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Old 01-15-2015, 11:21 PM   #21
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My general rule-of-thumb for determining total liability insurance coverage is Net Worth minus 401k balance - rounded up to next even number.
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Old 01-16-2015, 05:58 AM   #22
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Your net worth is irrelevant. Or at least not directly relevant. You aren't insuring the balance. If you have x million of insurance and are sued for x+1, you have a million of your own money at risk.

If there's any rule of thumb about how much liability insurance to have, it would be 'what might i be sued for?' Obviously a hard question to answer.
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Old 01-16-2015, 08:51 AM   #23
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Originally Posted by jon-nyc View Post
Your net worth is irrelevant. Or at least not directly relevant. You aren't insuring the balance. If you have x million of insurance and are sued for x+1, you have a million of your own money at risk...
I formed my opinion from some basic research - but I tended to avoid insurance sales-people's opinion. I found this in a Money Magazine article:
Quote:
Base your umbrella policy on the value of your assets. In a lawsuit, lawyers will aim for your available assets but probably settle for a comparable insurance amount.
...and this from Jack Hungelmann, Author of Insurance for Dummies:
Quote:
..A good start for a coverage amount is to add up the value of non-retirement-plan assets. And then add $1million for peace of mind...
Can you please point to research that enforces the point you are making?

Thanks!
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Old 01-16-2015, 09:27 AM   #24
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Just read your umbrella policy. It isn't net worth insurance. It's liability insurance.

Note the money magazine article, fwiw, frames the question the same way I did. It just assumes the answer is going to be tied to the value of your umbrella policy. I don't really understand the rationale behind that.
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Old 01-16-2015, 10:24 AM   #25
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I asked an attorney who does a lot of defense work for an insurance company "how much liability insurance should I carry" He didn't bat an eye and said "how much do you have to lose?".


He told me that most cases settle for policy limits as long as the defendant carried liability limits up to his assets. He did say that excess verdicts over policy limits are rare, but do happen if someone is blatantly underinsured.


I carry a $2m umbrella over the basic underlying policies. I spent a lot of time with my agent finding other ways to trim some coverage from my underlying policies to cover most of the premium. I increased deductibles to $1,000 and removed some smaller "feel good" options such as towing, full glass, jewelry riders and other options that I can live without.


I've got a friend who had a motorcycle accident last year and he's worried sick he's going to lose his business. He has a $1m umbrella and a net worth over $5m. I asked why he had such low limits and he said he didn't want an umbrella at all but his agent kept hounding him that he took out just to shut him up.
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Old 01-16-2015, 12:23 PM   #26
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We have an umbrella policy that matches our net worth.
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Old 01-16-2015, 12:37 PM   #27
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...He told me that most cases settle for policy limits as long as the defendant carried liability limits up to his assets. He did say that excess verdicts over policy limits are rare, but do happen if someone is blatantly underinsured...
I was told something similar by my insurance agent when discussing how much umbrella coverage to carry. He said as long as your total liability coverage is greater than exposed assets, it is "extremely rare" for settlements to exceed the liability coverage. I asked him why a plaintiff would stop at the amount of coverage, if they had a strong case? He said a personal injury attorney would much rather settle quickly for the amount of insurance coverage than risk a prolonged jury trial over personal assets.
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Old 01-16-2015, 12:43 PM   #28
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Next question is: do you know what the umbrella policy actually covers? Therein may be the reason that the coverage rate is so low. Just sayin'
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I was told something similar by my insurance agent when discussing how much umbrella coverage to carry. He said as long as your total liability coverage is greater than exposed assets, it is "extremely rare" for settlements to exceed the liability coverage. I asked him why a plaintiff would stop at the amount of coverage, if they had a strong case? He said a personal injury attorney would much rather settle quickly for the amount of insurance coverage than risk a prolonged jury trial over personal assets.
+1

Also, personal injury attorneys like to go where the money is and seem to be able to verify insurance coverage limits before deciding to take a case or not, but are they able to verify personal assets as well?
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Old 01-16-2015, 01:17 PM   #29
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For those with umbrellas in the 1-5m range.... Does your insurance carrier require all risks to be underwritten by them specifically, before an umbrella (by nature) policy is underwritten. ?

I have a classic car and can not get reasonable liability/comp/coll cover through anyone except a specific classic car insurer. Switching this cover to my main carrier would be way way more expensive at best and likely not even available.

Umbrella is not able to be written by main carrier unless said classic car is switched to main carrier even though liability limits are at same high level that are for my other vehicles insured by main carrier.

I found this to be a hassle. Any solutions in mind ?
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Old 01-16-2015, 01:26 PM   #30
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Interesting. We are currently going through this right now as our current ins provider has had a brilliant brain fart and started some kind of IQ rating that has rated us below 500 on a scale up to 900 and significantly raised our premiums. We have not had a claim for 25 yrs against any kind of ins. We have 0 debt and an ok sized NW so how the heck can we rate below 500 It's because we aren't in debt up to our eyeballs!!! Really torqued about it and we are switching. While going through this we checked on the umbrella thinking it might ins out of the ordinary accidents. It won't. All it does is extend house and auto $$ so we don't see the benefit. Seems kind of like life ins, a waste. My wife has been in the legal field for quite a while now and for those that think they can't be hit even with high umbrella. Better guess again. Steaming as I type
Well, hope your car ins is for 2 million, because you hit some other car with couple of kids in it, and you will lose.
Some guy comes to your door, rings the bell and slips on your porch... uh oh...

