speaking of liability protection

[lazygood4nothinbum]

not sure if this is correct catagory but all the umbrella talk got me thinking about liability & protecting assets.

i've got an old friend coming down for what i thought was a few days but somehow got extended to two weeks. i originally told him (before knowing how long i'd have the pleasure of his company) that he wouldn't need a car, we could just double up on mine.

in the past i've had no problem with that as i didn't have much assets to attack. but does having this money now in my name prevent me from being so generous with my things? if he got in an accident, could my assets be attacked?

 

[JustCurious]

I what state do you live?

 

[JustCurious]

and how much liability insurance do you have?

 

[JustCurious]

where are your assets? are they in qualified retirement accounts? Do you have any substantial assets not in a qualified retirement account?

 

[lazygood4nothinbum]

i'm in florida. i don't have an umbrella policy yet. just shopping it now. $300k on the house & i think similar on the car. less than 1/3 of the cash in retirement accounts. house protected by homestead for now but i'm planning to downsize (in cost, not in actual size) within 5 years which would free up more assets to be attacked.

 

[JustCurious]

Lazy, to my knowledge, Florida is the only state in the country where the answer would be "yes."

As far as getting an umbrella policy, where are the remaining 2/3 of your assets? How much money are we talking about.

In my opinion, most people simply don't need an umbrella policy. It is pushed by insurance companies because it is so rarely ever needed, and yet the collect premiums from so many people it is very profitable.

I should add that if you have 300k in liability protection, the chances of something happening where you would NOT have enough coverage is very very slim indeed.

 

[d]

most people simply don't need an umbrella policy

i'd seriously disagree ... it's cheap protection. while true that ever needing it might be a slim chance, it's one most cannot afford to take.

 

[JustCurious]

d, let me say that I can only speak for Florida, which is where I practice. But in my experience as a personal injury attorney for more than 11 years, I have only seen one case where a defendant had to pay money out of pocket over and above the policy limits. And I have seen and been involved with hundreds of cases.

Bear in mind that I usually only get involved AFTER a lawsuit is filed. There are many, many cases that are settled presuit. The point is that the number of cases where someone pays over and above the policy limits is so small that I deem it to be statistically insignificant.

Also bear in mind that in Florida, a person has many protections... homestead (unlimited), retirement accounts, jointly held marital accounts, all wages if you are head of household....

Insurance companies know this. Personal injury attorneys know this. This is why almost every single case that I have been involved with has settled or resolved for the policy limits, or less.

The only people out there pushing umbrella policies are the insurance companies who use scare tactics to scare people who are risk averse (like those on this board), and they cite to the worst case scenario which is technically possible, but EXTREMELY unlikely, to justify buying umbrella policies which are very very profitable because they have to pay benefits so rarely.

By the way, I know from first hand experience that having high liability coverage, or having an umbrella policy, makes it MORE likely that you will be sued because the high insurance policy makes you attractive to personal injury attorneys who know that they can only collect up to the amount of coverage.

 

[Martha]

Lazy, though what JustCurious makes a lot of sense, I would still get the umbrella. It is not at all expensive. And yes, if your friend has an accident with your car you can be liable. The nature of your assets are such that some are not going to be exempt from creditors (specifically, the assets you are inheriting from you mother may not be exempt).

There is another thread going right now where the topic has also moved to asset protection:

http://early-retirement.org/forums/index.php?topic=12396.msg228066#msg228066

Florida is very generous in protecting its residents from creditors.

 

[lazygood4nothinbum]

thanx all. i was also reading the other threads which got me to think about my friend's visit (didn't want to hijack other thread). in the past i just would have given a visitor permission to use my car. now maybe i can't.

martha is right that i am concerned about the inherited money. but also the house seems should be a concern. because even though it is homesteaded and so protected for now, i'm planning to sell and only put 1/2 that back into another homesteaded property. or maybe even none if i decide to become a vagabond, which looks better & better the more i look at it. and that move would then put most all my assets at risk if i'm reading all this right.

i agree also that justcurious is probably right about attracting lawsuits and the unlikelihood of otherwise being held liable. good points. but i remember people thinking how "crazy" my mother was to "over insure." back then it was with a long-term health care policy.

