Umbrella Insurance?

[cardude]

Does anyone here use umbrella liability insurance? I carried it when I had the car business, but didn't renew when I quit because I figured my exposure had dropped quite a bit since I just sit around the house cooking and drinking beer all day.

I do have 3 rental properties, one of which is my old car dealership property that is being rented out as a repair facility, so that's what's got me thinking about liability exposure again. My homeowers policy has $500K in liability, and the rental property policies carry less than that I think (I need to look that up but am not where I can get to the policies right now).

I got a quote from Geico for 4M of coverage for $800 per year, and that sounded pretty high to me.

Also, do any of you rental property owners have the properties titled in an LLC? Is it hard to keep the LLC up throughout the year? Is it like a regular corp where you have to keep minutes and have meeting as such? I think I'm getting lazy................

 

[ziggy29]

I believe quite a few of us here carry umbrella coverage. The GEICO quote sounds like it's worth getting some competing quotes, but $200 per million per year doesn't sound out of the ballpark. Of course, that assumes your underlying policy limits are high enough to qualify for it.

I have $1M umbrella with USAA for $190 a year.

 

[quietman]

The quote is about what I pay ($220/million) though I only bought a million. Maybe I should up the limit. Too many lawsuit possibilities to not insure against for my taste, so I carry the umbrella. Especially since as I get closer to FIRE, I do have more assets that a slip-and-fall or whiplash claim could take from me.

 

[cardude]

I knew I shouldn't have told them about the crystal meth lab in my back yard!

I'm sure the 3 rental properties upped the premium (makes sense), and when I told her one property was an auto repair shop that really started those keys-a-clickin' on her keyboard. I also have a dirt bike, ATV, and a damn boat. Seems like every bad thing she asked about I had, other than the pit bull!

The reason I wanted the extra coverage was because of the rental properties mainly. Why do you folks carry the extra liability insurace? Do you throw big parties? MX park in your back yard? I'm just wondering..........

My underlying liabilty on my homeowners policy is 500K which I though was kind of high, but the Geico lady didn't even seem interested in that. She was only worried about the limits on my Geico auto policies.

 

[ziggy29]

The reason I wanted the extra coverage was because of the rental properties mainly. Why do you folks carry the extra liability insurace? Do you throw big parties? MX park in your back yard? I'm just wondering..........

For me, it's fairly cheap peace of mind and I almost look it as having the insurance company's legal team "on retainer" as having that much on the line in any lawsuit against me will almost certainly increase their interest in defending me.

 

[IndependentlyPoor]

This is another aspect of FIRE that sneaks up on you. We are much more interesting targets for lawsuits. I feel particularly vulnerable; since I don't have a homestead, all my assets are subject to claims. (I am not a lawyer, but I believe that homesteads are off limits to civic suits.) As far as I know, umbrella policies are only available to those with homeowners insurance, so we carry $500K liability on our car. During the 2 years when we were traveling full time and did not own a car, we had special car renter's liability insurance through USAA. It isn't expensive.

 

[jimnjana]

Cardude,

We want to cover our ASSets with an UMBRELLA policy that won't leave us getting soaked in case of an accident etc.

Jim

 

[ziggy29]

This is another aspect of FIRE that sneaks up on you. We are much more interesting targets for lawsuits. I feel particularly vulnerable; since I don't have a homestead, all my assets are subject to claims. (I am not a lawyer, but I believe that homesteads are off limits to civic suits.)

The asset protection laws vary by state.

Texas has particularly strong asset protection laws; generally homesteaded personal residences, IRAs, 401Ks and insurance contracts (including cash value whole life and annuities) are shielded from creditors and lawsuits. Florida and Oklahoma are two other states that have similarly strong asset protection laws. If I lived in a state with lower asset protection, I'd probably up the amount of liability I carry. But as it is, a strong majority of my net worth (probably more than 80%) is protected from lawsuits in Texas (with the usual exceptions for gross negligence and criminal activity).