Its cheap, and covers beyond regular ins limits, so it raises your coverage.
And it makes the ins company fight harder as they have more to lose at trial.
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Old 01-16-2015, 01:28 PM   #31
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+1

Also, personal injury attorneys like to go where the money is and seem to be able to verify insurance coverage limits before deciding to take a case or not, but are they able to verify personal assets as well?
Yes that is what discovery is for...
Course for me, they will discover I spent it in the weeks prior to the appearance
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Old 01-16-2015, 01:33 PM   #32
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+1

Also, personal injury attorneys like to go where the money is and seem to be able to verify insurance coverage limits before deciding to take a case or not, but are they able to verify personal assets as well?
Usually can't verify the insurance limits before deciding to take the case, unless the person you are thinking of suing voluntarily discloses. (Exception is if you sued the potential defendant previously; then you can be pretty confident... Hmm, and we don't do auto cases, so maybe those insurers disclose more readily??)

The folks in our office who do personal injury will try to uncover assets before taking a case on (and we do it in business/commercial disputes as well). There is, however, no good way to find much out much with certainty beyond real estate, boats, and automobiles for individuals--unless they are all over the society pages; thus, you end up guestimating.

Once suit is filed, you can get the insurance coverage information, with the sole exception of Tennessee state courts. If coverage is reasonable and it isn't a catastrophic injury case (or a real bad actor), the coverage limits will usually be enough to settle. But, if it goes to trial and verdict is beyond the limits, there is still individual exposure....
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Old 01-16-2015, 02:30 PM   #33
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Usually can't verify the insurance limits before deciding to take the case, unless the person you are thinking of suing voluntarily discloses. (Exception is if you sued the potential defendant previously; then you can be pretty confident... Hmm, and we don't do auto cases, so maybe those insurers disclose more readily??)

The folks in our office who do personal injury will try to uncover assets before taking a case on (and we do it in business/commercial disputes as well). There is, however, no good way to find much out much with certainty beyond real estate, boats, and automobiles for individuals--unless they are all over the society pages; thus, you end up guestimating.

Once suit is filed, you can get the insurance coverage information, with the sole exception of Tennessee state courts. If coverage is reasonable and it isn't a catastrophic injury case (or a real bad actor), the coverage limits will usually be enough to settle. But, if it goes to trial and verdict is beyond the limits, there is still individual exposure....
That's kind of what I was thinking, and my experience was drawn from corporate litigation. It usually was the same firm who filed suit time and time again because they already had a good idea of the resources involved and potential payouts. And once that firm had success, either word would spread or the pattern became obvious to other firms. But I think they have a pretty good concept of how thin those resources can spread so there is a bit of litigation equilibrium in the industry - meaning they don't all swoop down on the same target, there is usually some back-door agreement as to who is eating lunch where.

Now, the firm that advertises on cable about a woman who got $97,489 because her finger was broken? I'm not sure how far beyond possible insurance limits and public-record assets they are willing to go before accepting a case. I might seem like a low-level target as an unemployed individual with minimum liability coverage on a Kia, a modest home via the tax records with no indication as to the extent of mortgage and vehicle registration on said Kia being the only other publicly available asset information.
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Old 01-16-2015, 03:00 PM   #34
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only $2 mil... need to up it.
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Old 01-16-2015, 03:52 PM   #35
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Now, the firm that advertises on cable about a woman who got $97,489 because her finger was broken?
$100k/finger? Another good reason for $1M umbrella coverage.
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Old 01-16-2015, 04:41 PM   #36
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Just read your umbrella policy. It isn't net worth insurance. It's liability insurance.

Note the money magazine article, fwiw, frames the question the same way I did. It just assumes the answer is going to be tied to the value of your umbrella policy. I don't really understand the rationale behind that.
That's why they don't call it asset insurance (e.g. property insurance). The other side of the balance sheet.
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Old 01-16-2015, 05:00 PM   #37
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My Umbrella Policy is for $1M which seemed reasonable back in the 90's. Definitely need to bump it to $2M.
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Old 01-16-2015, 11:33 PM   #38
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That's kind of what I was thinking, and my experience was drawn from corporate litigation. It usually was the same firm who filed suit time and time again because they already had a good idea of the resources involved and potential payouts. And once that firm had success, either word would spread or the pattern became obvious to other firms. But I think they have a pretty good concept of how thin those resources can spread so there is a bit of litigation equilibrium in the industry - meaning they don't all swoop down on the same target, there is usually some back-door agreement as to who is eating lunch where.

Now, the firm that advertises on cable about a woman who got $97,489 because her finger was broken? I'm not sure how far beyond possible insurance limits and public-record assets they are willing to go before accepting a case. I might seem like a low-level target as an unemployed individual with minimum liability coverage on a Kia, a modest home via the tax records with no indication as to the extent of mortgage and vehicle registration on said Kia being the only other publicly available asset information.
Your Credit record is easily obtainable which will show past credit worthiness, and inferences can be made like if you have a 20K limit on a CC, then you have a larger than normal income. Plus it will show some asset locations.
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Old 01-16-2015, 11:42 PM   #39
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Your Credit record is easily obtainable which will show past credit worthiness, and inferences can be made like if you have a 20K limit on a CC, then you have a larger than normal income. Plus it will show some asset locations.
Ah! I didn't consider a credit report.
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Old 01-17-2015, 07:26 AM   #40
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My understanding of liability insurance is to protect the unprotected part of your net worth. So if your net worth is around 2 millions and your house which has a value of $500K is protected through a homestead declaration and your 401K or your rollover IRA valued at $500K is protected through ERISA then you need a 1 million umbrella added to the basic insurance liability of 300K/500K to protect other assets such as simple IRAs, Roth IRA (some states do not offer full protection for these accounts), taxable accounts, other real estate etc.
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