How much liability insurance do you carry?

[Cobra9777]

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?

Sorry. I don't fully understand your question. But in general, yes, the intent of the statement by my agent was to offer a rationale for the oft-quoted asset-based umbrella coverage, and to prevent me from buying more coverage than warranted by real-world percentages. I cannot explain why... but he was very clear that liability coverage equal to or slightly exceeding exposed assets was adequate to protect personal assets in the vast majority of personal injury cases. Apologies if I misunderstood your question.

 

[explanade]

So what are the ballpark figures for the premiums, say per $1 million in umbrella?

 

[Corporateburnout]

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.

I found some information on injury settlements and jury awards in my county which is in a high cost of living state:

# of cases 151
Average award $741,913 (inflated due to a $33 Million award against a gangster for wrongful deaths and few 5-7 Million medical malpractice awards)
Median award $15,500 (probably a better stat than average)

We don't have a swimming pool, no kids in the house, no dogs and a perfect driving records. And since I don't hire any uninsured contractors we fall in the low risk pool and our current $1 Million umbrella to supplement the basic liability coverage would be sufficient.

If we get a judgement in excess of $1.5 million which based on the above data is unlikely and if they decide to come after our unprotected assets we should still be OK.

 

[Corporateburnout]

So what are the ballpark figures for the premiums, say per $1 million in umbrella?

My premium is $368 for 1 Million policy.

 

[523HRR]

$5 million umbrella coverage for $395 annually

 

[jon-nyc]

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?

If I were you I'd post this as its own thread, here and at Bogleheads in the personal finance subforum. You can't be the only person dealing with this.

 

[MooreBonds]

I also have no legal background...here are a few other things to consider:

Originally Posted by imoldernu
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

Wouldn't this also fall back on the 15 year old's parents? If your minor child injures someone, doesn't it revert to the parents' insurance? So the lawyer would sue both you and your nephew's parents. Unless your ATV was defective, I would see the lawyer making a claim that the bulk of the fault lays with the teen/teen's parents. But you know how juries can be...

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.

But if the lawyer can show that you (the homeowner) knew that you had a soft spot in the floor, or were somehow negligent in maintaining your house, there could be some liability exposure. Workman's Comp would cover your injury while working - but your WC insurance carrier (if the handyman even had it) would possibly argue that the injury was caused solely by your floor. It's not like the handyman was doing acrobatic maneuvers on the ladder and the handyman didn't grip his ladder rung tight enough and fell - he only fell because of your bad floor.

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

As noted, I'm not a lawyer or insurance industry person, but I do know that there is a very bad result if an insurer can prove you were negligent in your actions. And if negligence is involved, some liability protection could be negated. Check your umbrella policy. I say this based on the LLC corporate designation - legally, an LLC shields your personal assets from the activity of the business...UNLESS someone can prove criminal negligence or intent of negligence. In that scenario, your LLC does not shield your personal assets. In the same way, there might be some catches where insurance policy may/may not cover criminal activity or negligence. And I don't know what may define "criminal activity" - perhaps a certain level of felony?

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.

Getting back to negligence - the lawyer would try and argue that you placed it on the easel in a negligent, haphazard way.

In all of the cases, it costs the lawyer very little other than their own time to sue you and claim negligence in a variety of situations. Whether you were truly negligent or not is in the eye of the jury. But they will still probably at least try that angle. If the lawyer is successful in just 10% of the cases proving negligence, that one payday is enough to pay for the other 90% of the time that they fail in proving negligence.

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.

This is what worries me - not your particular case of the jury being "biased", but a random pool of jurors feeling much more sorry for the plaintiff than their injuries warrant, and 'sticking it to the wealthy retired guy' to make up for the injuries. You or your insurance company have no way of knowing what those 12 random people will think or feel when evaluating a decision. Or even a judge's feelings/view, if it's a solitary judge presiding over the award.

 

[explanade]

My premium is $368 for 1 Million policy.

