Umbrella Insurance Question

[Closet_Gamer]

Hi.

Would love some input from people experienced with somewhat complicated insurance situations.

We've recently moved to a stage of life where we are co-signing on kids apartments and we've bought a vacation property that we rent out. The vacation property is inside of an LLC with its own liability protection and a liability umbrella ... but we do worry that in a nasty situation, someone may try to pierce the LLC and come after us personally.

So we are re-visiting our personal insurance situation. Our assets have grown since we last did this, so we intend to increase our umbrella coverage to better align with our assets.

My question: do we need to explicitly put various items "under" the umbrella?

Someone said to my wife that we should "call the insurance company and put the two co-signed apartments under the umbrella."

I always thought the purpose of an umbrella was to catch everything in one place. I would have thought this would include both the risks from the co-signed apartments and any additional risk from someone trying to get around the LLC.

Would love any thoughts on how this works and how you might approach/have approached similar situations.

For reference, we do not need life insurance. Our core insurance needs are home, auto, and umbrella/liability. We've already learned that it will be difficult/impossible to source the insurance for the LLC and the personal insurance from the same carrier/agent.

Thanks!

 

[COcheesehead]

I have never had to schedule items with an umbrella. I have, however, had to see what the umbrella excluded and added riders to cover those perils. So read the fine print and see what it won’t cover.

 

[Closet_Gamer]

I have never had to schedule items with an umbrella. I have, however, had to see what the umbrella excluded and added riders to cover those perils. So read the fine print and see what it won’t cover.

Thanks. That is an important thing to know!

 

[LateToFIRE]

Sounds like you're mixing up a couple of concepts here. The umbrella policy is specifically for liability - basically for if you get sued because someone got injured on your property, you damaged someone else's property, or caused injury to them in some way. As a practical matter, it mostly funds the litigation costs and settlement associated with these events. Umbrella's are second-loss insurance, in other words you're required to have a primary auto/home policy that kicks in first, in terms of liability claims, and then the umbrella picks up where those leave off.

Not sure if any kind of insurance would cover a landlord or other type of party coming after you as a co-signer on a FINANCIAL or CONTRACTUAL obligation. That, you probably need a specific rider for (and probably not worth the cost if you could get it).

With respect to piercing the LLC, my understanding is that this is not uncommon - my observation is that when the poo hits the fan, everyone gets sued, whether warranted or not, with the objective to reach settlement prior to trial.

 

[LateToFIRE]

Sounds like you're mixing up a couple of concepts here. The umbrella policy is specifically for liability - basically for if you get sued because someone got injured on your property, you damaged someone else's property, or caused injury to them in some way. As a practical matter, it mostly funds the litigation costs and settlement associated with these events. Umbrella's are second-loss insurance, in other words you're required to have a primary auto/home policy that kicks in first, in terms of liability claims, and then the umbrella picks up where those leave off.

Not sure if any kind of insurance would cover a landlord or other type of party coming after you as a co-signer on a FINANCIAL or CONTRACTUAL obligation. That, you probably need a specific rider for (and probably not worth the cost if you could get it).

With respect to piercing the LLC, my understanding is that this is not uncommon - my observation is that when the poo hits the fan, everyone gets sued, whether warranted or not, with the objective to reach settlement prior to trial.

Just occurred to me, one of the things you're worried about as a lease co-signer is liability for what happens in your kid's apartment - they throw a huge rave party and some less mature friends do something stupid and get hurt or cause a bunch of damage. Hmmm, I think you and your kid should be named on a specific apartment policy because, again, the umbrella is a 2nd loss policy. Other work-around is for you to be a financial guarantor on the lease, not a co-signer, that would limit your liability to only issues related to the payment of rent, not broader liabilities. If you are on the higher end of NW scale, you should really consult a r.e. attorney and/or reasonably sophisticated insurance broker.

 

[MBAustin]

I co-signed on DD's apartment several years ago and did add it to our umbrella policy explicitly. Same with vacation home co-owned with my sister.

 

[Sunset]

I have a second residence named as "second residence" on our umbrella - with a separate additional charge of $50.

 

[Dash man]

We have five properties and all are named on the Umbrella policy. My DFIL lives with us and is also named on the policy even though he has his own auto insurance coverage. There is a $50k gap between his auto coverage and our umbrella minimum, but he won’t increase it any more, but that’s on him, not us.

 

[Stormy Kromer]

I am a retired insurance agent (35 years) and have seen a lot.

List any part of real estate that you have any potential interest in as a property on your personal and umbrella policies and don't take free advice on the internet.

I have been there when people receive a subpoena and throw it at their insurance guy and stay " I better be covered for this!!" You will be if you tell them you want to be. Insurance agents aren't mind readers and get blamed far too often for offering clients advice that can save their financial lives.

Cover the properties and sleep at night.

