How much liability insurance do you carry?

[mrfeh]

We have an umbrella policy that matches our net worth.

 

[Cobra9777]

...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.

 

[Looking4Ward]

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'

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?

 

[papadad111]

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 ?

 

[Sunset]

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.

 

[Sunset]

+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

 

[2017ish]

+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....

 

[Looking4Ward]

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.

 

[bingybear]

only $2 mil... need to up it.

 

[manerac]

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.

 

[jebmke]

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.

 

[prototype]

My Umbrella Policy is for $1M which seemed reasonable back in the 90's. Definitely need to bump it to $2M.

 

[Sunset]

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.

 

[Looking4Ward]

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.

 

[Corporateburnout]

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.

 

[jon-nyc]

That seems to be a common misunderstanding. There's nothing inherent in liability policies that will protect your assets. I get that someone suing you may find it easier to settle with an insurance company than to fight a person in court who will be very motivated to save his nest egg.

But there's nothing preventing such an outcome. If you disable a moderately good earner with 20 years of earning power remaining, you can easily imagine a judgement that wipes out a million or two of liability insurance and all your reachable assets beyond that.

 

[imoldernu]

The thread strikes me funny... As everyone talks about millions and lawsuits and how to protect... The question remains: Do you know what the policy covers?

So if: Your 15 year old nephew is visiting and you let him use your all terrain vehicle to ride around the property. He takes your neighbor's daughter for a ride and they roll it on a little hill. She suffers a broken arm and a permanent eye injury.

So if: You hire the local handyman to paint a room. The ladder sinks into a floor soft spot, the ladder falls and he is injured.

So if: Aunt mary slips and falls in your driveway and breaks her hip. She has Medicare and a Supplement.

So if: You're driving 10 miles over the speed limit and cause an accident that causes death to another person.

So if: You are harmed and go to court to sue a meighbor. You lose the case and your total legal fees, his and yours, total $100K.

So if: You work part time, restoring expensive artwork. The art falls from the easel and is destroyed.

Will your policy cover the expense?

 

[Corporateburnout]

That seems to be a common misunderstanding. There's nothing inherent in liability policies that will protect your assets. I get that someone suing you may find it easier to settle with an insurance company than to fight a person in court who will be very motivated to save his nest egg.

But there's nothing preventing such an outcome. If you disable a moderately good earner with 20 years of earning power remaining, you can easily imagine a judgement that wipes out a million or two of liability insurance and all your reachable assets beyond that.

So how much of an umbrella policy do you need? is it 2x,3x,5x your unprotected net worth? what if it's not enough?

Is there any data showing how much the courts awarded plaintiffs for personal injury cases? what percentage of cases are awarded multi million dollars?

 

[H2ODude]

I've probably naively assumed our umbrella covers "everything" the auto and standard homeowners doesn't. I'd be interested to see one or our experienced attorneys or similarly qualified members answer Imoldernu's scenarios.....

 

[Aeowyn]

I have no legal or insurance background. But here is my understanding of the scenarios

The thread strikes me funny... As everyone talks about millions and lawsuits and how to protect... The question remains: Do you know what the policy covers?

So if: Your 15 year old nephew is visiting and you let him use your all terrain vehicle to ride around the property. He takes your neighbor's daughter for a ride and they roll it on a little hill. She suffers a broken arm and a permanent eye injury.

Answer: Homeowners Insurance first and then umbrella for the rest

So if: You hire the local handyman to paint a room. The ladder sinks into a floor soft spot, the ladder falls and he is injured.

Answer: I don't think so - or it depends. When you hire a contractor to do a job, there is an understanding that they carry insurance for work related injuries (or at least are responsible for them). There may be some distinction if this is your friend Joe from down the road who came to help you out and maybe you fed him pizza for his trouble.

So if: Aunt mary slips and falls in your driveway and breaks her hip. She has Medicare and a Supplement.

Answer: Yes. Homeowners first and then umbrella. The fact that she has other insurance does not negate the fact that she can make a claim against your insurance. Most medical insurance companies would also make a claim against your homeowner's insurance to minimize their costs, but I'm not sure if Midicare does this.

So if: You're driving 10 miles over the speed limit and cause an accident that causes death to another person.

Answer: Yes. Auto insurance first and then umbrella

So if: You are harmed and go to court to sue a meighbor. You lose the case and your total legal fees, his and yours, total $100K.

Answer: Had not thought of this, but I wouldn't think so. Umbrella is liability and does not cover injury to you. You went to court because you thought that someone else was at fault, but apparently the legal system didn't think so. I see no reason your liability insurance would kick in.

