Umbrella insurance levels while ER ?

[MJ]

I have my auto and $1M umbrella from geico. Since I am selling my house and will not have an officical abode for awhile, I called to find out if I will lose my umbrella policy since I will no longer have the supposedly required $300k liability from my home insurance and I don't need any rentor's insurance yet. I was told, I would not lose my umbrella policy. This means is that any lawsuit from an outside auto or non-auto related incident will be covered by 100% of my umbrella coverage while any lawsuit from a home related incident will be covered by $700k (less $300k deductible) umbrella coverage.

 

[peteyperson]

Hi Kramer,

Forgive me, but from what you've said (maxing out the cover on the car, etc.), it seems that you want to have the umbrella coverage as the cover you have now isn't enough for your own peace of mind.

Just my take.

Petey

I have thought about getting an umbrella policy but do not have one.  Mainly because I am a renter, and I do not have renter's insurance, and I think this would be required.  I could replace my household items with one paycheck, so I don't see a need to insure them.  There is some diminishing risk of fire damage, if I did something negligent, but I could write a check for that low probability event, too (my building is mostly concrete).  But I am concerned about the big liability events.

As an apartment dweller, I have no yard, etc., and I am not self-employed, and so almost all my risk of being sued (95%+) for a big liability event is something happening while I am driving.  I raised my auto liability limits to the max, $500K total but it is only $250K per person.  I asked and I can't get them raised more.

Any renters with umbrella insurance?  Do you also have renter's insurance?  I would be willing to switch to an auto insurance company that had higher limits, if anyone knows of one. . . I looked at Geico and their max coverage was only $300K per accident.  Ideally, I would like to have $2M of coverage.

Kramer

 

[SteveR]

We have a $2M umbrella to cover above and beyond the liability insurance on our house, cabin, cars and cabin "toys". We pay about $300 per year. It might attract some "flies" but not having it could knock a huge hole in my FIRE plans.

I see it as FIRE insurance.

 

[Martha]

If someone knew you had an umbrella policy, would he/she be more or less likely to sue?

How will they know until they sue?

 

[cute fuzzy bunny]

Private investigator they hired, or they pay $25 to pull your credit report from one of the internet sites, do a little follow up after that...you'd be surprised how much you can find out for free or for just a few bucks.

By the way, nice pants!

 

[kramer]

Petey, yep, I would definitely like to get the umbrella, even though I am renting.

We are renters, have renter's insurance, and an umbrella policy of $1M. Will up it to $2M on renewal. Underwriter is Chubb. Total cost for both policies here in NYC is $1000 per year.

I personally would not get this if it is going to cost me $1K since the renters insurance is mostly worthless to me, but I can see if they would offer it to me for cheaper in California. I pay just $400 for my $500K of auto insurance liability now.

I am going to investigate going with Geico again. I am a Berkshire shareholder and that gives me an 8% discount.

Kramer

 

[free4now]

I don't have an umbrella policy even though I have more assets than my $250k/$500k car insurance covers me for.

I figure the odds of me being successfully sued are just not high enough to make it worth the approx $200 cost I was quoted.  I keep a pretty low profile, don't have people on my property very often, drive safely, and don't do things that I know might be hazardous to others.

From what I have read, the great majority of lawsuits seek only the insured amount, so you don't really get much benefit by increasing the insured amount.  In fact there might be a good argument to be made that increasing your insurance way beyond average does make you more likely to be sued.

I think having high coverage auto and condo insurance is a good compromise:  it doesn't cost me much extra and the high coverage is a strong enough motivation for the insurance lawyers to do a good job defending me, which is the main reason for insurance anyway.

It seems to me that the $200 per year could be much better spent on say better health insurance.  

One thing that makes me think umbrella coverage is overpriced is that it seems to be "one price" where everyone who gets a policy pays the same amount for the same amount of coverage.    This is much different from auto insurance where your car and driving record strongly affect the premium, and condo/homeowner insurance where the particular property characteristics strongly affect the premium.  The fact that they don't seem to price according to actual risk indicates to me that the actual risk to them is exceedingly low and most of the cost goes towards administration and sales overhead.