$5 million umbrella coverage for $395 annually

Quite a disparity there.

What are the carriers involved?

 

[Aeowyn]

For the case of someone self employed restoring artwork and damaging a painting...

Getting back to negligence - the lawyer would try and argue that you placed it on the easel in a negligent, haphazard way.

I have no doubt that you could be sued for this. But I rather doubt that a personal umbrella policy will cover you. Most likely you will need a commercial policy to cover this activity.

 

[Corporateburnout]

Quite a disparity there.

What are the carriers involved?

You have to compare the total cost of policies including home and auto before determining the real cost. Some companies will charge higher premiums for auto and home and lower for umbrella or visa versa.

 

[Options]

My premium is $368 for 1 Million policy.

+1
That's about what my premium is for $1M, carrier is Pacific Specialty out of Menlo Park, CA. Ins broker found them for me. They require underlying 100/300 limits on auto and $300K underlying homeowners policy.

 

[travelover]

+1
That's about what my premium is for $1M, carrier is Pacific Specialty out of Menlo Park, CA. Ins broker found them for me. They require underlying 100/300 limits on auto and $300K underlying homeowners policy.

We pay $176 a year for $1M, two people, similar limits on home and auto, no boats, pool or higher risk vehicles.

 

[explanade]

Do you have to have the car, homeowners and umbrella from the same carrier?

That is, do the umbrella carrier require that they also get the car and homeowner too?

 

[travelover]

Do you have to have the car, homeowners and umbrella from the same carrier?

That is, do the umbrella carrier require that they also get the car and homeowner too?

I have all three from the same carrier, but I shop insurance that way as it seems to be less expensive and hopefully easier to coordinate if I filed a complex claim.

 

[Options]

We pay $176 a year for $1M, two people, similar limits on home and auto, no boats, pool or higher risk vehicles.

Yea but I'm in Lost Angeles, where they sue you for breathing...

 

[Corporateburnout]

Do you have to have the car, homeowners and umbrella from the same carrier?

That is, do the umbrella carrier require that they also get the car and homeowner too?

Most carriers will not insure Umbrella without auto and home.

 

[travelover]

Yea but I'm in Lost Angeles, where they sue you for breathing...

I'll trade you for Michigan winters.........

 

[phil1ben]

My personal belief is that insurance is to protect against unforeseen circumstances. It is the expense that rises to the top of my "don't like" chart. But it is a necessary evil.

On the liability side of the equation I carry a 10MM umbrella which did not need to be specifically underwritten through Chubb Insurance. Chubb is able to combine all of our properties (except two) into a single policy. The exception is a beach house and a rental property at the beach in NJ. They could not be combined because of the need for flood insurance and excess flood insurance so they are stand alone policies. Both were damaged in hurricane Sandy. I complained for years about the high premiums Chubb charges but they were wonderful in dealing with those claims so I will stay and pay the higher premiums (which I estimate at 15-20%/year). The umbrella covers multiple properties, cars, boats, motorcycles everything. As an aside my auto, motorcycle and boat underlying coverage IS NOT THROUGH CHUBB but they provide the umbrella. On the property side (also through Chubb) I raised the deductibles years ago to $10,000.00 which resulted in a substantial savings. The increase to a $20,000.00 deductible did not result in a substantial savings so I did not go higher....or I would have. High deductibles are not for everyone but they work for us. If the claim is above the deductible amount, the deductible does not apply to the claim with Chubb. I just cannot make a claim below the deductible amount. I will not be making a claim for under $10,000.00.

 

[2017ish]

I also have no legal background...here are a few other things to consider:

....

But if the lawyer can show that you (the homeowner) knew that you had a soft spot in the floor, or were somehow negligent in maintaining your house, there could be some liability exposure. ...