So if: You work part time, restoring expensive artwork. The art falls from the easel and is destroyed.

Answer: Probably not. At least not under a personal umbrella policy. Personal umbrella policies do not cover business liability. If I were doing this type of work, I would check with my insurance company to see if I could specifically include it. Most likely I would need to get a business policy to cover it.

Will your policy cover the expense?

For that last one, here is my personal experience. I used to have an umbrella policy through USAA. Then I bought a farm. USAA declared the farm a business and wanted nothing to do with insuring anything to do with the land including specifically saying that it was not covered under the umbrella. At the time I got a separate commercial insurance that let me put a $2M liability coverage on the property (before I carried $500K under homeowners and $1M umbrella).

Now I've switched all my insurance over to Farm Bureau - they are used to insuring farms and I don't have to have a separate policy to maker sure my farm activities are covered.

 

[Aeowyn]

For the art restoration gig - I had assumed that was being done as a self employed gig. If you are a W-2 employee working for someone else, the person you work for would be responsible for damages.

 

[MRG]

....snip.... stuff I have no knowledge of....
Is there any data as to how much the courts awarded plaintiffs for personal injury liability cases? what percentage of cases are awarded multi million dollars?

Don't have real numbers, but did have to sue an insurance company who's driver rear ended me. Their rep refused to settle so I had no choice. The attorney I used said the 'norm' was 3x quantifiable losses. That's about what I was awarded, of course the attorney took a third of it.

Back about '80 I served on a jury in a personal injury case. The plaintiff had an unfortunate slip(wet floor, no sign), at the top of an escalator. We the jury found the mall 90% responsible. Well then it came time to decide the amount. That poor gal didn't even get her medical bills paid for. Nothing for lost wages, pain and suffering. I was livid, argued and fought all I could. It was very clear the other folks based their opinion on a sickening bias.


Sent from my SAMSUNG-SGH-I337 using Early Retirement Forum mobile app

 

[jkern]

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.

If the attorney would rather settle for insurance coverage limits rather than a jury trial, then why not have lower limits? It shouldn't matter if you have a $500K, $1M or $2M limit if their target is your limit. Let's say you have $1M in vulnerable assets, isn't it the same going after that independent of your insurance limit?

 

[jon-nyc]

So how much of an umbrella policy do you need? is it 2x,3x,5x your unprotected net worth? what if it's not enough?

Is there any data showing how much the courts awarded plaintiffs for personal injury cases? what percentage of cases are awarded multi million dollars?

i don't have a great way of answering the question. Ideally one could look at some data to help understand the relative likeliness of awards of various sizes. Then you could determine how much you are willing to pay to mitigate the various risks. WHen I looked into doing that, I didn't find much in the way of data.

Of course the insurance companies have this data, and you can impute an upper bound for their take on your risk based on the price of their policies. One odd thing I found is that the cost per million of coverage gets lower at first as you add more coverage but then gets much higher. In my investigations, 10MM of coverage was much more than twice the price of 5MM. Yet 5MM was less than twice the price of 2.5MM. I suspect they are worried about informaition assymetries for people who are trying to buy that much coverage.

Another approach would be to try to size the risks you think you realistically face in your own world. Obviously this is an art not a science since we don't have crystal balls, but we do know some things about our lives that can help. I don't have a swimming pool, or a trampoline, or a dangerous dog, or a handgun, etc. But I do have a car, and I do have a kid, and someday I'll have a kid with a car. Killing or disabling a breadwinner is probably one of the biggest risks that I'm regularly exposed to. Given the typical salaries in this high cost of living area, such a tragedy would almost certainly consume a one or two million dollar policy with plenty of claim to go.

So, repeating what I said before, I don't have a great answer. I will say that I'm more comfortable with a $5MM policy than I would be with 1 or 2. Like your mileage, your risk tolerance may vary.

 

[harley]

Since there seem to be some fairly knowledgeable insurance wonks on this thread, let me throw this one out there for everybody. Anybody know of a company that will cover homes in FL, MD, and VA, with FL being the primary residence? When we started snowbirding and changed our primary residence to FL, our insurance situation went to hell in a hand basket and I'm having fits trying to get it set back up properly. Florida homeowners companies don't seem to extend coverage second homes in other states, and since liability insurance normally is based from the primary residence I've ended up (unknowingly until recently) with no liability on the other homes. And not having liability precludes being able to get umbrella insurance. I've gotten some quotes for policies with liability on the second home, but the total insurance bills are going to be so high as to negate the tax savings of living in FL. It might actually be a better deal financially to make MD our primary rez and just insure the FL home separately.

Is anybody else in this situation, and if so, how did you deal with it?