We have to pass the bill so that you can find out what’s in it.
This well-known line came out of the mouth of Speaker of the House Nancy Pelosi in 2010 while discussing the health care bill.
It is a kind of circular logic that just doesn’t make sense. You pass bills because you know what they say, how are you going to know how to vote if you don’t know what’s in it?
Dumb statements like this will happen if you put anyone in front of a camera long enough. Remove a few words from the original context and they take on a new meaning.
What she meant was the results of the bill won’t be known until passed (even if that’s not what she literally said). Meaning people will come to see that the worst-case scenarios of the opposition are not true.
My search for an umbrella insurance policy reminded me of this. I want a policy, but can’t read the actual contract until I sign up.
A few weeks ago I wrote Defend Your Money – My Decision to Get an Umbrella Insurance Policy. It gets into why I started on this search. Basically extra protection against potential lawsuits from either rental properties or my family’s normal day-to-day life.
The logical place to start is with the insurance company I already have. I have Geico auto insurance, so asked them if they offer umbrella policies as well.
They do. Ok great, but the important question is whether my rental properties will be covered. Yetisaurus summed it up well in her comment on the previous article (she is a rental property investor and lawyer, so is very qualified to speak on this):
Check whether it’s a personal insurance policy or commercial policy. Be careful about taking your agent’s word for it. They’re often unsure of the distinction and may give you inaccurate info. (Mine did at my last policy renewal. Thankfully I knew better.) Read the policy yourself, very carefully, and/or talk to an attorney who does insurance defense work or a claims adjuster who you know and trust to make sure your policy is protecting you in the way you’re expecting.
When I asked the Geico agent if my rental properties were covered, he said yes and gave some additional details. Sounds good, but I shouldn’t just blindly trust that answer. I need to look at the fine print.
Turns out I can’t read the policy details without signing up for the policy first. Then a couple business days later they will both email and physically mail it to me.
I Said: Sign Me Up!
Why did I agree to sign up? I’m not sure if it covers what I want it to cover, but I went forward with it anyway.
The worst case scenario isn’t bad.
If I find out the policy sucks, I can cancel. They will issue a refund for everything except the days I was covered.
So I’m not really risking anything other than a couple dollars to sign up, then read the policy details.
It is very backwards, but oh well.
The Details I Do Know
The agent said for someone living in California, I can have a maximum of 4 rentals (they can be out-of-state) before they have to refer me to another insurance carrier.
The properties have to be in my own name, not an LLC or other business entity.
I also have to increase my auto insurance coverage. My coverage limits have to be $100k / $300k.
Geico offers a 10% discount on auto insurance when you have an umbrella policy. Let’s drill down into the numbers.
Before my wife and I were paying $1550 a year for $50k / $100k auto coverage. Increasing it to $100k / $300k is an extra $60 a year. With the 10% discount for an umbrella policy, it comes to $1450 a year. So more coverage for $100 less!
The umbrella policy quotes were $207 ($1 million), $342 ($2 million), $497 ($3 million). I signed up for $1 million in coverage.
The net is only an extra $107 a year for better auto coverage and a million dollar insurance policy! Sounds pretty good if it covers what I hope it does…
Side note: I was a little surprised by the price for larger umbrella policies. I expected a much steeper drop off in price. Consider I doubled my auto coverage limits for a 4% increase in price. Doubling the umbrella policy coverage increases the price 65%!
It was cheap and easy to get umbrella insurance coverage through my auto insurance company. Had I known this earlier, I would have signed up a long time ago!
However, the work isn’t done if the policy documents don’t match what the agent told me. More on this to come.
What do you think, are those prices surprising to you? Do you think I’m in for a surprise when the policy document arrives?