insurance question

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Do you have a reading problem? Or is it a more serious cognitive deficiency? The future is unknown (at least to mere mortals), and we cannot precisely prepare for all eventualities. That does not mean we have no moral and legal obligation to make reasonable preparations. And nowhere do I maintain otherwise.

A confidence interval is a statistical measure of the reliablity of an estimate. I'm pretty sure that's not what you mean. People make judgments based on costs and perceived risks.

Congratulations. You've just won an argument with yourself. You're not having this argument with me, anyway.

Nobody claims a right to harm others. Nobody claims that you shouldn't obey your state's laws to carry insurance to compensate victims of your negligence. The question is how much you should pay to cover that unknown. Your net worth is certainly relevant to how much insurance you can afford. This seems blazingly obvious to me.

Well, then I guess it's a good idea I'm not arguing that, eh?

The OP was considering upping his coverage to the amount of the worth of his house, $800K. This is forty times my state's minimum. Not enough for you?

Thanks for sharing. Now answer my question: How much coverage should the OP buy?
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on 7/28/2007 5:24 PM Deadrat said the following:

For the last 22 years, I have had auto and home insurance with the same ins. company. I also pay extra to have an umbrella policy for $1,000,000 that covers both of those policies. I don't have flood insurance and don't need it, since I am 400 feet above sea level and nowhere close is anything higher. If I get a flood out, someone better be building an ark ( I figure I'll be safe even if the polar ice caps melted). :-)
--

Bill
In Hamptonburgh, NY
  Click to see the full signature.
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<snip>


I'm not sure what to say here. Thanks for sharing?
I can't see what your not needing flood insurance has to do with this thread, but congratulations on not needing to pay yet another premium.
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Deadrat writes:

Driving uninsured or underinsured is exactly that. Claiming a right to harm others, by harming someone (by accident) and then forcing them to pay the harm instead of you. It may have been an accident you didn't mean to cause, so you didn't claim the right to cause the harm itself, but you did deliberately arrange to stick the innocent party with the bill if an accident happens, so you are "claiming a right" to harm others.

Everyone has to make that judgment personally. I would hope that if someday I crippled a child, that I could at least pay for that child's recovery and support. Otherwise, I shouldn't be risking such a possibility.
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Richard J Kinch wrote:

No, driving has nothing to do with harming others, unless possessing firearms "is exactly that" too, jackass.

Nope, no one has claimed a right to harm others.

What does that have to do with driving?

What accident?

Correct, that's exactly what he said.

What innocent party? What bill? What accident?

Nope, you're just stammering in the wind again, moron.

So you don't drive at all then, eh?
What if you crippled 50 children in a school bus, you got enough converage to rehabilitate and support 50 children in wheelchairs for life, eh moron?
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UltraMan writes:

It is a statistical risk, not a certainty, of causing harm. But it is still harm.
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Seriously, now. Do you have a reading comprehension problem? Or is it a more serious cognitive disorder?
How can I make this clearer for you? Do I need to type more slowly? Something else? Just tell me. I'll try to accommodate you.
Nobody is claiming a right to harm others. Not me. And not anyone else on this thread. Is that clear?
Nobody is claiming a right to drive uninsured. Not me. And not anyone else on this thread. Is that clear?
Nobody is claiming that it's OK to drive underinsured. Not me. And not anyone else on this thread. Is that clear?
The question is how to determine at what limit you're no longer underinsured. For any reasonable coverage anyone might obtain, it is always possible to posit an accident that would exceed the limits of that coverage.
<bloviation snipped>

Oh, they do, do they? And do they have a right to make that judgment personally without your claiming that no matter how much insurance they have, they're still claiming a right to harm someone?

Hope in one hand, and shit in the other. Tell me which fills up first.
You *hope* that you could pay for that child's recovery and support, do you? And which hand are you gonna offer the crippled child when you can't pay for that child's recovery and support?