As noted, I'm not a lawyer or insurance industry person, but I do know that there is a very bad result if an insurer can prove you were negligent in your actions. And if negligence is involved, some liability protection could be negated. Check your umbrella policy. I say this based on the LLC corporate designation - legally, an LLC shields your personal assets from the activity of the business...UNLESS someone can prove [PERSONAL] negligence .... In that scenario, your LLC does not shield your personal assets. In the same way, there might be some catches where insurance policy may/may not cover criminal activity or negligence. And I don't know what may define "criminal activity" - perhaps a certain level of felony?


[/I]

...

True, intentional misconduct, which is likely criminal as well, typically isn't covered. But, essentially all liability insurance covers negligence. Usually, if you aren't negligent, there would be no liability in the first place.

Consider the physician or attorney who is sued for malpractice, or the driver who rear ends a dumptruck and is sued for denting it. Negligence is the issue in each case. This is true for just about any liability situation faced by individuals. (There are areas of strict liability, of course, but they are outliers) This is the reason for insurance--to spread the risk of having to pay a, unexpected, amount for negligence. (A pediatrician doing nasty things to his/her patients or a divorce attorney tanking H's case because he is in bed with W are likely to not be covered, because their misconduct is other than negligent.)

The LLC (and corporation) situation is distinguishable. It is not a matter of insurance law, it is a matter of agency not removing responsibility for direct culpability. For example, any mop-wielding employee of, say, Walmart could be personally sued for negligently failing to post a "wet floor" sign, which causes a customer to slip and fall. Doesn't usually happen because of pocket depth. OTOH, when you have a small LLC and the mop-wielder is the sole owner, his/her personal negligence is going to be more important--especially if the LLC is underinsured.

 

[explanade]

Most carriers will not insure Umbrella without auto and home.

From the same carrier or from other carriers?

 

[Car-Guy]

We pay $176 a year for $1M, two people, similar limits on home and auto, no boats, pool or higher risk vehicles.

Very similar here. The last few years I've been paying $200 per year for a 1m policy. It doesn't seem to matter what vechicles I drive since my daily drivers are all late models and include a couple of 4 wheel drive trucks and a C6 Corvette. Interesting though, the insurance on my Vette, with the same levels of coverage, is cheaper than the insurance on any of my other cars or trucks. Probably has something to do with being in my 60's rather than my 20's.

 

[45th Birthday]

Your net worth is irrelevant. Or at least not directly relevant. You aren't insuring the balance. If you have x million of insurance and are sued for x+1, you have a million of your own money at risk.

If there's any rule of thumb about how much liability insurance to have, it would be 'what might i be sued for?' Obviously a hard question to answer.

I completely disagree. Umbrella coverage is in essence insuring against a catastrophic loss. How much can you lose? Your net worth. You could lose less, but you can't lose more, realistically. I have $10 million, and this is short by a fair amount of my net worth. I would like to have more, but this would require going into the re-insurance market, which is a hassle and quite expensive I've been told.

 

[jon-nyc]

But the judgement can be equal to your liability coverage plus your net worth and you're still broke. That's my point when i say theres nothing magical about insuring just for your net worth. Umbrella policies are decidedly *not* net worth insurance. They just move your assets up the capital structure.

 

[phil1ben]

I completely disagree. Umbrella coverage is in essence insuring against a catastrophic loss. How much can you lose? Your net worth. You could lose less, but you can't lose more, realistically. I have $10 million, and this is short by a fair amount of my net worth. I would like to have more, but this would require going into the re-insurance market, which is a hassle and quite expensive I've been told.

I was told the same thing. That umbrella over 10MM would be reinsurance through Lloyds which is much more expensive.

 

[meierlde]

But the judgement can be equal to your liability coverage plus your net worth and you're still broke. That's my point when i say theres nothing magical about insuring just for your net worth. Umbrella policies are decidedly *not* net worth insurance. They just move your assets up the capital structure.

As pointed out earlier its net worth less 401ks and in some states IRAs, and also in some states your home equity. Also the remainder of your pension, and SS. So it really is net worth reduced by these things.