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Old 04-18-2017, 11:28 AM   #21
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I believe the idea of having an umbrella policy to cover your net worth is a rule of thumb because in the discovery phase of a lawsuit they will find out what assets you have and will likely go after that amount. There is no requirement nor should you disclose the amount of insurance coverage you have. Maybe some lawyers out there can confirm or correct this.
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Old 04-18-2017, 11:33 AM   #22
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Originally Posted by bingybear View Post
I agree with your second paragraph.

I don't see the "Just like insuring a piece of jewelry". If you are sued successfully (they win) for what you are insured + net worth, they don't give restore your net worth. If it was jewelry that was stolen, they would have given you the insured $ to replace it. Also when you insure jewelry you have an appraisal to guide you as to replacement costs and amount to insure.

For umbrella insurance you are trying to cover an unknown event that you'll be responsible for. It will protect for covered events up to the limit of the insurance (including primary policies). Unlike jewelry you don't have a good estimate upfront. You don't know if you'll loose control of your car and plow through a crowd of pedestrians and mam an kill many people or whatever bad event you can imagine. You are insuring against a risk that is not well define instead of insuring a well defined and valued item.
Agreed that you don't know what a liability loss might be, but you are insuring a loss up to the limit on your policy, just like with a piece of jewelry. So if my wife loses a $15,000 ring, I don't have to come up with the $15,000 to buy her a new one. Similarly, if I get hit with a judgement and costs of $4 million, I don't have to dip into my new worth to cover that.

True that if you are eventually liable for an amount that exceeds your liability limit + net worth your net worth isn't restored. But, the first $X, including defense costs, is paid by someone else. Using the jewelry example again, if my wife's ring insured for $15,000 is lost and costs $25,000 to replace, then I'm going to be on the hook for the balance. You can quibble about the need to pay the judgement versus the need to replace the ring, but if you do you don't know my wife...
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Old 04-18-2017, 03:52 PM   #23
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As long as you understand MrLoco that the 4MM does not actually protect your $2.5MM exposure. It only protects you from the first 4MM that a court awards to the injured partie(s). There is nothing to prevent the injured party from suing for a sum larger than your liability coverage.
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It would seem to me that a $5MM+ settlement would be the result of some really extreme negligence.

Just because you're worth $5MM doesn't mean that a settlement for that amount would be granted for a fairly run of the mill liability.

"...I'll sue you for all you're worth!!" (Funny, I thought I was worth more than the $100K you got).

ICBW!!

As my lawyer always says "Anyone with 50 bucks can sue you, it doesn't mean they'll win"
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Old 04-18-2017, 06:41 PM   #24
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I have a $5M umbrella policy through Allstate. I'm not sure I completely understand the relationship between net worth and coverage limits, but I was required to provide documentation that I was really worth at least $5M before they would issue the policy. They wanted a statement from my accountant, but I don't have one, so I just provided a statement on my own stating that my assets exceed $5M.
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Old 04-18-2017, 06:58 PM   #25
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As my lawyer always says "Anyone with 50 bucks can sue you, it doesn't mean they'll win"
And even if they did win, they'd simply have a judgement, no money.
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Old 04-19-2017, 05:55 AM   #26
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As long as you understand MrLoco that the 4MM does not actually protect your $2.5MM exposure. It only protects you from the first 4MM that a court awards to the injured partie(s). There is nothing to prevent the injured party from suing for a sum larger than your liability coverage.


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True but many times people only sue you for the insured amount. I don't know why this is?
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Old 04-19-2017, 08:41 AM   #27
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I have $5mm umbrella, even though NW is higher. I just think the risk of litigation that costs more than $5mm (plus my underlying auto limits, if the claim is auto related) to defend/settle is very low.

I do think there is a relationship between NW (or, I guess I should say, the value of non-exempt assets) and umbrella coverage levels, in this sense: If I had, say, $750,000 in non-exempt assets, and I get a $5 million judgment against me, I can always file a personal bankruptcy case, give the trustee the $750,000, and discharge the remainder of the judgment (assuming the judgment is not within the category that is nondischargeable). So all the coverage I would need to protect my non-exempt assets and avoid having to file bankruptcy would be $750,000. But if my non-exempt assets were, say, $5 million, then absent insurance coverage, I could have to give $5 million to the trustee, to get a discharge, so I have more NW to protect by insurance.

