying flood insurance even if you are not required to by your mortgage lender. We carry a modest amount of optional building coverage from the NFIP.

Argh… they got me. I usually filter out PR emails, but I went ahead and took the Insurance Intelligence Quiz by the National Association of Insurance Commissioners (NAIC). According to them, a recent survey found Americans only answered an average of 4 out of 10 questions correctly. The quiz turned out to be reasonably quick and the questions weren’t horrible, so I figured I’d share it for the semi-competitive folks out there that want to test their insurance knowledge.

Quiz Spoilers below…

I ended up getting 8 out of 10 correct. I did not know that auto insurance was not required in all 50 states. Well, technically not required in New Hampshire and Wisconsin. I found this information from Carinsurance.com:

New Hampshire state law does not require minimum auto insurance coverage. However, if you are at-fault in an accident without having insurance coverage you will be required to get car insurance. In this state it is advised that if you own a vehicle you get at least some type of bodily injury coverage, in addition to $25,000 worth of property damage.

Many people believe that Wisconsin does not require insurance, which is true however you must have other means to pay for damages you cause if you are at fault in an accident.

Wisconsin has a financial responsibility law that pertains to any motorist licensed to drive in Wisconsin. This law is designed to make sure anyone operating a vehicle has insurance or enough money to pay for damages to others that may have been caused by a motor vehicle. These requirements may be met through an automobile liability insurance policy, a surety bond, personal funds or a certificate of self-insurance.

I also missed the 100/300/100 question, which is bodily(per person)/bodily(total cap)/property damage. This is a quick way to check up on how much your insurance covers in the even of an accident. I used to think my insurance was pretty cheap, only to find out it was because my coverage limits were near the state minimum.

With unemployment still at historic highs in many areas, a common concern is what to do about health insurance. A friend of mine was recently notified that he was going to be laid off, and so we talked about some of the options out there, and I told him I’d do some research about it since I had recently looked into an individual health plan.

About COBRA, Stimulus Bill Subsidy
COBRA gives people who lose their jobs the right to continue coverage under their group health plan. The catch is that workers must pay the entire premium themselves (plus a 2% administrative fee), which can be a lot higher than just the partial payment the employee usually pays. According to this WSJ article, the average cost of COBRA coverage for a family is $13,000 a year. In my friend’s case, he was surprised to see his corporate employer paid nearly $600 a month for his health insurance.

Keeping insurance continuity is important beyond immediate health concerns, because if you don’t have health insurance for more than 63 days, then even group health insurance plans can reject you later due to any pre-existing conditions. That can be a total disaster.

However, in February 2009 the “Stimulus bill” included a provision that would cover 65% of the COBRA premium for up to 9 months for people who qualify. You must have been involuntarily terminated between 9/1/08 and 12/31/09, and also not exceed an adjusted gross income over $125,000 for individuals ($250,000 for married couples filing jointly). According to this IRS page, there is no paperwork or extra tax return details to deal will; you just pay the 35% to your employer and let them handle it. In my friend’s case, this would lower his required payment about $210 a month for the next 9 months. That’s quite a discount!

Individual Health Plans
Still, if you are relatively young and in good health, you should be able to get a much cheaper health plan from many insurers. Group health insurance by definition has to cover everyone in the company, and may cover a lot more than you’d be willing to pay for yourself. However, you’ll have to familiarize yourself with some of the terminology. Here’s another quote from the WSJ article:

“My beef with Cobra is that it is the same gold-plated plan that my employer offered, when I would settle for copper or tin,” he says. Instead, he bought a catastrophic health plan, which covers only major hospitalizations, for $100 a month.

One of biggest comparison sites for individual plans is eHealthInsurance.com, which has a separate section on short-term health insurance plans. From their site:

Short-term health insurance plans provide you with coverage for a limited period of time, and may be an ideal solution for those between jobs or those waiting for other health insurance to start. Typically, short-term plans offer coverage up to six months, although some plans may offer coverage up to 12 months.

Indeed, I found basic 6-month plans starting at $50 a month, though they come with some hefty deductibles. As quote above, the idea here is just cover catastrophic events.

If you see the tab labeled “Help Me Choose”, I found the questionnaire there really helpful in narrowing down the choices. I figured I would want a temporary plan that would basically cover everything over, say $1,000-$2,000, but everything below that I would pay for, including doctor’s visits. The recommended plan ended up being a regular individual plan (not short term) that only cost $120 per month.

The annual deductible was $1,800, but I with 0% co-insurance (nothing above the deductible) as opposed to the 20-40% co-insurance on other plans. So the most I’d be out-of-pocket would be $1,800 a year. If there was no 65% subsidy, this $120/month insurance would beat out the $600/month COBRA option easily. Even now, it’s close. I could even add on a health savings account (HSA) and put more money away tax-deferred.

(The above is just an example. Your actual comparison results are dependent on age, sex, and location.)