Umbrella insurance levels while ER ?

[MJ]

Originally Posted by omni550

I have had umbrella liability insurance for 5-6 years. I was telling a friend of mine that he might want to consider getting some for himself, as his net worth is starting to grow.

When he called his agent to get pricing on unbrella liability insurance -- she quoted him $200 for $1 million coverage and said for only $10 he could increase his personal liability coverage to $1 million.

Can anyone explain the difference between umbrella and personal liaiblity insurance and why the huge difference in cost?

Thanks,

omni

Your umbrella goes wherever you (not sure about international) and are covered for any civil lawsuit, home, auto or other. If you increase your personal liaiblity on your auto or house insurance then you are only covered for lawsuits associated with your car or home.

MJ

[justin]

Originally Posted by Cute Fuzzy Bulldog

What I'm getting at, aside from the umbrella, is there a strategy or method for hiding or improving transparency that you're "sue-able". Does putting the money in a trust, or some specific investment vehicle make it harder for an investigator to find?

Surprised no one else said it. Don't buy a $60,000 Lexus!!!

[cute fuzzy bunny]

No ****, sherlock...

[CybrMike]

Originally Posted by Cute Fuzzy Bulldog

What I'm getting at, aside from the umbrella, is there a strategy or method for hiding or improving transparency that you're "sue-able". Does putting the money in a trust, or some specific investment vehicle make it harder for an investigator to find?

A good estate attorney can help you construct LLC(s) or perhaps a limited family partnership that makes it very difficult for people suing you to collect money. Attorneys cost money though so you might want to weigh it against your net worth. I've easily spent $5000 or more getting my asset protection setup.

It also makes things a bit of a hassle when obtaining brokerage or bank accounts, as they all have to be in the LLCs name to get the protection.

At the end of the day though, it helps me sleep at night.

[bongo2]

For a contrary view think about this. If you are paying $200 for a $2m umbrella, then, if your insurer is writing at break-even, you have about a 1 in 10,000 chance of using the cover. That's a little low because you may use it for less than the full amount, but, on the other hand, there is quite a bit of expense and risk load in your premium that makes the probability even lower. On balance that estimate probably isn't that bad. Now, what is your chance of dying this year? Maybe 5-50 times that 1 in 10k? I've debated this in my head quite a bit, but for now I just drive carefully and don't worry about it.

[cute fuzzy bunny]

This is one case where you cant self insure. Its like losing your home with no insurance...five times in the same day.

Completely unrecoverable.

Well worth the two hundred bucks.

Odds of it happening have a lot to do with your lifestyle. If you never come out of the house and only drive 10 miles a week, maybe a low chance of hitting a major liability...until someone trips on a crack in your driveway or falls in a sinkhole in your front yard. You like to drive 40,000 miles a year and invite strangers to play in your yard, and let all the neighbor kids play with your .44 and some live electrical wiring while in your olympic sized pool...while you sit inside and make pitchers of margaritas...ehh...get the insurance twice.

[free4now]

It's hard to find much information about incidences of various award sizes, but here's one page that gives pie charts breaking down the different sizes of awards:

http://www.verdictsearch.com/jv3_news/trial_trends/

It's almost impossible to read the small type, but it seems like truly huge awards do happen more often than I had thought.* I'm guessing they studied mostly cases involving deep pocket institutions rather than cases of individuals found liable.

I must admit to being surprised that a significant amount of the awards are really huge, and that does make me reconsider whether to get umbrella coverage.


Another interesting site is morelaw, which lists actual verdicts in detail for various categories. Here is the collision verdicts:

http://www.morelaw.com/cases/Collision.asp

From reviewing those, it looks like when the defendant is an individual the awards are almost always low (under $100k), and that almost all the million dollar plus awards are against institutions. But there isn't enough data to draw any firm conclusions.

[Sarah in SC]

So the real-life examples in this thread prodded me to an embarrassing conclusion upon chatting with ins. broker. I've been paying $358 per 6 mos for (ahem) really low coverage (25k,50k,25k) on the POS fleet. As it turns out, the max (250k,500k,250k) coverage is (ahem) $387 per 6 mos (for 2 cars & truck). Yeah. I'm an idiot.
So, thanks a lot for the impetus to get this coverage raised! And, interestingly, the take in SC from the broker is that umbrella coverage makes it more likely that the other side will go for a higher award, so it is unofficially not recommended.
Sarah

[cute fuzzy bunny]

A nice trick with liability is to offset the cost by partially self insuring.

I raised my car and home deductibles to levels at which I would probably rather pay out of my own pocket than file a claim. Then raised the liability and instituted the umbrella. Net cost was about the same. I'm covered for moderate to substantial losses, but I'm not overpaying for it.

I'd rather have the coverage and have the "other side" go for a higher award that the insurance company pays than go for a lower award that I pay....

[spike]

Just had a business chat with my lawyer and I asked him his opinion if I should keep my 1m umbrella policy. He said keep it until you retire, it cost me about $368 a year. But if I owned rental property I would keep it until it was all sold.

I think I'll keep it until the premiums get to high or I retire, which ever comes first.