 

[laurence]

When we say, "attract lawsuits" are we saying that lawyers have access to insurance company records, and have a phone book of umbrella policy holders they can just dip into for that next yacht? Or are we saying that if you make it known....

I got the $1 Mil policy because I felt it was worth the small premium to protect my assets from that very unlikely but possibly devestating occurence. I believe it's been said on this board before that the original idea of insurance is to protect against financial ruin, and you shouldn't look for an ROI from it.

Of note, I had to up some of my existing homeowners insurance to qualify for the umbrella, that raised an eyebrow, but it only added a couple of bucks so I let it slide...

 

[audreyh1]

Yeah, that's what I want to know. How can you "attract" lawsuits? How can someone know if you have an umbrella policy?

Audrey

 

[JustCurious]

When we say, "attract lawsuits" are we saying that lawyers have access to insurance company records.......

Laurence, I did not use the phrase "attract lawsuits." Here is what I said: "By the way, I know from first hand experience that having high liability coverage, or having an umbrella policy, makes it MORE likely that you will be sued because the high insurance policy makes you attractive to personal injury attorneys who know that they can only collect up to the amount of coverage."

Update: I stand corrected, I see you were quoting lazy.

 

[lazygood4nothinbum]

sit or stand, yer still in the hot seat. what's the difference please between what you said

having an umbrella policy, makes it MORE likely that you will be sued because the high insurance policy makes you attractive to personal injury attorneys

and how i distilled that to "attracting lawsuits"?

or if i did not misunderstand what you were saying can you please address laurence's question. thanx.

 

[Peaceful_Warrior]

Especially in such a litigious country... and considering I'm in CA where the car/property values are even higher, last thing I want is to worry about getting taken for several hundred thousands when I could have paid $10 a month for that protection.

Also, the umbrella gives me some flexibility with other things, such as when I start up a home based business and don't yet have corporate structures in place (i.e. not enough income that paying the $800 CA LLC fee makes sense).

i'd seriously disagree ... it's cheap protection. while true that ever needing it might be a slim chance, it's one most cannot afford to take.

 

[donheff]

The insurance companies are pretty ruthless with their money. I can't believe they make it easy for plaintiffs' attorneys to find out who has umbrella policies so they can cherry pick their suits. On the other hand, it is probably quite easy for an ambulance chaser to find out that you have lots of personal assets so they can cherry pick people with money. Thus it would appear even more important to carry an umbrella policy for them.

 

[chinaco]

I have heard that annunities and life insurance can be used to shield assets in some states. Can anyone confirm?


Also has anyone found a site that shows asset protection strategies state by state?

 

[Empty Pockets]

In Minnesota I know the owner of the car is responsible for it if he gives anyone else permission to drive it. The owner is the one who gets sued.

I would be very cautious who I let drive my vehicles.

I don't know why anyone would question having an umbrella policy if you have the assets to protect. I would not count on ANY legislation protecting my assets, they may be protected under statute, but it may cost you a fortune in court costs to prove that point.

I think the most valuable part of any liability policy is the defense coverage that it provides in addition to the amount of liability coverage.

It's cheap peace of mind and as far as I'm concerned it's the best buy in the insurance industry.

 

[laurence]

sit or stand, yer still in the hot seat. what's the difference please between what you said

and how i distilled that to "attracting lawsuits"?

or if i did not misunderstand what you were saying can you please address laurence's question. thanx.

Ditto, I'm trying to see where the hook is in your statement, JustCurious. Are we saying that once the accident happens, the attorney files for discovery (or whatever the right term is) and finds out about the policy? At what point do you become more attractive?

