To "umbrella" or not to "umbrella"...

[Sunset]

I believe ERD50 has the correct idea.
It's useless to add up your assets and say that is the umbrella ins. limit you need.

Much better is to guess, how much is enough the other side will settle for (1M, 2M, 3M) and how hard the insurance company will fight to not pay (1M, 2M, 3M), and how much can you afford to pay to cover what is at risk (not 401K, etc).

 

[Lucantes]

I don't have an "umbrella" policy yet, but did purchase an additional liability of $1M, for $700, on our house that is currently rented out until we retire next year in addition to our normal homeowner's policy which has $300K of liability built-in.
Once we are retired into the house with new cars purchased etc. then we will get an umbrella policy also to cover several million as just a CYA.

 

[thatguy]

I didn't realize retirement accounts were protected.
2/3 of our net worth is in retirement accounts.The other third is under 500k. There are 500k limits on our house & cars. Income is pensions & social security so maybe we're covered. I did get a quote of $386 for an umbrella. I thought it was high.

 

[ziggy29]

Our agent told us (hopefully correctly) that in Tx, our homestead, pension and 401k is protected.

Yes, that's correct. Texas is one of three states, last I checked, which more or less fully protect IRAs and homesteads as well as pensions, without limit (a 401K is considered a pension under federal law). Florida and Oklahoma are the other two -- again, last time I checked.

 

[Trawler]

Yes. We also have umbrella policy. Bought it when shopping for new insurer and the savings from switching was more than enough to pay for the policy.

 

[Corporateburnout]

This has been discussed here numerous times before. [FONT=&quot]I think you need to evaluate your risk and exposure to determine [FONT=&quot]the amount of[/FONT] umbrella policy you need. People with swimming pools, dogs, boats etc. need a higher umbrella protection than others.

Also most people over estimate the judgment amount awarded by the courts in personal injury cases. [FONT=&quot]O[/FONT]ur state [FONT=&quot]protects[/FONT] IRAs and our home is also protected under the [FONT=&quot]H[/FONT]omestead exemption. Our taxable accounts are our main exposure.

When I [FONT=&quot]researched[/FONT] injury settlements and jury awards in my county which is in a high cost of living state [FONT=&quot]I[/FONT] found the following:

# of cases 151
Average award $741,913 (inflated due to a $33 Million award against a gangster for wrongful deaths and few 5-7 Million medical malpractice awards)
Median award $15,500 (probably a better stat than average)

We no longer have a swimming pool, no kids in the house, no dogs and perfect driving records. And since we don't hire uninsured contractors we fall in the low risk pool and our current $1 Million umbrella to supplement the 300/500K auto liability and the 500K home liability coverage would be sufficient protection.

If we [FONT=&quot]get hit with[/FONT] a judgment in excess of $1.5 million which based on the [FONT=&quot]data above[/FONT] is highly unlikely[FONT=&quot] they can only[/FONT] come after our unprotected assets[FONT=&quot] and that's a risk we are willing to take.[/FONT].[/FONT]

 

[Dawg52]

I have a $2mil policy with premium just under $400. Not the cheapest but not as high as many here.

 

[pb4uski]

The way I figure it I spent a 35 year career building my wealth and while the risk that something unfortunate could happen and I could get sued and have a large judgement against me is low it exists nonetheless and I would be foolish not to spend $500 a year to protect 35 years of work and sacrifice.

 

[imoldernu]

Yes... Peace of mind if nothing else.

Savings by putting all... cars, house and liability with one company.

 

[Lucantes]

+1 on the peace of mind: pb4uski and imoldernu

 

[Sarah in SC]

Risk and exposure, as corporateburnout mentioned, is the key, not really so much your assets. You can always be sued for more than you have, unfortunately.

We have fairly modest risks and exposure these days, thanks to selling the boat and curtailing our raucous parties at the house in recent years. Though I was glad I had it just in case something happened when we were traveling in our old bus cross-country with 8 friends a couple of years ago. If we'd had an accident that injured more than a couple of them, that policy could have easily been needed.

I'll keep the relatively inexpensive $1M umbrella for the foreseeable future. I figure my savings from a decade of minimum auto coverage back in my 20s when I didn't know better are still being spent.

 

[ziggy29]

I'll keep the relatively inexpensive $1M umbrella for the foreseeable future.

Yeah, same here. In fact, I just upped mine from $1M to $2M since it cost only about $5 a month to do so.

