MUTUALS

Just in case you have not yet really focused on this ‘mutual fund scandal’ that’s been in the news, Paul Krugman nailed it in his column Tuesday. Yet one more reason actively managed mutual funds have generally done worse than a monkey throwing darts at the stock pages.

MEDICARE

You might also read his column today on the rotten Medicare bill. If I were an AARP member, I’d quit.

UMBRELLAS

Lisa: ‘My husband and I have 3 insurance policies with the same company – his life insurance, our homeowner’s, and our automobile policies. Recently the company offered us an ‘umbrella’ policy, but would require higher liability coverage for the auto policy, and would cost more in premiums. What would be the value in this kind of coverage?’

☞ If you have assets to protect, the umbrella provides an extra layer of coverage (typically $1 million, though you can buy more) on top of your auto and homeowners liability coverage.

For someone with little or nothing to sue for, it’s not worth buying an umbrella policy.

For someone with lots to sue for (and, thus, to protect) – or for a young brain surgeon just starting out (whose future earnings are worth suing for) – additional liability coverage is a good idea. It won’t cover the brain surgeon’s malpractice, or anything else related to your business or profession. But it will cover you if you hurt someone with your car or your cooking or your canine.

Insurers require you to take top limits on auto and homeowners first to keep you from replacing those, more expensive, coverages, with the cheap umbrella. (The primary coverages are more expensive because that’s where almost all the claims are. Relatively few claims exceed the $500,000 required in primary coverage. So the lower layers of coverage are much more frequently tapped and, as a result, must be priced higher.)

Having said all this: shop around. Even though you have three other policies there, your insurer may not be offering you the lowest price.

 

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