Curious about umbrella liability policy experience

[Buckeye]

Good for you, Buckeye. No access to USAA for us, unfortunately.

I'm wondering if the difference is the commission.

 

[Nords]

Our daughter is getting ready to buy a car. She's nearly 20 years old with her own savings and some NROTC income, so the discussion came up with USAA on whether to keep her on our policy (until she graduates from college) or to split her out on her own policy.

They quoted a hypothetical 2004 Honda Civic sedan on our policy: minimal personal injury protection, liability for our assets, plus towing & roadside assistance. No collision or comprehensive. If the car was put on our Mom & Dad policy then she'd pay $65/month because of our honkin' big liability limits. If she paid for her own separate policy then it'd be $50/month because she essentially has no assets.

If she plowed into a schoolbus full of lawyer's kids, USAA would look at who was paying the policy premiums (our daughter or Mom & Dad) and whether we were claiming her as a dependent on our tax returns.

Although her status as a full-time student means that we can declare her our dependent, we don't need to do that. It's better for her to pay her own insurance premiums (even if she's reimbursed or gifted by us) for her to build her own payment record.

Anyone else had to parse through the legal & financial issues of this decision?

I'm wondering if the difference is the commission.

I wonder if it could be the claim rates, or that USAA has a much broader client base with a relatively efficient claims process of fewer man-hours.

They have a "skunkworks" division that tries to come up with new/faster ways to process claims. One of their ideas was a digital camera attached to a 10-foot pole for taking photos of roof damage while standing on the ground. Sounds pretty silly until you multiply the time savings, the reduced danger (of ladders or hanging out windows), and thousands of roof-damage claims.

 

[EveryLady]

Here's a comment/question I had on umbrella policies, from (!) 5 years ago.

http://www.early-retirement.org/forums/f28/yet-another-umbrella-policy-topic-25886.html#post482351

an excerpt:



-ERD50

Like you, have the same question and don't intuitively grasp the connection between liability total on an insurance policy and assets. Years ago when I took out the first umbrella policy, an attorney friend recommended $1 million. His rationale was that $1 million was then large enough that a court might well consider my having it as evidence of "responsible" behavior and subsequently limit liability to the policy total. Dunno how valid this POV is/was or what the equivalent amount today would be.

 

[Buckeye]

Our daughter is getting ready to buy a car. She's nearly 20 years old with her own savings and some NROTC income, so the discussion came up with USAA on whether to keep her on our policy (until she graduates from college) or to split her out on her own policy.

They quoted a hypothetical 2004 Honda Civic sedan on our policy: minimal personal injury protection, liability for our assets, plus towing & roadside assistance. No collision or comprehensive. If the car was put on our Mom & Dad policy then she'd pay $65/month because of our honkin' big liability limits. If she paid for her own separate policy then it'd be $50/month because she essentially has no assets.

If she plowed into a schoolbus full of lawyer's kids, USAA would look at who was paying the policy premiums (our daughter or Mom & Dad) and whether we were claiming her as a dependent on our tax returns.

Although her status as a full-time student means that we can declare her our dependent, we don't need to do that. It's better for her to pay her own insurance premiums (even if she's reimbursed or gifted by us) for her to build her own payment record.

Anyone else had to parse through the legal & financial issues of this decision?


I wonder if it could be the claim rates, or that USAA has a much broader client base with a relatively efficient claims process of fewer man-hours.

They have a "skunkworks" division that tries to come up with new/faster ways to process claims. One of their ideas was a digital camera attached to a 10-foot pole for taking photos of roof damage while standing on the ground. Sounds pretty silly until you multiply the time savings, the reduced danger (of ladders or hanging out windows), and thousands of roof-damage claims.

With regard to claiming your daughter as a dependent, the facts are the facts whether you claim her or not.

 

[tryan]

It's a tough world out there, especially when it comes to money.

One of DW "friends" (we don't see them anymore) sued a neighbor after her kid taunted thier dog and got bit. What was once a tight group of friends on a cul-desac is now Hatfields vs McCoys. Some are MOVING OUT. Really sad.

Rumor is the insurance settlement was 6 figures ... but nobody is telling.

FWIW, I got bit by the neighbors dog in the 70's ... nearly ripped my ear off. The owner came and aplogized (with the dog). That was good enough for us. Times have changed.