In fact, it's these asset protection laws that occasionally make the "a-word" a feasible strategy for some high-income and high net worth individuals in high-risk occupations who want more lawsuit proection -- in states where the "a-word" is judgment-proof.

 

[FIREd]

I also have umbrella coverage through USAA. My home is on a steep plot and there is always a chance for someone slipping and falling. But I am most worried about car accidents. I live in a state which offers notoriously weak asset protection in case of a lawsuit, so I regard umbrella insurance as a must.

 

[travelover]

I carry a one million dollar policy and rate is about $180 a year for DW and I on our home and autos - no toys. I do have a pond in the back that makes me a little cautious, but doesn't seem to enter into the rate calculation like a swimming pool would.

 

[prubin]

I just checked my USAA umbrella policy -- $2million for $250/yr. Does USAA do an especially good job of selling umbrella policies or is it the type of individual who insures with USAA. I suspect "we" have similar concerns about mitigating risk. I also trust USAA to sell to keep me aware of risks that should be covered.

 

[FIREd]

I just checked my USAA umbrella policy -- $2million for $250/yr. Does USAA do an especially good job of selling umbrella policies or is it the type of individual who insures with USAA. I suspect "we" have similar concerns about mitigating risk. I also trust USAA to sell to keep me aware of risks that should be covered.

Actually USAA did not try to sell me anything. I became aware of umbrella coverage while reading books about personal finance. Since I had my car and home insurance with USAA, I started inquiring about umbrella insurance with them. I wasn't even sure they offered such insurance. It turned out they did. I must confess that I do not believe in people's innate good nature (how cynical of me!). So it seemed like a must-have to keep what we have worked so hard for away from the vultures.

 

[ksr]

BTW, I didn't see it mentioned here but if you do carry an umbrella policy, you don't want to mention to anyone outside your household. It might just encourage the lawsuits, you know?

 

[bongo2]

I'm surprised your personal umbrella will cover liability from your rented auto lot. Typically personal liability prolicies exclude commercial liability, and will sometimes add back in coverage for residential rental. I'd double-check that it will cover liability from a commercial rental.

Martha may want to weigh in on the LLC question, but I'd guess that an LLC is not a foolproof way to limit liability from rental properties. - Edit: I see you started a separate thread for the LLC question.

 

[Walt34]

I bought an umbrella policy too, it's about $200/year for $1 million. We had to up the auto liability to $500k and the umbrella policy picks up after that. Given the cost of a week in ICU it doesn't seem out of line to me. I've seen it happen too many times: one second's inattention changes your or someone else's life forever.

I just bought it because I don't have 30 years to start all over again. Well, I could, but I sure don't want to.

 

[LOL!]

Our homeowner's and auto policies have liability limits of $1 million. We have teenage drivers. We have an umbrella on top of those limits.

 

[growing_older]

I carry an umbrella because I have assets that I do not want at risk should an accident occur. I also believe that as I get closer to FIRE (and my assets increase) I become a more attractive target for lawsuit. I was once an attempted victim of a fraud ring (rear ended while I was stopped, then other driver claimed I caused their injusties). Because I had insurance, the insurance company took care of the entire defense and I was hardly bothered with either the expense or nuisance of defending the claim, no matter how bogus.

 

[prubin]

Actually USAA did not try to sell me anything.

USAA has never tried to sell me anything. That's one reason that I trust their advice. I was at fault in an auto accident and after that incident I became aware of umbrella coverage. I then had a sevral year waiting period until USAA would provide umbrella coverage. They paid a large settlement as an outcome of the accident. In addition because I had a $500k limit USAA hired a terrific lawyer to represent out interests.

 

[cardude]

Our homeowner's and auto policies have liability limits of $1 million. We have teenage drivers. We have an umbrella on top of those limits.

Can I be nosey and ask how much you pay for each mil of umbrella coverage? Was it cheaper to set the homeowner's policy limit to 1M and then have the umbrella cover after that?

Also, are you supposed to "umbrella up" equal to the amount of your net worth, less home and 401K?

No teenage drivers yet. I told them we are moving to a deserted island with only bicycles when they reach driving age.

