Auto Insurance: when’s the last time you looked at your policy?

Many people don’t know this but my career in personal finances began as a result of auto insurance. That right, auto insurance. No, I wasn’t an agent who was selling it. I was a consumer, most likely not that much different from you, who owned a policy, but had never taken the time to actually look at it.

It started as a regular day. I was a teacher at the time, and my sitter had come by to help me around the house. She asked if she could borrow my car and take the kids to the park, so I could get some work done. I immediately said yes, but then paused. “Wait,” I asked, “are you covered under my insurance?”

Embarrassed that I didn’t know the answer, I pulled out my policy— proud of myself that I even knew where it was (!)— and called the number listed. I then spent the next 45 minutes talking the ear off my poor broker and asking him “dumb” questions, like what was the difference between comprehensive and collision coverage, what was my deductible, should I raise any of our limits and, of course, was my sitter covered if she got into a wreck (the answer was yes)?

After I hung up the phone, I felt empowered by my newfound information, but also still embarrassed. How did I not know such basic information? Here I was, in my early 30s, a successful professional, a graduate at the top of my class from two Ivy League universities, yet I lacked fundamental knowledge in an area that was so critical to my family and myself.

That afternoon ignited a curiosity to find out “what else I didn’t know” about our personal finances. I started researching our home insurance, life insurance, investments, wills, mortgage, taxes, and everything in between I could get my hands out. My afternoon curiosity quickly transformed into a full-fledged passion, eventually propelling me to earn the CFP designation and launch a new career as a fee-only financial planner.

That was back in 2004, and I am happy to say that since then, I have not only mastered such vital and practical information but also be in a position to help others do the same through education, motivation, and planning.

Not everyone’s meant to be a CFP. Taking a look at your auto insurance may not result in such life-changing decision as my own. But by all means, still take a look.

The saying “what you don’t know can’t hurt you” can’t be further from the truth. Even if my sitter was covered under my policy, what if I did not have adequate protection and she got into an accident with my children? And beyond auto insurance, there are so many what-if scenarios having to do with all areas of personal finances, from taxes to investments to cash flow, etc. that could have a major impact on your life so you want to make sure you have all your ducks in a row.

Knowledge is power. What part of your financial life could you learn a little more about today?

> > Here’s a start! Do you know what SUM coverage stands for?

It’s something called “Supplemental Underinsured Motorist” coverage – it’s additional coverage that protects you in the event that you get into an accident at the fault of another driver who may not have enough, or any, insurance to fully pay for the bodily harm or property damage that result.

Some states require that drivers purchase SUM; in other states, motorists are required to purchase another type of coverage called PIP (personal injury protection) to ensure that all drivers have access to emergency care, regardless of who is at fault for the accident. Finally, your health insurance also may kick in and cover some of the costs if the at-fault driver is underinsured; however, this is not always the case.

To determine if you need SUM coverage or additional coverage, it may be a good idea to contact your auto policy and health care providers and determine whether or not you are adequately protected.