 

[ziggy29]

Should assets on a 401K be excluded too?

Well, in *general* these will be protected regardless of your state, unlike an IRA where the protection varies widely depending on state law.

General legal concepts, of course, are no substitute for qualified legal consultations with attorneys well-versed in the asset protection laws of your own state.

 

[Sarah in SC]

One of DW "friends" (we don't see them anymore) sued a neighbor after her kid taunted thier dog and got bit. What was once a tight group of friends on a cul-desac is now Hatfields vs McCoys. Some are MOVING OUT. Really sad.

Rumor is the insurance settlement was 6 figures ... but nobody is telling.

FWIW, I got bit by the neighbors dog in the 70's ... nearly ripped my ear off. The owner came and aplogized (with the dog). That was good enough for us. Times have changed.

This is the kind of story I have nightmares about, thanks to my work with rescue dogs. I've only had two bite incidents, one was a teenager walked up to a rescue dog and got bit pretty good and the parents were old-school "you shouldn't go up to a strange dog" people and wouldn't even let me pay to get the stitches! I kept waiting for the suit that never came.

The other was a dog that bit my brother. I paid for the stitches and still had to deal with all kinds of family drama, but the only good news was that he was so mad about my lack of interest in his quarter-sized injury that he didn't speak to me for a year!

I don't take dogs to any public places any more--just too many variables!

 

[Texas Proud]

One of DW "friends" (we don't see them anymore) sued a neighbor after her kid taunted thier dog and got bit. What was once a tight group of friends on a cul-desac is now Hatfields vs McCoys. Some are MOVING OUT. Really sad.

Rumor is the insurance settlement was 6 figures ... but nobody is telling.

FWIW, I got bit by the neighbors dog in the 70's ... nearly ripped my ear off. The owner came and aplogized (with the dog). That was good enough for us. Times have changed.

Not all states have the same laws.... here the dog gets at least one free bite...

My son was sitting in our front yard when a dog ran up to him and bit him on the leg... the lady who owned it came by to apologize and offered to pay the DR bills.... when I sent them to her, we heard nothing... I did some research and found out our state laws...

All I was looking for was the Dr bills.... nothing more...

 

[tryan]

This is the kind of story I have nightmares about, thanks to my work with rescue dogs. I've only had two bite incidents

Wow! This was also a rescue dog. The owner runs/coordinates the rescue effort for the state/region.

DW always said the dog is a big teddy bear and would "never harm anyone" ... but you never really know what you're adopting.

The commical piece is that the family who sued have maintained "the suit did not cost anybody anything" since insurance paid. Seems a bit naive given the neighborhood shake-up. DW was pushing me to purchase a house - before the suit - on the circle ... that idea has faded away (it's a good thing!)

The little tot has a Harvard size college fund from a incident he'll never remember (he was 3 yo).

 

[Sarah in SC]

The commical piece is that the family who sued have maintained "the suit did not cost anybody anything" since insurance paid.
The little tot has a Harvard size college fund from a incident he'll never remember (he was 3 yo).

Grrrr! That is what drives me crazy about stuff like that--the idea it doesn't "cost" anything! Be very glad you didn't get stuck in that 'hood.

 

[ejman]

Thank you all for the guidance in this thread. It motivated me to investigate further and I found out it was a two step process.

1) Had to increase my base auto insurance to 250k/500k liability - cost additional $50/year two vehicles
2) Excess liability to $1 M cost $170/year.

Seems like a reasonable cost of $220 year. My conclusion is that Ins companies must have some pretty sharp lawyers that fight tooth and nail so that they hardly ever pay up and as a result premiums are largely icing on the cake for the Ins companies.

 

[Nords]

With regard to claiming your daughter as a dependent, the facts are the facts whether you claim her or not.

My response would be "Nah, she's not our dependent, we're just nice parents who gift our offspring." She has a college scholarship, a monthly NROTC stipend, and (soon) her own shared lodging and her own transportation.

The advice is coming from the company that would have to handle the lawsuit. And notice that they suggested we take the cheaper alternative, when they could've scared us with lawyer talk.

She's been on our policy for over three years and we haven't paid a single penny in higher premiums. They could've socked it to us anytime they wanted to. We explained it more than once. But having three drivers for two cars, and no collision/comprehensive coverage, allowed them to cut us the slack.

