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Umbrella Insurance
Old 10-15-2018, 10:17 AM   #1
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Umbrella Insurance

It is that time of year in our household where all the insurances come due. Home, Flood, Auto, Umbrella etc. It is an expensive time of year for us here in NE Florida.

I was wondering what the rule of thumb was for the amount of Umbrella coverage. In Florida, Annuities, First Residence, Qualified accounts etc. are protected by state law. Does one add up their non qualified accounts x 2 and that is the number to the closest upper limit?

Or is there another formula?
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Old 10-15-2018, 11:35 AM   #2
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I think the rule of thumb is Umbrella insurance matching your net worth. Although, I still don't see how that would prevent a judgement against you of 10 times your net worth.
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Old 10-15-2018, 12:00 PM   #3
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My rule of thumb is to buy enough so that you know the insurance company will work hard not to pay it out.
There really is no absolute protection as the suing party can ask for the moon, so it's just how hard do you want the ins company to work.
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Old 10-15-2018, 12:23 PM   #4
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My rule of thumb is to buy enough so that you know the insurance company will work hard not to pay it out.
There really is no absolute protection as the suing party can ask for the moon, so it's just how hard do you want the ins company to work.
^^^this^^^
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Old 10-15-2018, 12:57 PM   #5
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So what number would that be? $1m - $10m?
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Old 10-15-2018, 01:16 PM   #6
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I have $3 million and for some reason for us its cheap. I pay less than $300 a year. Others on here have much higher costs based on their circumstances.
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Old 10-15-2018, 01:19 PM   #7
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This comes up over on bogleheads all the time.

As many posters over there note, you don't see non-DUI judgments against individual defendants (as opposed to companies) that exceed low 7 figures.

State laws can also help...e.g., here even 1% fault by the plaintiff & they can't collect a single dollar in damages.

And don't DUI.
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Old 10-15-2018, 01:20 PM   #8
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I am in FLA and have 2mm. FLA is one of the most expensive Umbrella policy states. $625 yearly premium.
I have read that at 2mm and above, they will "fight" for you.
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Old 10-15-2018, 01:54 PM   #9
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I have $2m also, but it is only $288.
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Old 10-15-2018, 01:58 PM   #10
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Old 10-15-2018, 02:15 PM   #11
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We pay $325/yr for $1M in Texas. The premium is a bit high in our case because our coverage includes a rental house, plus our main house has a pool and a pond. I think the $1M plus the normal policy liability coverage is sufficient to motivate the insurance company to put some effort into our defense. Are they going to be more motivated with $2M or $3M? Would they put more resources on our case? Would more resources change the outcome? Maybe, maybe not. I think $1M is fine, given the probabilities involved. Plus, in Texas, our main house, pensions, and qualified retirement accounts are protected. So with all that and SS still to come, even in a worst-case scenario, life will carry on just fine.
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Umbrella Insurance
Old 10-15-2018, 02:43 PM   #12
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Umbrella Insurance

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I have $3 million and for some reason for us its cheap. I pay less than $300 a year. Others on here have much higher costs based on their circumstances.


Your policy probably doesn’t include Uninsured/Underinsured motorists. That adds quite a bit to the premium and for us is worth the additional cost. We carry 4MM -cost is $633.
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Old 10-15-2018, 02:43 PM   #13
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Can you tell me more about how the umbrella policy works? I assume it only kicks in after primary coverage is exceeded, yes? But what if your primary does not cover a certain event, will the umbrella still work?

Here is my situation - we live in a hurricane prone area (Hawaii) and have a separate policy for hurricane coverage because our homeowner's explicitly excludes hurricane damage. But the hurricane policy only covers damage to our structures, not to neighbors who are harmed by any trees from our property that fall on their houses. We have big trees and they worry me so I want to get coverage for that and was thinking an umbrella policy. Any ideas if it would work?
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Old 10-15-2018, 02:44 PM   #14
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Your policy probably doesn’t include Uninsured/Underinsured motorists. That adds quite a bit to the premium and for us worth the additional cost. We carry 4MM -cost is $633.
Possibly why I have $5M for about $900. California has a lot of uninsured people.
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Old 10-15-2018, 02:47 PM   #15
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This is a timely thread, I just wrote the check today for $217.19 for $1m umbrella policy. I probably should raise it to $2m.
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Old 10-16-2018, 09:05 PM   #16
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I keep $2M, and pay $250 per year for it. No uninsured/underinsured - I have sufficient coverage for that on my auto policy. Mine is also renewing in a couple of weeks.
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Old 10-16-2018, 10:06 PM   #17
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I'd keep it close to my total asset. That reminds me. I need to increase the limit for my umbrella policy.
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Old 10-16-2018, 10:30 PM   #18
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I keep $2M, and pay $250 per year for it. No uninsured/underinsured - I have sufficient coverage for that on my auto policy. Mine is also renewing in a couple of weeks.
Ditto, though State Farm made me max my auto coverage before setting up the umbrella.
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Old 10-17-2018, 12:07 AM   #19
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Ditto, though State Farm made me max my auto coverage before setting up the umbrella.
Same here, googily, except I have Geico.
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Old 10-17-2018, 05:52 AM   #20
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Does anyone have access to umbrella/excess liability claims distribution data? A data distribution would tell what percent of claims you would be protected against at a given policy limit. As an example, the data may show 98% of claims are below $1M and 99% are below $2M. (In reality, I suspect the difference between $1M and $2M is less than 1% and both cover way over 99% of claims. But, just a guess.)

With one exception*(that I can think of), asset levels do not impact the above. Whether you have $1M or $2M in assets, both have the same risk of being sunk by a >$3M settlement or judgement. In other words, your risk of a large event does not change with a change in net worth. (see the exception below)

*That exception, yes you are more of a target as your wealth increases. Like bank robbers, plaintiffs tend to go where the money is.
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