But apparently you do, since hope is all you've got to offer.
Let's get back to the OP's question: "If I'm worth at least $800K, should I carry that much liability coverage or should I carry more?"
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Deadrat writes:

I agree.
My point is that the harm is statistical, and so is the coverage. You have to make a personal and moral judgment about what coverage is proper. There's no a priori "correct" number, although there are certainly incorrect coverages. As to the basis of that judgment, I can state that zero coverage is incorrect, as is "insure your net worth". The net-worth figure is an easy number to throw. It's the lazy and selfish man's excuse for not thinking about it like a responsible adult. Likewise the state-mandated coverage, which is typically absurdly low.
Let me compare it to dam building. That's a concrete engineering decision, how high to build a dam. Higher is more expensive but more confident that it won't be flood breached. No matter how high you build a dam, some day a flood will come along high enough to breach it. You have to make a judgment about risk versus cost. Likewise you don't know in advance how much insurance you'll need in the future, but you must make a judgment as to how much diminishes the uncovered risk to a small enough risk. In the case of auto accidents, the cost of a catastrophe is potentially to others, rather than yourself, and you shouldn't use that fact to selfishly wave off the need to insure against it, as the OP was advised by a smarmy insurance "agent" (salesman).
Higher coverage is marginally cheap. I think it's worth it.
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Another point, and the one your're missing, is the difference between a statistical likelihood of harm and harm itself. The latter is damage, and the former is not. As I pointed out in a previous post, I doubt you'd actually be happy with a statistical approach. After all, what are the chances that the OP will cause $800K of harm in a year?

And yet another point you've missed. Whether the net worth number is incorrect depends on the net worth.

The OP was talking about at least $800K. As I pointed out, this is forty times my state limit. The simple fact that the OP is considering using his net worth may be selfish but it doesn't mean he's being necessarily being irresponsible.

A dam. It's a *concrete* engineering problem. For someone so judgmental and humorless, you're cracking me up.

I get it. A flood. From a dam. *Wave* off.
Stop it. You're killing me.

*Higher* coverage. Like the *higher* dam. Next you'll tell me not to *breach* the social contract with my fellow drivers. Please. Stop.

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Deadrat writes:

No difference in this regard. You are morally responsible for the consequences of your actions. It matters not that the consequences are statistical or accidental, versus certain.

And I suppose you believe the fool's idea that a stopped clock is right twice a day. In fact it does not correlate to the correct time, nor does net worth correlate to the harm you can cause with an automobile.
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Do you just not read what I post? Or do you just not understand it? Harm and the statistical likelihood of harm are different things. Once harm occurs, of course the probabilities don't enter into it.

And I suppose you believe that wasn't a nonsequitur. You must, although I fail to see how.

And I'm guessing you don't know any more about correlation in measure theory than you do about chaos theory.
Of course, net worth is independent of the harm you can cause. But if you're insured to your net worth, then the adequacy of your insurance is highly correlated to your net worth. Very wealthy people (who would thus carry a high level of insurance) would have adequate coverage; very poor people (who would thus not carry much insurance) would not have adequate coverage.
What's so hard about this?
Whether a person insured to his net worth is underinsured depends on what his net worth is.
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Seems some of you may have drifted off point, but here's my story and while I don't know if this applies in other states (I'm in Washington State) this is what happened to me from an injured person's point of view:
I was rear-ended while stopped by a drunk traveling an estimated 80mph. It fractured my neck, hip and sacrum. I've had eight surgeries to regain partial use of my legs and will live the rest of my life in pain (or in a stupor from the pain meds.) There is much more loss than I just described but let's just leave it at what I said.
My lawyer explained to me that I had a choice- either I could accept what the insurance companies (mine included) were offering me (policy limits, both) OR I could go after the person who hit me's assets, but not both. To put it another way, when I accepted the insurance settlement, I would have to agree that it was full payment for my injuries OR take my chances ferreting out well-hidden assets from an upper-middle class family - I was also reminded that the wife, who didn't hit me, would be able to protect nearly half of their assets in this community-property state. The insurance policy limits would be eaten up promarily by medical bills, then the next big chunk went to the lawyers (who, I must say earned it in this particular case - but I have little empathy for lawyers) and then I would get what's left. My lawyers negotiated the medical bills down significantly on my behalf, but I was left with a little less than $100k out of a million dollar settlement.
That's not much. I think the important part to remember here is that in order to get that 1M settlement I couldn't go after more assets. I well-know that the person who hit me didn't have 1M in assets. Fortunately, I had recently upped my uninsured motorist limits at the suggestion of my insurance company (GEICO) as well as my medical. (This really saved me in many respects and I can't say enough good about how GEICO treated me as a human being.)
Like I said, I don't know if this is different in other states, but I wonder what it might have been like had the person who hit me had a minimum liability policy (25k!) what decisions I might have had to face. Furthermore, the person who hit me filed bankruptcy - and my lawyers told me that it did NOT protect them from liability in my case since he was drunk. I don't know the law, and I went with what my lawyers advised me at the time (they are a well-known top-drawer legal firm in Seattle.)
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jeffreydesign writes:

