inquisitive
Recycles dryer sheets
- Joined
- Apr 7, 2008
- Messages
- 223
Although people often cite figuring like this as a guideline for sizing umbrella policies, this is not how it works. A $1 million umbrella policy does not protect your $1 million net worth and then pay any claims to protect your $1 million. The policy will pay claims up to the limit, then you are responsible for any overage. So your $1 million policy and $1 million net worth would both be used to pay a $2 million claim, leaving you with zero. Likewise claims over $2 million will wipe out your policy and your net worth and leave you owing any overage.
To size an umbrella policy, the relevant number is largest claim you want to protect against, not networth. Now people with very low net worth may not bother with umbrella protection because they are poor targets for litigation, there just isn't much there to win. But that doesn't mean as net worth grows you need a corresponding size umbrella policy. It means once your networth is substantial enough to be worth bothering to sue you, you need umbrella coverage to protect against the largest claim you could reasonably face.
Most actual cases I've read either involved gross negligence on the part of the insured or a high-risk situation such as owning a trampoline, having paintball games in the backyard, etc. So for a careful person without these unique risks, I guess the question is how much are the claims usually? And since the insurance company is hiring the lawyers, how much of a policy will be enough for them to put in sufficient resources to defend in a case, even if that policy is well below net worth?
Does the insurance company gather data on the individual in determining the cost of a policy? And is it really true that someone can sue for future wages?
Regarding the family LLC or titling, don't these affect ability to take tax deductions, or is it on non-personal property?