Surviving Mayhem

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I like the one where your blind spot is personified. I also like the one where you get to be inside a deer’s head. My favorite one, though, is where they show how to disarm a good guard dog. Yes, I’m talking about the successful series of Allstate commercials, but more importantly, I’m telling you that Allstate is absolutely correct when they warn that “Mayhem is everywhere.” These commercials that you and I enjoy are only funny because the horrible things being shown aren’t happening to us. If they were happening to us and we were uninsured, or even underinsured, we wouldn’t be laughing near as hard.

With Allstate’s ominous warning in mind, let’s take a brief look at car insurance, homeowners insurance, and umbrella policies. This will by no means be an exhaustive or personalized analysis, but it should give you some things to consider to make sure that you and your family can survive whatever "mayhem" life throws your way.

• Car Insurance
• Everyone should have car insurance. Most states even require it. 
• Car insurance is frequently quoted like “50/100/50,” meaning you would be insured for $50,000 per bodily injury, up to $100,000 for total bodily injuries, and $50,000 for property damage. There is no magic set of numbers for me to suggest, but make sure you have a reasonable amount considering your assets. Going with a higher deductible will help keep your premiums reasonable and allow you to increase your coverage amount.
• You will likely want to have collision coverage (what you need when your car collides with another car or object) and comprehensive coverage (think theft, weather, anything but collision). You may also want to consider paying a little extra for uninsured or underinsured motorist coverage (coverage that will look out for you if it’s the other person’s fault, and they don’t have adequate insurance) if it’s not required in your state.
• One other topic to mention here is rental car insurance. Renters frequently go back and forth on whether they should agree to all those additional charges at the rent-a-car desk, but the answer is that you should do your homework before you travel. Many insurance policies and even credit cards already protect you and your rental car. Saying yes to whatever product the rental car agent is offering you could mean throwing away money towards duplicate coverage. Look at your policy or call your insurance/credit card company before your trip so you know what to say at the desk!
• Homeowners Insurance
• Everyone should have homeowners insurance. Your mortgage holder probably requires it, even though state law actually does not.
• You need to think about the value of your home, the value of your personal possessions in your home, and the potential for accidents that could occur in your home when you are considering what size and type of policy you will need. A good insurance agent will be able to help tailor a plan to your specific needs, but insuring your home for 80% or more of its market value or replacement value is not uncommon. In some cases, your insurer will require that you have insurance up to a certain percentage of your home’s value or else they will prorate payments to you in the event that some peril occurs. In English, if the insurance company requires you insure 80% of your home’s value and you only insure 60%, you can roughly expect to be reimbursed for only three-fourths (60% / 80%) worth of your claims!
• If you have a pool, are renting out your home, or have a specific item of particular value like an engagement ring or firearm, you may want to consider additional coverage or higher limits for those items under your policy.
• You want to always make sure your homeowners policy is adequate, but not excessive, so review it at least once a year as property values fluctuate. Just as with car insurance, going with about as high of a deductible as you can afford will help keep your premiums down. You may also want to go ahead and put in that security system you've been considering, as most insurance companies will give you a discount for adding this degree of protection to your home.
• Umbrella Policies
• Umbrella policies (sometimes called PUPs or Personal Umbrella Policies) are up there with sliced bread in my book. Put simply, you need one! These policies have large coverage amounts and are relatively inexpensive. They are usually sold in increments of $1 million.
• I know a $1 million insurance policy may sound crazy to some of you, but you can likely get this type of policy in conjunction with your car and homeowners policies for only a few hundred dollars more a year. The reason you should strongly consider an umbrella policy is because it is very easy for even the most careful person to underinsure a particular peril or inadvertently pass on a certain type of car or home coverage. It’s also possible that if you were sued, the liability could go way beyond your car and home coverage limits or even beyond your current assets if the judgment also applied to your future earnings. I really think it’s worth it if, for a few hundred dollars, you can almost completely erase your insurance risks and put your liability worries at ease!

I know this is a lot to consider, but protecting your and your family’s hard-earned assets is very important. You don’t tug on Superman’s cape. You don’t spit into the wind. You don’t pull the mask off that ol' Lone Ranger, and you don’t mess around with Mayhem!

-Tom