So the drunken insect that did this to you gets to go back to his normal life. I don't know how you can relate your story so coolly. I could only hope in the eventual justice of a day of judgment.
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Deadrat writes:

There are different in some regards and not in others. Not different in you being morally responsible for the consequences of your actions. If you drive and cause an accident, you are morally reponsible for the property damage and personal injury you cause. That liability has exactly nothing to do with your net worth. And so your insurance limits likewise ought not to be held down to your net worth. Your ability to hurt people with your car has no correlation to your net worth. You ought to be insured with enough limits to justly compensate those you hurt in the event of an accident.
I do say "ought". The fact that people get away with causing accidents and sticking victims with an inadequate insurance settlement is unjust to the victims. It works out very "well" for the irresponsible.
To say "buy insurance to cover your net worth" is to say, "buy just enough insurance so you can stick your victims with the bill and keep all your stuff". That's a despicable attitude.
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OK, this is where I usually ask whether you have a cognitive impairment, and ususally it's just an insult. But I'm beginning to think it's a serious question. It is intellectually useful to understand the defintions of the things under discussion.
A statistical likelihood of harm (or anything else) is a mathematical funtion. Legal harm is damage done to another, usually quantifiable in monetary terms. The former is a useful tool in talking about the latter, but they are entirely different things; they are not similar in any "regards." You can't think clearly about the insurance problem under discussion unless you understand the definitions.

Moral responsibility attaches to the actions one takes or fails to take.

Do you suppose that anyone in this thread disagrees? It's a serious question. I can't tell from your posts.

Let's be done with the moral responsibility by adopting a code that says we're morally responsible for all damages we cause, even though I'm not sure that has an operational definition.
On to the real world. If we expand net worth to include the worth of future income, then your actual liability cannot exceed your net worth. You simply can't pay more money than you have or ever will have. Your actual liability cannot have "exactly nothing to do with your net worth." It is limited by your net worth. Your statement is so obviously false that you must mean something other than what you write.

You state this as a univesal rule. And again, it is so obviously false as a universal rule, that you must mean something else. Counterexample: if my net worth exceeds the amount of damage I can forseeably do, then insurance limits set at that net worth are just fine by definition.

Do you suppose that anyone in this thread disagrees? It's a serious question. I can't tell from your posts.
The correlation we're seeking here with net worth is not the ability to hurt someone -- both rich and poor careless drivers may cause injury independent of their means. The correlation is between the ability to compensate the people you injure and net worth. Rich people have more ability; poor people, less.

Is this the crux of the problem? Have your taken a moral rule and combined it with your confusion of harm and likelihood of harm? Is the necessary consequence that you believe that we're all morally bound to carry enough insurance to cover the worst accident that we could possibly cause?
I ask because I sincerely do not know from your posts.

It's unjust? So we're back in the moral realm, right?

It does? Since we're in the moral realm, how do you know this?
Even in the legal arena, how do you know this? If the judgment garnishes the plaintiff's wages for life, how is that working out "well"?