 

[LOL!]

Can I be nosey and ask how much you pay for each mil of umbrella coverage? Was it cheaper to set the homeowner's policy limit to 1M and then have the umbrella cover after that?

About $270/million. Yes it was cheaper to set homeowne'rs to $1MM and then add onto to that. Our insurer had a $1MM
limit on homeowner's and auto, so we maxed on that before adding a PUP.

Also, are you supposed to "umbrella up" equal to the amount of your net worth, less home and 401K?

I actually don't know. My understanding is that in comes "round" millions, so if you have $1.5MM to cover, you would buy $2MM coverage.

 

[Rambler]

We have a $1 million umbrella, and it was about $200/year. Had to max the liability on the cars and homes first, which was $500k. All the umbrella I could buy at the time was 1mil, and all the liability on cars and homes was 500k. Seems like the limits must have gone up, so I need to check on getting more, since our current umbrella doesn't come close to the size of the ASSets that need to be covered.

R

 

[Katsmeow]

Also, are you supposed to "umbrella up" equal to the amount of your net worth, less home and 401K?

We have umbrella insurance. I know many people do set their amount based upon that kind of "formula" but I have always felt that to be illogical. The amount of umbrella insurance should be tied to the amount of potential claims not tied to the amount of your net worth. That is, let's say your net worth is $1 million. Let's say you get $1 million in coverage. Well, it doesn't really matter if you had no insurance and someone got a $1 million judgment or if you had $1 million judgment and someone got a $3 million judgment against you. In either instance you had inadequate insurance to protect your interests.

Now, many people might say that they think $1 million is adequate. Look at some reports of jury verdicts sometime and you may change your mind. Of course, there is always some potential for a higher judgment than your coverage but in my opinion many people get limits that are too small.

Bear in mind to not only look at the limits but at the coverage provided by the policy including any exclusions.

 

[MichaelB]

We just increased our umbrella to $2M - for $550. Dog, pool, other risk factors keep that number a bit high, but it declined significantly when the last offspring moved out

Coverage has nothing to do with our assets, and as Katsmeow points out, it doesn't make sense. It has more to do with what the average lawsuit and judgment is in our area, and they aren't declining.

It is usually cheaper to get liability though an umbrella, and the insurer will determine how it splits between auto, home and separate umbrella.

Teenage drivers, especially the male-type (aka walking hormones wearing sneakers) will drive the cost of insurance up beyond belief.

 

[cardude]

I'm surprised your personal umbrella will cover liability from your rented auto lot. Typically personal liability prolicies exclude commercial liability, and will sometimes add back in coverage for residential rental. I'd double-check that it will cover liability from a commercial rental.

Just got off the phone with the agent who writes the policy on my commercial property, and she said what you said, that she would be very surprised if the personal umbrella would cover the auto repair facility.

It's hard getting a straight answer from GEICO. The last I heard from them is that they are not sure (?) if they can write the full 4M umbrella due to the size and the one commercial property, but they offered to just write a 1M policy that and then they would see if they could write the rest later. That sounded like a crazy way to approach it so I'm looking for other carriers.

Who are you folks using, other than USAA since I don't qualify, for your umbrella coverage? I've have my homeowners policy agent working on something, but he didn't seem too up-to-speed on umbrella policies. His response was, "A 4M umbrella? Oh, hmmmm, I've never done that before. Commercial buildings? Hmmmm, I'm not sure.............".

Insurance is so fun!!

 

[MichaelB]

Most insurance companies will only provide umbrella if they sell the underlying auto or home policy. Because all these policies include some liability, this must be to avoid conflict (who pays first) between policies.

USAA will only write umbrella if they write the homeowners.

GEICO sounds like they will write the $1M but need a closer look by the underwriters before going higher. This is not unusual - we use State Farm (can't get USAA due to Fl home) - and they won't go above $2M without "further underwriter analysis" - which our agent didn't seem to keen on. When the seller doesn't want to sell, it's best not to push it...

$1M is still a hefty amount. Are you far from teenage drivers, especially the y-chromosome type?