If umbrella coverage could somehow cap my liability so that my assets would never be vulnerable then I would buy it in a heartbeat, but it only protects me against a small slice of possible scenarios.

It seems to me there are two main categories of judgements: small reasonable and huge out of control. My conventional insurance covers the former, and the latter can't be covered at all.

But I would be very interested in any information anyone has on how often umbrella insurance is actually exercised.

 

[bamsphd]

I want to be assigned the insurance company's BEST lawyer!
To get that I figure I need to max out the insurance company's risk.

If I am at fault, and managed to paralyze the majority of
students on three school buses
I at least want to be able to cover their expenses.

 

[MJ]

But I would be very interested in any information anyone has on how often umbrella insurance is actually exercised.

I don't know how often it is exercised but in 2004 my $1m premium was $227, in 2005, it when up 7%. This year it shot up another 10%.

So much for low inflation.

 

[cute fuzzy bunny]

Look out MJ...Greenspan has a clear calendar now. You start talking smack about his nearly non-existant inflation and he might come over there and bauer you.

 

[omni550]

I have had umbrella liability insurance for 5-6 years.  I was telling a friend of mine that he might want to consider getting some for himself, as his net worth is starting to grow.

When he called his agent to get pricing on unbrella liability insurance -- she quoted him $200 for $1 million coverage and said for only $10 he could increase his personal liability coverage to $1 million.

Can anyone explain the difference between umbrella and personal liaiblity insurance and why the huge difference in cost? 

Thanks,

omni

 

[SamHouston]

I've been working on getting an umbrella policy through Allstate for the last few days and got a quote yesterday of $140 per year for $1 million of coverage, plus my auto insurance would increase by $256 per year to get my coverage up to the limits needed to sell me an umbrella policy. That seems to be about average around here as I had quotes in the $300-$500 per year range from other carriers.

 

[cute fuzzy bunny]

Can anyone explain the difference between umbrella and personal liaiblity insurance and why the huge difference in cost?

With no other info, i'll guess the breadth and depth of the coverage. The million for ten bucks probably covers anyone who gets hit in the head with a rock falling from the sky while they're on your front lawn, and if the lawn wasnt freshly mowed that morning...

 

[Martha]

Umbrella insurance is much cheaper than your other liability issurance because the odds of a claim are so much less. Most insurance claims are small claims.

I would never be without umbrella insurance given its small costs and what we have to lose.

 

[BarbaraAnne]

One thing to keep in mind about umbrella insurance.  Our policy went from about $200 per year for 2 million in coverage to over $700 when our 16 year old son started driving... (and we had never had any auto claims in 25 years).

Those of you with young kids might want to include that in your Excel spreadsheets for your future expenses. 

 

[MJ]

I have had umbrella liability insurance for 5-6 years. I was telling a friend of mine that he might want to consider getting some for himself, as his net worth is starting to grow.

When he called his agent to get pricing on unbrella liability insurance -- she quoted him $200 for $1 million coverage and said for only $10 he could increase his personal liability coverage to $1 million.

Can anyone explain the difference between umbrella and personal liaiblity insurance and why the huge difference in cost?

Thanks,

omni

Your umbrella goes wherever you (not sure about international) and are covered for any civil lawsuit, home, auto or other. If you increase your personal liaiblity on your auto or house insurance then you are only covered for lawsuits associated with your car or home.

MJ

 

[justin]

What I'm getting at, aside from the umbrella, is there a strategy or method for hiding or improving transparency that you're "sue-able". Does putting the money in a trust, or some specific investment vehicle make it harder for an investigator to find?

Surprised no one else said it. Don't buy a $60,000 Lexus!!!

 

[cute fuzzy bunny]

No ****, sherlock...