[cute fuzzy bunny]

His canned advice may have been appropriate for the average retiree who has a small nest egg, a paid off house and social security income.

Might not be as good for someone with $2M in the investment account, a paid off house, and social security income...

Just determine your own level of risk tolerance vs the cost. Not losing everything because you ****ed up once for a second is usually worth a couple of hundred bucks a year. Most people pay more than that for a couple of months cell phone service...

[Finance Dave]

Originally Posted by cute fuzzy bunny

Then you'd be pretty much wrong again

The cost is low.

We have $2M in coverage. I'd have to go look for the exact number but it costs about $200 a year on top of about $200 extra a year total over our house and three cars as you have to carry a minimum liability on your home and cars thats higher than what most people carry.

While I agree it's relatively inexpensive, we should give people the entire story. We should mention that to have such an umbrella, most companies require you to increase the limits you have on auto policies. This varies state by state, but in Indiana where I live, I had to double the state minimum protection on my auto policies to get the umbrella in place. Thus, the overall cost of the umbrella should not be considered to be only the policy, but also the incremental cost to the auto policy.

Dave

[cute fuzzy bunny]

Well noted, although I mentioned in that in the portion of the post you quoted from last year.

For me it was about $50 extra per car for 3 cars and about $50 extra for my house to bring the liability up to the required level...$200 plus $200 as mentioned.

You're also new and dont realize that the fellow I was responding to was allegedly a wife beater who married his wife for her paycheck, then immediately divorced her when she got cancer. He also gave bad financial advice on a regular basis.

Would you like to see a recent news article where he's being interviewed in the front yard of his great value waterfront property up to his knees in the flood waters? It seems that this was problematic since he bought a home on a river in a floodplain and had no flood insurance. Funny, since he couldnt stop telling us what an expert he is in real estate...

[haha]

I think that if one is retired and is not sure that all sources of his income are invulnerable, he really should not consider going without maximum liability limits on home and car anyway. And to me, no way would I go without an umbrella.

We often mistakenly weigh only the frequency of an event- like hitting and killing or maiming a young neurosurgeon with 6 kids. We also ought to look at what this event would do to our financial picture should it occur. If it costs $200 per year for 40 years to look after this risk, to me that would be $8000 well spent. Our conscience might be in better shape too.

Ha

[Porkfat]

In my opinion, Umbrella insurance is a necessary budget item for ER. You rpobably have a pile of assets that are not subject to state homestead protections and for a relatively small sum, you can assure that even if you are sued, there are excess funds for both settlement and attorneys fees. I spend about $300 per year for $2million in umbrella coverage and would not be caught without it. Check with the agent who handles your homeowner's insurance - it can often be purchased as an adjunct to your homeowner's policy. It should also provide excess coverage for your work on charitable boards, since you are now volunteering instead of working! Check it out, but I believe it is a necessity at a nominal cost.

[cute fuzzy bunny]

Originally Posted by haha

hitting and killing or maiming a young neurosurgeon with 6 kids

Doesnt even need to be that exotic. Taking my kid trick or treating last night, I observed that my next door neighbor had left a hose running down and diagonally across the steep set of stairs to his front door. My wife also noted his fresh oxygen tanks next to the front door "Knock those over and damage the valve, and its a rocket..."

We mentioned both to him. He seemed to have not really thought about the implications and said he'd pull the hose in and take in the tanks. A couple of hours later when trick or treating was winding down, I peeked over and saw the hose and cylinders still in position...

[JohnDoe]

I guess I should look into this insurance?

My home and car insur are with the same firm. I'm 38 and plan to retire at 50. I have 300k in retirement savings and 500k net worth.

Should I consider a $1M policy or wait until my net worth is $1M?

[samclem]

Originally Posted by cute fuzzy bunny

Taking my kid trick or treating last night, I observed that my next door neighbor had left a hose running down and diagonally across the steep set of stairs to his front door. My wife also noted his fresh oxygen tanks next to the front door "Knock those over and damage the valve, and its a rocket..."

Sounds like Gabe could have made you guys a fortune. If he'd taken one for the team on your neighbor's steps, you'd have another Lexus by now. Put that boy to work!

[ziggy29]

Originally Posted by JohnDoe

I guess I should look into this insurance?

My home and car insur are with the same firm. I'm 38 and plan to retire at 50. I have 300k in retirement savings and 500k net worth.

Should I consider a $1M policy or wait until my net worth is $1M?

Sounds like you have enough to get at least $1M already. Judgments aren't necessarily limited to your net worth. If a judgment exceeds your net worth (or at least the assets which aren't judgment-proof by law according to your state), they can still order you to pay up from future income.

Plus, buying an umbrella is like having a strong legal team "on retainer." When someone is trying to get $5,000 out of your insurer, they aren't likely to fight hard since it might be more costly to fight than pay up. But when hundreds of thousands are on the line, their lawyers will be on it.

One thing to remember about an umbrella is to not tip your hand and let the party suing you know you have it. If they know there are deep pockets backing you, they'll try even harder to get more out of you.