Umbrella policies

[Retch The Grate]

So, I probably should have done this sooner, since my assets have been significant for a while, but buying a house is making me look at insurance, and getting an umbrella policy. Anybody have any suggestions for determining how much coverage is needed?

I've been reading articles online and I don't see why they say to get coverage equal to your net worth minus your other coverage? It seems like if somebody is suing you they can sue for far more than you are worth?

I've never been sued before, but I guess with owning a home that makes me more obviously a target in California given how expensive they are letting people know that I have at least enough to own property...

 

[Walt34]

There are lots of previous threads on this topic:

https://www.early-retirement.org/forums/f28/umbrella-insurance-98780.html

https://www.early-retirement.org/forums/f28/calculating-umbrella-insurance-needs-95777.html

https://www.early-retirement.org/forums/f28/umbrella-insurance-87255.html

https://www.early-retirement.org/forums/f28/insurance-for-protection-104785.html

...and several more...

 

[Sunset]

......
... It seems like if somebody is suing you they can sue for far more than you are worth?

......

Exactly,
So get 2 or 3 million coverage, as this will ensure the insurance company works VERY hard to avoid paying it.

That really is the only reasoning I use.

 

[Happyras]

Exactly,
So get 2 or 3 million coverage, as this will ensure the insurance company works VERY hard to avoid paying it.

That really is the only reasoning I use.

+1 I think a 1M coverage gets you just as much interest from their lawyers to back you. I believe that is all your really need. If they sue you for 20M and you loose, you have the rest of your life to re-trial it away....I recently was forced into testifying in a major trial with my former big corporate in a case involving a death. It was settled on the last day of trial prior to the jury decision. Big bucks passed hands, but not nearly as much as the plaintiff requested. The trial process took well over 15 years. How many years do you have left? Just need enough insurance to cover those lawyers!!!

 

[rodi]

As suggested above and in the other threads linked - get enough that the insurance company is vested in deploying their best lawyers if you get sued.

Also look at your risk factors... I have young drivers under roof (although both are now legal adults as of today) and we have a granny flat rental property... both add risk compared to if it was just hubby and I with no rental property. I chose $2M. I figure that is more than enough to get the insurance company vested in fighting any lawsuits that might come my way.

 

[Car-Guy]

As Walt34 said, there are plenty of threads on this topic... For myself I realized a long time ago that you can be sued for more than you have including the value of your umbrella policy, so in theory there is never enough... I settled on a million for the same reasons/logic Happyras mentioned in post #4 and rodi mentioned in post#5. It should be enough for the insurance company to fight for you and/or settle for less than that...

 

[Aerides]

I've been reading articles online and I don't see why they say to get coverage equal to your net worth minus your other coverage? It seems like if somebody is suing you they can sue for far more than you are worth?

exactly, there is no relationship. Just get enough that you're confident the insurer will bring their good lawyers.

We have 2m. It did require that we adjust our car insurance a tad, but nothing major.

 

[Dash man]

Look at what you can comfortably afford. It’s not that much to increase it depending on your personal risk factors. We have $5M on top of our other policies. I don’t think it’s too much these days.

 

[PatrickA5]

We have 1m, but not sure we even need that. 90% of our net worth is in retirement accounts and our house. I know our retirement accounts are safe from lawsuits, and I think our house is too. Now that our last kid is off our insurance, a lot of our potential liability is gone. We'll keep it anyway. Fairly cheap at $167.

 

[Involuntary Retiree]

Lawyer friend of mine once told me, "Hey, I can settle anything for a million dollars." He is who I would call if we ever got sued, and I believe him. Our umbrella policy limit is $1 mil.

 

[Retch The Grate]

Ok, this thread makes more sense than the articles, thanks all!

 

[ncbill]

Umbrella coverage (plus underlying home/auto limits) is to make the person suing you go away no matter what other assets you have.

E.g. if you're suing me you can take a settlement offer of (up to) $2.5 million in insurance coverage NOW or go to trial & spend several years waiting to see if you get anything at all.

 

[38Chevy454]

Also the umbrella policy is after you have used up your primary home or car liability. It is secondary to those. So $1M umbrella on top of $250K liability really means the insurance company has 1.25 million reasons to have good lawyers fighting on your behalf.