I'm not sure that a lawyer would let facts stand in the way of their prosecution or their defense. It'd be the behavior of a young adult whose parents might or might not be subsidizing her independence. Perhaps the question would be more clearcut if the age was 21 or 25, but it's probably clear enough at 19+.

 

[pb4uski]

Thank you all for the guidance in this thread. It motivated me to investigate further and I found out it was a two step process.

1) Had to increase my base auto insurance to 250k/500k liability - cost additional $50/year two vehicles
2) Excess liability to $1 M cost $170/year.

Seems like a reasonable cost of $220 year. My conclusion is that Ins companies must have some pretty sharp lawyers that fight tooth and nail so that they hardly ever pay up and as a result premiums are largely icing on the cake for the Ins companies.

Your's is more reasonable than mine.

My quote is $82 to increase my home liability to $1m and vehicles to $500k and then $367 for a $1m umbrella. Still worth doing in the whole scheme of things, but significantly more than your deal

 

[H2ODude]

Lots of good insights. I'm reminded of something my father used to say...you hope to never need insurance, but if you do you'll wish you had the best money could by. I know a lot of people who never considered that their investments and home equity were way unprotected in the event of some weird accident that opened up the door to financial ruin.

 

[rodi]

Your's is more reasonable than mine.

My quote is $82 to increase my home liability to $1m and vehicles to $500k and then $367 for a $1m umbrella. Still worth doing in the whole scheme of things, but significantly more than your deal

This thread also triggered me to look into it. My quote was similar to EJMANs...

About $50 to up the liability limits on auto/home. And $199 for the $1M policy.

that included one rental home. The rental kicked up the quote a bit. I think having a dog kicked it up too. (It was one of the questions asked.)

 

[Finance Dave]

When you hurt a relatively young person permanently, lifetime medical costs can roll up to a very large number very quickly. I started the process of purchasing an Umbrella policy very soon after my mock jury experience.

Exactly!!! This is the type of thing that worries me and why we have the policy. Could be any person on your property who gets hurt, a contractor, a friend, relative, mail carrier, newspaper delivery person, etc. The thought of losing my whole life's savings made me get a policy...which we've now had for about 10 years.

 

[H2ODude]

Exactly!!! This is the type of thing that worries me and why we have the policy. Could be any person on your property who gets hurt, a contractor, a friend, relative, mail carrier, newspaper delivery person, etc. The thought of losing my whole life's savings made me get a policy...which we've now had for about 10 years.

I could be wrong on this, and it may vary by state, but if an employee of a contractor gets hurt working on your property and the contractor is unlicensed and/or does not carry worker's comp, I believe you are on your own. As in your insurance carrier will say, "sorry, not our problem." Anyone know otherwise? This is why you need to be careful and hire only properly licensed contractors.

 

[Finance Dave]

I could be wrong on this, and it may vary by state, but if an employee of a contractor gets hurt working on your property and the contractor is unlicensed and/or does not carry worker's comp, I believe you are on your own. As in your insurance carrier will say, "sorry, not our problem." Anyone know otherwise? This is why you need to be careful and hire only properly licensed contractors.

Not sure...we'll let others weigh in.

However, what if they ARE insured, but you were grossly negligent? In that case, even the contractor's insurance may refuse to pay.

"Hey, my electrician was working on your wiring, and he both told you not to flip any breakers and he put a piece of tape over the breaker box door so you could not open it...but you decided to remove the tape and flip the breaker anyway in spite of his warnings. He got shocked, fell from the ladder, and broke his clavicle..we're not going to ask our insurance to pay for your stupidity"

 

[H2ODude]

Finance Dave: in that case (and I'm not a lawyer) I'd guess your insurance could be held to pay (or you sans insurance). After all, it was your act of negligence. In all likelihood, his workers comp would pay for the broken clavicle and then his wife would find a lawyer to sue you for all you're worth because his, ahem, love performance was diminished by the trauma!

 

[Bdroc]

Umbrella is too expensive for me, probably because I have an 18 year old son that drives. Believe it or not I have $2 million liability on my auto policy and $1 million on my homeowners and it's not too expensive. I tried to reduce those limits to $500k and replace with a $3 million umbrella but the net cost increase was well over $1,000.