And if your net worth (and thus your insurance limit) is enough to pay your victims' bills in full?
I haven't seen you answer this question. And I suspect the reason goes back to your confusion of probabilities (likelihoods) and actualities (harms).
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Deadrat writes:

Perhaps this summarizes your confusion. Liabilities have nothing to do with your ability to pay, and certain can exceed your net worth. You can be indebted beyond your means. The practical reality that the creditor will never get paid does not diminish the liability. Specifically in a civil suit, the judgment creditor is issued a judgment for a debt of a certain dollar amount that is supposed to be fair, and that dollar amount has no relation to the judgment debtor's means. Indeed, most judgments go uncollected. Asbestos liability and the OJ Simpson civil case are famous examples.
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I am often confused. This isn't one of those times.

But the actual amount that you pay cannot exceed the amount that you actually can pay.

This legal liability beyond your means, present and future, is weightless now that we've abolished debtors prisons.

But it certainly diminishes the amount that you actually pay. Which is the point of this whole thread. How do you prepare for the possibility that your ability to pay what you owe exceeds your legal liability, i.e., the amount the law says that you should pay?

Thanks for sharing.
Perhaps now we can return to the issue of how to prepare given the possibililty that without preparation, you will never be able to pay what you owe.
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I think this is an apples/oranges discussion.
Of course you can't pay more than you actually have (or can get), but that doesn't mean that you can't OWE more than that.
17 year old kid has his first car. He works at his McJob making $17k/year. A tire blows out and he mows someone down, leaving them a quadraplegic for life. Should the court decide "Kid, you only make $17k... So your liability is $150,000."
Even $150,000 is going to be more than that kid can manage. Do you think that this amount, even if it WAS paid would be fair resitituion to the person run down?
...and consider this. The day after all the court proceedings and legal work are done, signed and sealed that the kid wins ten million dollars in the lottery. THEN what?

Why would you pay MORE than your liabilty? If the courts says that you caused Joe Blow $10 worth of damage, then your liability is that $10.

Uhm... what do you think happens when you buy a home, then lose your job?
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Yeah. And I'll take part of the blame for that.

Agreed.
Don't know; don't care. These questions are impossible to answer.

I give up. Then what?

Sorry. I'm making things worse by getting the sentence bassackwards. Let me try again.
How do you prepare for the possibililty that your legal liability exceeds you ability to pay what you owe?

Oh, no. A pop quiz. And it's not even multiple choice. How about:
    a) Nothing, if I own the home free and clear.     b) Nothing, if I get another job and can pay the mortgage     c) Nothing, if I have the money in savings to pay the mortgage     d) Nothing, if I can borrow the money to pay the mortgage from           family     e) I sell the house.     f) I default on the mortgage and lose the house     g) Any of the above.
The mortgage is a known liability backed by a real asset. Everybody involved has assessed the risks (or they're supposed to have).
The problem is different with liability for negligence. You don't know the risks, the injured party hasn't agreed to shoulder any part of them in any case, there's no fixed limit to the liability, and the amount you owe may far exceed your ability to pay.
There are two ways to prepare. One is to arrange to be very wealthy. The other is buy insurance.
OK. Now we're back to the original question. Supposing you can't arrange to be rich, how do you select the limits on your liability insurance?
RJK seems to think that considering one's net worth in making the decision is necessarily a morally reprehensible thing to do.
I haven't been able to find out why this is so or what practical and morally acceptable method is available.
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OIC...
Of course your current net worth plays a big part of how much insurance you decide to buy.
You can never bet that insurance will cover 100% of all situations. You have to compare how much you pay up front to the chances of actually needing that insurance.
That's the reason I never buy collision insurance for my cars. I could put $150/month into my insurance companies bank account, but over my lifetime that will end up being a fair bit of money. Or I can put that same $150/month into my own investment bank account and get a concrete return on it. The chances of me writing off enough cars, soon enough after being purchased is a lot less than the amount of money I'll earn on my investment account.
If you are worth a lot, you pay the premiums for the extra coverage because you actually have assets that can be taken away. If you're making minimum wage you only get the bare minimum.
BTW, I also believe that any government mandated insurance should be affordable to ALL, and that level of insurance should be enough to cover the majority of circumstances.
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