 

[CybrMike]

What I'm getting at, aside from the umbrella, is there a strategy or method for hiding or improving transparency that you're "sue-able". Does putting the money in a trust, or some specific investment vehicle make it harder for an investigator to find?

A good estate attorney can help you construct LLC(s) or perhaps a limited family partnership that makes it very difficult for people suing you to collect money. Attorneys cost money though so you might want to weigh it against your net worth. I've easily spent $5000 or more getting my asset protection setup.

It also makes things a bit of a hassle when obtaining brokerage or bank accounts, as they all have to be in the LLCs name to get the protection.

At the end of the day though, it helps me sleep at night.

 

[bongo2]

For a contrary view think about this. If you are paying $200 for a $2m umbrella, then, if your insurer is writing at break-even, you have about a 1 in 10,000 chance of using the cover. That's a little low because you may use it for less than the full amount, but, on the other hand, there is quite a bit of expense and risk load in your premium that makes the probability even lower. On balance that estimate probably isn't that bad. Now, what is your chance of dying this year? Maybe 5-50 times that 1 in 10k? I've debated this in my head quite a bit, but for now I just drive carefully and don't worry about it.

 

[cute fuzzy bunny]

This is one case where you cant self insure. Its like losing your home with no insurance...five times in the same day.

Completely unrecoverable.

Well worth the two hundred bucks.

Odds of it happening have a lot to do with your lifestyle. If you never come out of the house and only drive 10 miles a week, maybe a low chance of hitting a major liability...until someone trips on a crack in your driveway or falls in a sinkhole in your front yard. You like to drive 40,000 miles a year and invite strangers to play in your yard, and let all the neighbor kids play with your .44 and some live electrical wiring while in your olympic sized pool...while you sit inside and make pitchers of margaritas...ehh...get the insurance twice.

 

[free4now]

It's hard to find much information about incidences of various award sizes, but here's one page that gives pie charts breaking down the different sizes of awards:

http://www.verdictsearch.com/jv3_news/trial_trends/

It's almost impossible to read the small type, but it seems like truly huge awards do happen more often than I had thought.  I'm guessing they studied mostly cases involving deep pocket institutions rather than cases of individuals found liable.

I must admit to being surprised that a significant amount of the awards are really huge, and that does make me reconsider whether to get umbrella coverage.


Another interesting site is morelaw, which lists actual verdicts in detail for various categories. Here is the collision verdicts:

http://www.morelaw.com/cases/Collision.asp

From reviewing those, it looks like when the defendant is an individual the awards are almost always low (under $100k), and that almost all the million dollar plus awards are against institutions. But there isn't enough data to draw any firm conclusions.

 

[Sarah in SC]

So the real-life examples in this thread prodded me to an embarrassing conclusion upon chatting with ins. broker. I've been paying $358 per 6 mos for (ahem) really low coverage (25k,50k,25k) on the POS fleet. As it turns out, the max (250k,500k,250k) coverage is (ahem) $387 per 6 mos (for 2 cars & truck). Yeah. I'm an idiot.
So, thanks a lot for the impetus to get this coverage raised! And, interestingly, the take in SC from the broker is that umbrella coverage makes it more likely that the other side will go for a higher award, so it is unofficially not recommended.
Sarah

 

[cute fuzzy bunny]

A nice trick with liability is to offset the cost by partially self insuring.

I raised my car and home deductibles to levels at which I would probably rather pay out of my own pocket than file a claim. Then raised the liability and instituted the umbrella. Net cost was about the same. I'm covered for moderate to substantial losses, but I'm not overpaying for it.

I'd rather have the coverage and have the "other side" go for a higher award that the insurance company pays than go for a lower award that I pay....

 

[spike]

Just had a business chat with my lawyer and I asked him his opinion if I should keep my 1m umbrella policy. He said keep it until you retire, it cost me about $368 a year. But if I owned rental property I would keep it until it was all sold.

I think I'll keep it until the premiums get to high or I retire, which ever comes first.