How to save a ton of money and avoid financial disaster

I’m gonna save you a ton of bucks right now, and maybe if you are really unlucky, a few $100,000.

In one of those odd confluences of fate, I heard two really awful insurance related stories yesterday, neither of which had to be so painful.

Learn from them.

Ugly Story One:
A relative has her condo up for sale. Long story short, jewelry was stolen during one of the showings. A few specific expensive pieces were pilfered.

Here’s the insurance info you may not know:  Unless you specifically have a rider for individual items on your Home Owner’s policy, you are likely looking at a $3,000 limit (it varies by policy). 

Not per piece — without a rider, that may be the total limit on personal items. EVEN IF $50K IN GOODS IS STOLEN (Ouch)

Important Lesson:  Buy a rider for specific items worth more than $3k in value: Rings, Bracelets, Earrings, Watches, even Plasma Screens. I assume the same applies to any Art items — paintings, lithos, etc. Of course, save reciepts and place copies in a duplicate locations.

Also, one can never go wrong with an Umbrella Liability Insurance policy; $3 Million is actually prettty cheap coverage.


Ugly Story Two:  You have fire insurance, which you assume covers rebuilding your home in the event of a total loss. Not true. As one of my neighbors discovered, their insurance is for a specific dollar amount — NOT REPLACEMENT VALUE.

So if you bought a house 10 years ago for $300k, your insurance today (likely $150k — it covers the home, not the land) is likely totally inadequate to replace the home in the event of a total loss.

Important Lesson:    Periodically review the replacement cost of your home(s). Get builder/contractors estimates of a total rebuild costs; Upgrade your coverage to full replacement cost.


Pay attention:  I declare today CALL YOUR INSURANCE AGENT AND COVER YOUR ASS day.


Feel free to share insurance horror stories — as well as good coverage tales — in the comments below.


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  1. spencer commented on Mar 24

    Always buy replacement value insurance.

    I had a house fire in 1988 and believe me, it was worth it.

  2. David commented on Mar 24

    Dude, you’re not turning into Suze Orman are you? There’s already one too many of her in this world….

  3. Barry Ritholtz commented on Mar 24


    She reminds me too much of — Aaggghhhh! — my mother

  4. Mark commented on Mar 24

    It’s the new, “softer” Big Picture. Anyone with recipes to share send them in.

  5. slg commented on Mar 24

    Coins & firearms are two other items that need specific riders because the default coverage is tiny.

  6. Jim Harris commented on Mar 24

    I raised the value of my fire insurance, as you suggest, some time back. State Farm subsequently wrote me a letter saying that I was overinsured, noting that a complete loss is actually fairly rare. I have kept the full coverage anyway, but I thought they had a point.

  7. GRL commented on Mar 24

    Suze Orman reminds you of your monther?

    I feel your pain, Bro.

    As for insurance, it’s a total scam. Here in California, the Land of Socialist Utopia (a.k.a, “Fruit and Nut Land,” to all you Kojak fans), insurance is totally regulated in the Name of the People. As a result, there is very little competition, which permits the insurance companies to get away with murder.

    1. Premiums are sky-high, and, in some cases, you can’t get coverage at all.
    2. If you make a claim, one of two things wll happen:
    (a) You will have your premiums jacked up even higher (the best-case scenario) or
    (b) Your insurance company will dump you and you will be blacklisted, meaning, for example, that you cannot get homeowners’ coverage, even though your bank requires it.
    (For the recrd, I have had both (a) and (b) happen.)
    3. What coverage you do get is what I call “swiss cheese insurance,” meaning, it’s full of holes. (“Sorry, but but the policy doesn’t apply because your loss occurred at 3:30 p.m. on a Thursday in the fast-lane on the 405.”)
    3. In the case of earthquake coverage, . . . well, we won’t even go there.

    So, the rule of thumb is, except when it comes to liability coverage (which is supposed to cover you if you get sued, and which you need to max out), you should buy as little insurance as possible. One thing I normally do is to drop comprehensive and collision on my cars after 3 or 4 years, since the insurance companies will generally only pay you for the “fair market value” of your depreciated car. For the insurance you do buy, you should keep your deductibles as high as you can possibly afford (it’s only meant to cover catastrophic losses, right?). You should avoid making claims if at all possible.

    Fail to do these things, and you can plan on dumping 10% of your after-tax income (after tax income is lower in California than in other states) down the insurance black-hole.