 

[FinanceDude]

I pay $226 a YEAR for $2 million coverage........to me, that's cheap coverage.

Not that I am an accident waiting to happen, but you know if that Girl Scout selling cookies slips on a little patch of ice on my sidewalk, and breaks her leg, I'm getting sued.......

 

[tryan]

Tried getting an umbrella but no one will talk to you if you have >=6 rental properties.

Just don't qualify ... yet.

 

[Empty Pockets]

Tryan, try taking out a separate General Liability Policy on just the rental properties. You should be able to get a $1,000,000 policy for around $250.

Then check and see if a company will offer you an umbrella.

With that many rental units, you may want to keep them off your personal liability policy anyway. Then slip & falls, and other misc. claims will not impact your Homeowners Policy.

 

[spideyrdpd]

My company has the umbrella with over 6 properties. Maybe you need to shop insurance ?

I have read that is one advantage of leasing a car. Its not titled in your name.

I would also wonder the advantages if your not involved in things that would be considered litigeous ?
Although florida has a lot of people being hit by cars lately. I wonder if they sue and what they get ?

 

[JustCurious]

Laurence and Lazy: let me explain what I meant, and let me dispel some misinformation. First, there is no list for plaintiff's attorneys to find out who has an umbrella policy. That is ridiculous, the insurance companies don't make their list of insureds public information. Second, even if an attorney were to somehow find out that you have an umbrella, it's meaningless information unless you do something to create liability, ie., cause a serious motor vehicle accident. The mere presence of insurance means nothing without liability.

As far as my statement, I did not mean that having umbrella coverage or high liability limits somehow makes you a target, or an "attraction" for lawsuits in the abstract. That is simply not true. What I meant was, in the event you did have an accident or do something which may cause you to be liable to someone else, and in that event, and only in that event, if the injured party gets a lawyer and the lawyer finds out that you have very high liability coverage, it then becomes more likely, not less likely, that you will be sued. Because if you had say a 10k policy, it is likely that the insurance company will simply offer the limits and the plaintiff's attorney will settle, knowing that it is unlikely he or she will ever collect any money from you. However, if you have a 500k policy, it is unlikely the insurance company will readily agree to pay such high limits without you first being sued, and the plaintiff's attorney going through the litigation process and setting up the real possibility that you will lose at trial. Only then (in my experience) will insurance companies agree to pay a large settlement on the eve of an impending trial. Of course this is after you have gone through 2 plus years of litigation because the insurance company doesn't want to pay it's high limits. Ironically, if you had low limits, the case may have settled without a lawsuit being filed.

Some of this may not be intuitive if you are not familiar with the insurance defense litigation system. Also, I freely admit that if you have substantial non-exempt assets, you should get high enough liability limits so that you feel comfortable, even though the chances of needing such high limits, in my experience, is very remote.

In my experience, in Florida (a very debtor protective state) it is the extremely rare situation where someone has any significant non-exempt assets such that the plaintiff's attorney wants to try and collect against the individual defendant. 99.5 percent of the time, it's the policy coverage limits that control.

 

[laurence]

Well JC, we simply pointed out how your posts came across. I think we were just holding up a mirror, as our thoughts were exactly what your latest post has made clear. So you are telling us from this latest post that "Ironically, if you had low limits, the case may have settled without a lawsuit being filed."

-but it may not have. So each person has to weigh the inconvinience of a court case because the attorney discovered your umbrella insurance vs. the risk he sues anyway and takes your house, your cars, garnishes your wages, etc.

You admit yourself you come from a state that is not friendly to these types of lawsuits. I'm in California - lawsuit capital of the world. So let's see, a couple of bucks and a hassle of a lawsuit vs. the chance of losing everything....I hear what you are saying about probably "getting over" on the plaintiff, but the 1% chance of being sued isn't much comfort if it's you that gets served!