I should throw in that none of us are lawyers (that I know of) but every legal argument I've been involved with included two attorneys on opposite sides that were 100 per cent confident that they were right. Half the time one is wrong.

 

[Closet_Gamer]

Thanks all. Very helpful. Time to call our insurance company.

My daughter does have a renters policy that includes $100K of liability, but we are not listed as an additional insured. We are listed as additional insured on the home owners policies on the vacation property ... need to double check on the liability.

I've always heard the rule of thumb on umbrella liability was to make it roughly equal to your assets.

Curious if others have a viewpiont on how much to carry?

Thanks.

 

[Dash man]

I've always heard the rule of thumb on umbrella liability was to make it roughly equal to your assets.

Curious if others have a viewpiont on how much to carry?

Thanks.

That’s not a good rule of thumb. They can sue for twice your umbrella policy and still get all your assets if it’s serious enough. If you have a vacation rental as we do, get as much as you can. We have a $5M umbrella because, generally, umbrella insurance is the cheapest insurance out there and I will want the best lawyers my insurance company can buy.

 

[COcheesehead]

Here’s some free advice from the internet. Certain assets are non attachable.
https://www.investopedia.com/articles/retirement/07/buildawall.asp

 

[Sunset]

......
I've always heard the rule of thumb on umbrella liability was to make it roughly equal to your assets.

Curious if others have a viewpiont on how much to carry?
..

We carry $2M as it should satisfy people looking to make $$$, <edit> and make the insurance company work hard to avoid paying out that much.

We also keep some retirement money in 401K and roll-over IRA's as those are more protected than a bank account/regular brokerage account.

 

[Stormy Kromer]

Here of thumb for how much liability insurance you should carry....

If someone else hurt you and you couldn't do anything anymore......what would you sue them for??

Next person on this post tell me what you'd settle for. And then see what your umbrella limit is, Bet it is less. much less.

 

[Closet_Gamer]

All super helpful input.

DW and I plowed throug all of our insurance docs today.

Phone calls tomorrow morning to both the insurance broker for the vacation property/LLC and our personal insurance person. We have a lot of work to do.

The level of difficulty in protecting yourself is insane. I'm willing to write quite large checks to be covered properly. Finding a way to do it seems unbelievably difficult.

Thanks for the help!

 

[wolf]

California. AAA. Home/Auto/Rental. All insured thru AAA. Umbrella $2 milllion.
But each (Home/Auto/Rental), must have minimum, $500K, liability coverage.
Before Umbrella coverage kicks in.
In effect. We have $2.5 million liability coverage.

Not sure if other insurance carriers who offer Umbrella coverage, require
a "basic" minimum of liability insurance before Umbrella kicks in.

Not an issue, if you use the same Insurance carrier for all of you insurance needs. Hope this make sense.

 

[Sunset]

California. AAA. Home/Auto/Rental. All insured thru AAA. Umbrella $2 milllion.
But each (Home/Auto/Rental), must have minimum, $500K, liability coverage.
Before Umbrella coverage kicks in.
In effect. We have $2.5 million liability coverage.

Not sure if other insurance carriers who offer Umbrella coverage, require
a "basic" minimum of liability insurance before Umbrella kicks in.

Not an issue, if you use the same Insurance carrier for all of you insurance needs. Hope this make sense.

Yes, our house and car insurance have to have minimums before the umbrella coverage starts.

 

[Closet_Gamer]

California. AAA. Home/Auto/Rental. All insured thru AAA. Umbrella $2 milllion.
But each (Home/Auto/Rental), must have minimum, $500K, liability coverage.
Before Umbrella coverage kicks in.
In effect. We have $2.5 million liability coverage.

Not sure if other insurance carriers who offer Umbrella coverage, require
a "basic" minimum of liability insurance before Umbrella kicks in.

Not an issue, if you use the same Insurance carrier for all of you insurance needs. Hope this make sense.

Thanks. Our personal stuff is all in the same place. The major carriers are declining to insure coastal properties in many areas, including ours. We have relationships with both Farmers and USAA. Both will not insure the coastal property. Our beach home/LLC has had to be insured through other carriers. Actually, there are four different carriers on that house for the various needed insurance coverages.

 

[Dash man]

Thanks. Our personal stuff is all in the same place. The major carriers are declining to insure coastal properties in many areas, including ours. We have relationships with both Farmers and USAA. Both will not insure the coastal property. Our beach home/LLC has had to be insured through other carriers. Actually, there are four different carriers on that house for the various needed insurance coverages.

USAA insures our Florida oceanfront condo (8th floor), but not our home at the Jersey Shore, two blocks from the beach. We use a local agent who got us a policy through Lloyds of London. USAA still provides the umbrella coverage for that home.
For the Florida condo, USAA covers basic homeowners, but Citizens covers windstorm needs.