Insurance Umbrella Size--How Much

[braumeister]

$2M umbrella for 2 cars, 2 drivers. Basic cost is under $300, but our state and city both put a surcharge on it for a total of another 13%.

We also have to maintain high underlying coverage on both vehicles.

 

[Markola]

Hmmm.. I guess I don't understand why anyone would maintain an umbrella policy for their entire net worth.

It is that my understanding that 401ks are not subject to collections under current Federal law and it has been this way for quite some time.

Depending on your state law, IRAs may also be protected.

I believe also that the income from Social Security and DB pensions are also protected.

If I were to get an umbrella policy, I would, at a maximum, only cover my unprotected assets -- ie. real estate, after tax accounts etc.

Perhaps the risk is that these asset protection laws could change at some point in the future perhaps.

-gauss

I’ve wondered the same but:

1) My state is among the worst at protections for IRA assets, and

2) Could a court garnish the payout of one’s retirement plan asset instead of the principle?

Our $2M policy is cheap at $45/month or so and reduces such worries.

 

[Ready]

I don’t prescribe to the idea of matching up your policy limit to your net worth. It seems somewhat random to me. I simply maintain $5M in coverage because that is the most my insurance company is willing to offer, and it cost me less than $500 per year so it’s such a small component of our overall insurance package that it’s not even worth thinking about.

 

[Midpack]

We have a $2M umbrella policy with Geico, I think the annual premium is just under $300. I considered more, but $2M was Geico’s limit without a lot more trouble. I may look into more again...

 

[Dtail]

We have DGF's 21 y.o. son on our policy, so 2m coverage in FLA is over 1k in premiums.

 

[ncbill]

Underwriting for umbrella policies seems to be a dart-board exercise. For reference, our USAA $1M policy was $348/yr for 2 drivers, 2 cars, a truck and an RV (trailer). Sold one of the cars and it dropped to $216.

Yep, from what I've read on my umbrella (& stand-alone umbrella from other companies) they only cover one vehicle before you have to pay extra.

e.g. for my policy additional vehicles are $25 each, anyone under 25 adds a flat $75...then subtract the policy credit (for having home & auto with them)...finally the result multiplied by 1.75 is what I pay for $2 million of umbrella coverage...remember that's over and above home/auto limits.

 

[Fermion]

Remember that 401K and IRA balances are in most cases protected from creditors. Also, a paid off home might still have some protection.

So you may have a $2M net worth but have $1M in a 401K and $500,000 in IRAs. Maybe you have a home worth $200K

So you have $300,000 of assets that *maybe* are at risk. By the time the appeals and everything were over, you could probably spend this down to $150k without doing anything that would be considered out of the ordinary. I don't think they can force you to tap your 401K at all.

So really, what do you need for protection in this situation?

 

[ExFlyBoy5]

It's peace of mind for me. I am a member of an attorney-only discussion board and just this AM there was a question posed by a PI attorney that is suing an 18 year old who crashed into and seriously injured a prominent neurosurgeon. The 18 YO was driving the mother's car. OVERWHELMINGLY...the other PI attorneys were very enthusiastic about having the plaintiff's attorney also naming the mother in the law suit as well, even to accuse the mother of "negligent entrustment." It was frightening to read...these are the guys/gals that give attorneys a bad name IMHO.

So, I am glad to have coverage that is over my net worth. Small price to sleep well at night. Oh, and attorneys are NOT CHEAP...at 2MM of coverage, there is great incentive for them to defend me to their utmost ability.