 

[Sarah in SC]

Yeah, same here. In fact, I just upped mine from $1M to $2M since it cost only about $5 a month to do so.

WooHoo! Party at Ziggy's house!

 

[Fermion]

The real question we should be asking is if these policies will actually protect you. It sounds like you need to be maxed on every other liability policy (and I don't know that we are). My experience with insurance companies is they try very hard not to pay out.

It could be we are paying for peace of mind that we really should not have. But as long as we *think* it protects us, there is some value in the peace of mind even if we are not really protected. But then you should not have read this post as it may have destroyed that value. Sorry.

 

[rayinpenn]

you say you are well heeled and want to know about whether you need an umbrella policy.. Easy when a vulture considers its next victim it will certainly look for a critter with some meat on its bones...

Get the umbrella now more then ever...
Say Is that some vultures I see circling overhead?


Sent from my iPad using Early Retirement Forum

 

[NYEXPAT]

What is the common wisdom as to the need for umbrella insurance for someone who is retired with a few millions in assets?

Would be great to get an actual YES (I have one) or NO (I don't have one) in the answer and the rationale behind that answer...

Don't have insurance because I do not have a car and in my country nobody sues anyone. Even doctors here do not have malpractice insurance and when the "odd gringo" talks about suing for some injustice at the local bar/cafe, everybody starts laughing.

 

[Buckeye]

Thanks, no young drivers but we have a place in FL with a pool. Appreciate it makes me feel better.

Some of what folks are paying seems incredibly low to me though....

I'm in the Orlando area with a pool home and two adult drivers with clean records. $1M is about $200 per year. We go through USAA and they use RLI.

It was $400 when hubby had a fender bender on his record that was under 3 years old.

 

[Buckeye]

I agree. Typically it's a catastrophic auto accident with multiple claimants and severe injuries (much more expensive than death claims). I did see one in which the insured rented an expensive vacation home and accidentally caused a fire that destroyed it. There's a liability section of your Homeowners policy that covers such incidents but the umbrella would provide coverage above that if necessary.

I was talking to the USAA rep about Umbrella when we were switching things around and the rep said 80% of Umbrella insurance payouts are related to auto accidents.

 

[Car-Guy]

Yes, cheap insurance....

 

[pullmyfinger]

Yes, a 2M policy through USAA. A few years ago I looked at increasing it to 3M but as I remember the premiums took a significant hike.

We also carry earthquake and flood insurance just to protect against a catastrophic loss.

 

[ziggy29]

WooHoo! Party at Ziggy's house!

Wait a couple weeks. Our kitchen is being remodeled. And bring beer!

 

[eyeonFI]

YES, $2 mil for about $250/yr. As others have said, I want the insurance company motivated to defend me if I get sued.

 

[pb4uski]

.... It sounds like you need to be maxed on every other liability policy (and I don't know that we are). ...

Not necessarily. Prior to assessing our needs a few years ago we didn't have much liability insurance.

In getting quotes for the umbrella, I found it was cheaper to increase liability coverage on our base policies and get a smaller umbrella than to leave the base policies where they were and get a bigger umbrella. I was not required to max out the coverage of the underlying... even though in my case both the underlying coverages and the umbrella were with the same insurer.

 

[growing_older]

Yes, I think umbrella insurance is a good idea. I have had a policy for many years and never used it, but I'm glad it's there. I did get sued once by someone without any good reason, but the liability insurance on my auto fought (and won) that one. It did however serve as a concrete example that anyone can sue you for any reason, real or imagined, and I like the idea that my umbrella protects me.

 

[pmac]

Yes. Very inexpensive insurance for the coverage. While a bit off subject, depending on your state laws, you should also consider maximizing your un and underinsured motorist coverage, which you can generally increase up to the amount of liability coverage under your policy.

My guess is that most folks on this forum have pretty good driving records, but, as we all know, there are a lot idiots driving without any or adequate insurance. In general, if you have 500,000 in liability coverage, but only minimal 10,000 un/underinsured coverage, and you are seriously injured by an un/underinsured driver, the most you would be able to recover on your own policy would be the limit of the un/underinsured motorist coverage. If you increase your un/under motorist coverage to the amount of your liability coverage you can recover up to that limit from your own carrier for your proven damages.

You may aslo you be able to recover from umbrella policy if you had catastrophic injuries, but you would probably have to a minimum amount of underlying un/under coverage before any coverage under the umbrella policy would kick in.