umbrella policy question

[bobbyr]

Quote:

Originally Posted by ncbill Claims against individuals who have umbrella excess coverage settle within the total coverage limits. If the defendant has $2 million in umbrella & $500k on the underlying auto policy, no matter how bad the auto accident a plaintiff will settle within the $2.5 million combined limit.

This is what I thought was the case.

[Car-Guy]

So for someone who has the vast majority of his/her NW in IRA's, 401k's and in their Homestead (using Texas residence for an example), do they really need an umbrella policy in addition to their normal liability coverage in their homeowners and auto policies?

The text below was taken from one of the Texas law firms and many have similar text.

In addition to insurance planning, the first level of planning uses statutory exemptions provided by Texas law to protect assets from creditors. Texas, as a debtor-friendly state, provides debtors with generous exemptions to protect assets that are directly owned by the client. For example, the total value of a debtor’s homestead is protected, regardless of its value, from seizure by creditors. Retirement accounts, such as IRAs and 401(k) plans, are also protected from creditors. Texas goes further than most states by protecting retirement accounts even if they are inherited accounts. (Please note that the laws vary from state to state.)


Anyone have an educated opinion?

[LateToFIRE]

Quote:

Originally Posted by ncbill Claims against individuals who have umbrella excess coverage settle within the total coverage limits. If the defendant has $2 million in umbrella & $500k on the underlying auto policy, no matter how bad the auto accident a plaintiff will settle within the $2.5 million combined limit. If the plaintiff tries to go for a higher settlement when an offer for the combined limits above is already on the table their contingency-fee attorney would fire them as a client.

But as Huston55 posted, and my observations reflect, most settlements for the run of the mill accident stuff don't come anywhere remotely close to $2.5M. The most I've ever seen in auto-related was around $100K and that was a situation where there was a death due to a very clear-cut case of speeding and reckless driving. I think the higher $ amounts occur in cases where there is tangible property damage - you swerve to avoid something in the road and end up plowing into someone's [custom-built from reclaimed antique wood, designer, party] barn. Well, the barn owner probably has property coverage, but you get sued to recover their deductible + their insurance co sues to recover the damages they had to recover.

Now, all that said, true, I have millions of dollars of coverage, but that is because I engage in stuff that could result in big dollar damages (a boating accident [say I collide with Bezos's new yacht], a board of director lawsuit, an injured tenant, household worker or contractor, etc.). Really, the insurance is largely intended to cover to cost of the litigation.

[Kings over Queens]

Quote:

Originally Posted by bobbyr This is what I thought was the case.

Of the claims I've observed, the insurance company attorney's always push for a stipulation to settle within policy limits. My observation has been when there is usually more than one plaintiff, and there are substantial injuries, the insurance company will ultimately offer up policy limits and tell them "you figure out how to divide it."

Keep in mind that $1,000,000 plus whatever you carry on the car or house liability adds up to a lot of money, especially when defense costs do not erode that limit of coverage.

[COcheesehead]

I carry a lot. Why? I’ll likely get a better defense if they have more to lose.

[bobbyr]

Quote:

Originally Posted by Kings over Queens Of the claims I've observed, the insurance company attorney's always push for a stipulation to settle within policy limits. My observation has been when there is usually more than one plaintiff, and there are substantial injuries, the insurance company will ultimately offer up policy limits and tell them "you figure out how to divide it." Keep in mind that $1,000,000 plus whatever you carry on the car or house liability adds up to a lot of money, especially when defense costs do not erode that limit of coverage.

helpful TY

[imnontrad]

Talk to an attorney. First of all, putting the rental property into a LLC may reduce your risk. I have heard some people create a different LLC for each property.
I have heard that an insurance company will work really hard to defend your case to avoid paying out 1 million - the same effort as if you had 2 million.

[ncbill]

Quote:

Originally Posted by imnontrad Talk to an attorney. First of all, putting the rental property into a LLC may reduce your risk. I have heard some people create a different LLC for each property. I have heard that an insurance company will work really hard to defend your case to avoid paying out 1 million - the same effort as if you had 2 million.

dependent on state law.

keep in mind LLCs were created to limit other members' liability for the actions of another member of the LLC.

so, IIRC, some courts are now skeptical there's any liability shield with a single-member LLC.

umbrella insurance always applies, however, and even with rental properties is obtainable at a reasonable cost.

[Stormy Kromer]

Insurers will defend you hard no matter what. It is the first line in any liability policy. If they don't they're subject to a bad faith claim themselves.