 

[Dtail]

Umbrella insurance in certain parts of FLA can be very expensive, especially with a 21 yr old under coverage.
So we keep it to 2m coverage.

 

[FIREHAPPY]

Great question! Something to consider.....

I've read that funds in retirement accounts, like a 401k are often protected against lawsuits. Check the laws in your state. I was considering rolling funds from my 401k plan (previous employer) to an IRA but decided against the move since funds in an IRA don't offer the same protections as 401k type plans. I'm not a lawyer so you should check on your own but i purchased an umbrella policy covering my net worth less funds in my tax deferred retirement plan(s).

 

[2017ish]

Lawyer friend of mine once told me, "Hey, I can settle anything for a million dollars." He is who I would call if we ever got sued, and I believe him. Our umbrella policy limit is $1 mil.

Hmm. My experience on both the defense and Plaintiff side was different. I did not focus on PI cases with just a few parties, but helped out a partner who is in that area on several complex cases and appeals involving individual defendants and/or their families. Any case I got involved with was not going to be settled for 1 million (and most of his cases were on referral from other lawyers; very few of them were in that low value category.)

We've had three million umbrella for years. Less that our net worth, but almost all of our net worth is in IRAs that, if we file bankruptcy, aren't going to be grabbable. In Tennessee at least, the difference between 1 and 3 was and is inconsequential.

 

[Ready]

Most insurance companies will not write policies in excess of $5M. If they do it becomes very expensive. So get a few quotes for different coverage levels to see how much it cost.

We pay around $450/year for $5M in coverage. Could we get by with less? Sure. But for $450/year why bother?

 

[KenZ71]

Thanks to this post I'm looking to up my Umbrella coverage.

Also need to find out what Liberty Mutual means by this exclusion especially around Covid.

"Communicable Disease Exclusion"

 

[street]

I have a 1 million and it is like any other insurance, it is a safety net and there is a balance on how much you want to spend on something you may or may not use.

Just like auto insurance, I have and never have had a claim, but I wouldn't ever not have it.

I have 1 million coverage on the ranch plus this umbrella of 1M is it enough I don't know.

 

[Stormy Kromer]

I had a friend involved in a school bus accident. 4 fatalities.


I wish I knew the attorney who said he could get any suit solved for $1,000,000. He could have saved my friend a few million $$$$k. He lost everything...


His $1,000,000 umbrella got him a modest defense, the insurance company put his policy limits in the court's hands and he was on his own.


Settled for $3,ooo,ooo. I think it was called an "excess judgement". He's not the same mad 20 years later. $300 would have gotten him the limits he needed.

 

[srblanco7]

Most insurance companies will not write policies in excess of $5M. If they do it becomes very expensive. So get a few quotes for different coverage levels to see how much it cost.

We pay around $450/year for $5M in coverage. Could we get by with less? Sure. But for $450/year why bother?

I pay roughly double that for the same coverage. Though it's worth noting that we have an under 21 driver in the house (and are soon to be adding a second).

I use the rule of thumb that the value of your umbrella should be roughly equal to your net worth.

 

[Golden sunsets]

Most insurance companies will not write policies in excess of $5M. If they do it becomes very expensive. So get a few quotes for different coverage levels to see how much it cost.

We pay around $450/year for $5M in coverage. Could we get by with less? Sure. But for $450/year why bother?

That is low. We pay $633 for 4 MM. Ours does include UI and UUI, does yours?

 

[ncbill]

Hmm. My experience on both the defense and Plaintiff side was different. I did not focus on PI cases with just a few parties, but helped out a partner who is in that area on several complex cases and appeals involving individual defendants and/or their families. Any case I got involved with was not going to be settled for 1 million (and most of his cases were on referral from other lawyers; very few of them were in that low value category.)

We've had three million umbrella for years. Less that our net worth, but almost all of our net worth is in IRAs that, if we file bankruptcy, aren't going to be grabbable. In Tennessee at least, the difference between 1 and 3 was and is inconsequential.

DUI or non-DUI?

These type of questions come up over on Bogleheads all the time & AFAIK nobody yet has been able to identify a judgment (collectible, not default) in excess of $1 million against an individual (not company) defendant where the latter was not DUI.

Charles Givens ("Wealth without Risk", etc.) concluded the same after having his staff review civil cases in south Florida...so my takeaway was "never drive after even a single drink."