I am not saying umbrella coverage should equal NW or non-exempt assets (and I am sure as heck not giving anyone legal advice; I am not qualified to do that!), but I do think the amount of NW (or non exempt assets) is relevant to the decision about amount of coverage. And I guess, now that I am typing this, maybe I should increase my coverage levels....
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Old 04-19-2017, 09:28 AM   #28
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True but many times people only sue you for the insured amount. I don't know why this is?
As explained to me by a lawyer is that juries tend to shy away from large awards when you are going after someones home or bank account, as long as the insurance is paying its all good.
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Old 04-21-2017, 02:31 PM   #29
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From experience, higher umbrella coverage means that in the event you are sued they will hope to sue you for more. Daughter several years ago had accidental, she was found at fault and was on our policy. Once the attorney of person she had accident with learned of our umbrella policy they made an effort for big settlement (our attorney told us this). In the end she received only out of pocket costs.
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Old 04-21-2017, 03:06 PM   #30
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From experience, higher umbrella coverage means that in the event you are sued they will hope to sue you for more. Daughter several years ago had accidental, she was found at fault and was on our policy. Once the attorney of person she had accident with learned of our umbrella policy they made an effort for big settlement (our attorney told us this). In the end she received only out of pocket costs.
I carry huge liability on my car insurance, last time somebody near my daughter's school didn't turn on headlight in a rainy night, on purpose, staging an accident, I might add, she only got $25k. My kid was at fault, she turned left, but she didn't remember the headlights on.
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Old 04-21-2017, 04:42 PM   #31
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From experience, higher umbrella coverage means that in the event you are sued they will hope to sue you for more. Daughter several years ago had accidental, she was found at fault and was on our policy. Once the attorney of person she had accident with learned of our umbrella policy they made an effort for big settlement (our attorney told us this). In the end she received only out of pocket costs.


I don't believe there is any legal requirement to disclose the amount of insurance coverage...especially umbrella coverage. Best to keep it quiet.
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Old Yesterday, 04:26 AM   #32
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I don't believe there is any legal requirement to disclose the amount of insurance coverage...especially umbrella coverage. Best to keep it quiet.
I wonder about this. Can you be compelled to disclose this? Just the fact that the insurance company is involved - does the coverage become known somehow?
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Old Yesterday, 04:53 AM   #33
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Leave that to the lawyers
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Old Yesterday, 05:20 AM   #34
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Leave that to the lawyers
Same difference. You think people usually volunteer this information?
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Old Yesterday, 05:32 AM   #35
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You think people usually volunteer this information?
As in most legal matters, the answer is complicated: https://www.irmi.com/articles/expert...-for-bad-faith
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Old Yesterday, 05:38 AM   #36
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As in most legal matters, the answer is complicated: Disclosing Policy Limits in Liability Claims: A Landmine for Bad Faith
there is something wrong with your URL.
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Old Yesterday, 05:40 AM   #37
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Like other financial insurance, need for liability protection has to be based on risk, not assets. If there is no business or professional risk involved, I would guess most people would not need more than $1M - $2M unless they have very specific risk needs that are not common. Here's a checklist that helps identify one's own risk profile. http://www.eqgroup.com/Pdf/ACE/ACE-p...-scorecard.pdf
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Old Yesterday, 05:41 AM   #38
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there is something wrong with your URL.
Fixed - I hope: https://www.irmi.com/articles/expert...-for-bad-faith
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Old Yesterday, 06:42 AM   #39
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Interesting thread.

Quote:
Originally Posted by Dash man View Post
I believe the idea of having an umbrella policy to cover your net worth is a rule of thumb because in the discovery phase of a lawsuit they will find out what assets you have and will likely go after that amount. There is no requirement nor should you disclose the amount of insurance coverage you have. Maybe some lawyers out there can confirm or correct this.
(underlining / highlighting is mine)

After reading the link from REWahoo, I wonder if you actually should... ? In other words, the plaintiff may consider insurance coverage as something you would easily give up (and you just might), and offer to settle up to that amount. Something that you and plaintiff have as common interest in (and not the insurance company).

@MichaelB: thank you for the link, too! I like that link and I agree that it makes sense that insurance should be based on your risk. I don't fully get when people say it "covers" their net worth. Instead, your net worth is just $X further away from the potential claim. $1M is probably more than enough of a "moat" for most people.

Then again, I suppose if plaintiff sees that you have $10M assets and $1M insurance, they are more likely to NOT settle (potential for $11M judgement vs $1M) as opposed to when you have $2M assets + $1M insurance; so perhaps some relationship between the two makes sense... ?
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Old Yesterday, 07:17 AM   #40
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The insurance company attorneys represent the insurance company and not the policy holder. It may be wise to hire your own attorney to represent your own interests while working with the insurance company. The severity of an injury affects the eventual award, and any negligence can significantly increase the punitive award. I would think the nature of the case should be considered in whether to divulge insurance limits or not. The insurance contract itself may require the insured to not reveal limits. I think I'll read my contract more closely.
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