I've heard that most claims settle within policy limits. But some don't. An example I can think of is I neighbor of mine who crossed the rail road tracks at an uncontrolled intersection and caused damage to a BNSF locomotive. They sued him for the cost of a new train before he got home from the hospital. He had an adequate amount on his umbrella.

[COcheesehead]

I had a friend who hit someone in a crosswalk. The victim’s lawyer went after the umbrella and won. Which isn’t the end of the story. She cannot now get another umbrella as a result.

[PatrickA5]

Quote:

Originally Posted by ncbill Claims against individuals who have umbrella excess coverage settle within the total coverage limits. If the defendant has $2 million in umbrella & $500k on the underlying auto policy, no matter how bad the auto accident a plaintiff will settle within the $2.5 million combined limit. If the plaintiff tries to go for a higher settlement when an offer for the combined limits above is already on the table their contingency-fee attorney would fire them as a client.

I was offered $100K full policy limit for an auto accident. My lawyer left it up to me whether or not I wanted to try for more in court.

[ncbill]

Quote:

Originally Posted by PatrickA5 I was offered $100K full policy limit for an auto accident. My lawyer left it up to me whether or not I wanted to try for more in court.

That's another reason I purchased umbrella...a good friend had his younger brother "borrow" his car, kid brother wasn't paying attention (not DUI), ran a stoplight or stop sign, and seriously injured a young mother in another vehicle.

So I added umbrella coverage as soon as my kids started driving.

None of us should be so arrogant to think we (or another member on our auto policy) could never be the cause of an accident.

Best to have inexpensive umbrella coverage in place so not only does it settle quickly but the injured party has quick access to funds given you or a family member are at-fault.

[PatrickA5]

I have a $1M policy, for my own protection but also so the other party is fairly compensated for what I've caused. I'm not sure how those with the minimum can live with themselves if they cause bodily harm to someone else and not have to pay for it - all to save a few bucks.

Having said that, I realize that not everybody can afford insurance.

[Stormy Kromer]

Quote:

Originally Posted by PatrickA5 I have a $1M policy, for my own protection but also so the other party is fairly compensated for what I've caused. I'm not sure how those with the minimum can live with themselves if they cause bodily harm to someone else and not have to pay for it - all to save a few bucks. Having said that, I realize that not everybody can afford insurance.

The person injured could very likely be a passenger in your car such as a close friend or family member. I want enough liability insurance to make sure they were compensated if I was negligent.

[street]

Quote:

Originally Posted by Stormy Kromer The person injured could very likely be a passenger in your car such as a close friend or family member. I want enough liability insurance to make sure they were compensated if I was negligent.

Very good point!! Again, thanks for your experience and knowledge you share.

[PatrickA5]

Quote:

Originally Posted by Stormy Kromer The person injured could very likely be a passenger in your car such as a close friend or family member. I want enough liability insurance to make sure they were compensated if I was negligent.

Are you sure your Umbrella policy would cover a passenger in your car if you were negligent?

[Dash man]

Quote:

Originally Posted by PatrickA5 Are you sure your Umbrella policy would cover a passenger in your car if you were negligent?

Yes, it’s a liability policy that provides additional coverage above your standard auto coverage. Any medical coverage on the auto policy covers first, then auto liability, then the umbrella coverage kicks in.

[PatrickA5]

Quote:

Originally Posted by Dash man Yes, it’s a liability policy that provides additional coverage above your standard auto coverage. Any medical coverage on the auto policy covers first, then auto liability, then the umbrella coverage kicks in.

I sent my agent this question and I'll see what he says.

It's my understanding that liability/umbrella covers the other persons car/occupants. But, I could be wrong.

[PatrickA5]

Heard back from my agent. Her answer was interesting. This is State Farm in Oklahoma.

Question: Does my Liability coverage and/or Umbrella coverage cover injuries to passengers in my own car if I'm at fault?

Answer: If they are members of your household or listed on the policy, the liability doesn’t extend for them. If they do not live with you, liability would extend for them. So if I was to ride in the car, your liability would extend for me but not for the people in your household. The umbrella will follow suit with the liability as it is an extension of that coverage.

[Dash man]

Quote:

Originally Posted by PatrickA5 Heard back from my agent. Her answer was interesting. This is State Farm in Oklahoma. Question: Does my Liability coverage and/or Umbrella coverage cover injuries to passengers in my own car if I'm at fault? Answer: If they are members of your household or listed on the policy, the liability doesn’t extend for them. If they do not live with you, liability would extend for them. So if I was to ride in the car, your liability would extend for me but not for the people in your household. The umbrella will follow suit with the liability as it is an extension of that coverage.

That makes sense. My wife can’t sue me if injured in an accident where I’m at fault.