    BTW, I notice new home sales are down 10%.

  8. pete Preissle commented on Mar 24

    GRL nailed it…particularly the part about not making any claims unless absolutely necessary. As he/she said, this is a scam industry.

  9. Bob A commented on Mar 24

    and remember, these days your insurance company is going to look for every possible way to get out of paying your claim before they do.

    insurance companies have found they can make a lot more money by hiring attorneys to contest paying claims.

  10. royce commented on Mar 24

    Damn, you mean my homeowners policy doesn’t cover my collection of Faberge eggs? I didn’t see that coming.

  11. Mark commented on Mar 24

    As a former insurance defense attorney, I want to say that that is utterly, completely, totally, and unequivocally… uh, uh, uh…

    Hey! Is that the doorbell?

  12. David Silb commented on Mar 24

    Well in FL we got a whole set of “new rules” when it comes to insurance.

    1st – Windstorm (Not covered by any Policies) must be purchased separate.

    2nd – Very Very Very few Private insurance companies sell windstorm for Homeowners. State enacted a “State Run” Insurer of last Resort Called Citizens. By Law Citizens is not to compete with private insurance companies and it rates are mandated by the State to always be the highest.

    3rd – Citizens announced a 1.3 Billion deficit and will assess all homeowners in the state to make up the difference.

    Most expensive insurer in the state (By Law) and still has a deficit.

    And they wonder why Private insurance companies avoid Florida as if all had the plague.

  13. Barry Ritholtz commented on Mar 24

    My point (and I do have one) is if you have assets, you best protect them . . .

  14. Lois commented on Mar 24

    Just so everyone knows, Geico uses your education and job to determine your premium. They actually charge blue-collar workers more and college-educated folks less. You are not saving a lot of money with them.
    Beware Geico.

  15. GRL commented on Mar 24

    My point (and I do have one) is if you have assets, you best protect them . . .

    I could not agree more completely, which is why I feel the way I do about insurance.

  16. Jason commented on Mar 24

    They actually charge blue-collar workers more and college-educated folks less. You are not saving a lot of money with them.

    As that may be morally questionable, if I’m college-educated with a white-collar job, wouldn’t I save money at Geico?

  17. Lord commented on Mar 24

    You should always check the companies credit rating, and their complaint rating if available from the state. I have seen differing quotes from $93/sqft to $125/sqft or even higher replacement (divide your coverage by the size). The first is probably too low, the last probably too high.

    The latest problem area is water damage (mold). Companies are attempting to limit coverage while states are fighting it. You may not obtain coverage if you have had claims for it.

    Only replacement coverage may not be replacement coverage. All sorts of things like building codes and zoning can affect whether you can actually rebuild and these are not generally coverable.

  18. cm commented on Mar 25

    Jason: My story with Geico is this. I moved from a zip code to a neighboring zip code, by approx. one mile. They informed me that my rate on the renewal would increase approx. twice because the new zip code had soooo much higher accident statistics. I got another, and incidentally better than the previous, insurance quote and called them up again informing them that I terminate. They suddenly went ooooh, somebody made a terrible mistake and of course we will reinstate you as the rate in your new zip code is actually the same as the old rate. Bye, bye Geico!

    Geico was my first insurance in this country for practical reasons, but not for long.

  19. cm commented on Mar 25

    GRL: I also considered dumping my comprehensive insurance, and could not make up my mind, when somebody decided to key my car on almost all surfaces, resulting in a $2000 paint job. That plus a broken windshield earlier, both with a $100 deductible, probably more than paid it off.

    But then I guess everybody has different experiences.

  20. wnsrfr commented on Mar 25

    I got SLAPP sued by a Malaysian Penny Stock co. for bashing them on Raging Bull. To protect my anonymity, etc., I used a very good but very “well priced” attorney, and another plaintiff let me know that my homeowners would cover it.

    My insurance co., ended-up about $18K down, and cancelled my coverage. In Massachusetts that means no other insurance company will write a homeowners policy for you and you go in the “pool”. My insurance went from $695/yr to $2300/yr.

    The best part about it is the line item for personal injury (what my claim paid on) is $18. There is no way to separate personal injury from your general homeowner’s — if the company pays for anything, they refuse to renew, and all others go along.

    My agent told me that this is due to it being a “hard” market, as-in, the insurance companies are having a hard time making money as their investments aren’t keeping-up with payouts. In about 3 years, I re-apply and should be back amongst the “OK” risk pool.

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