Question about umbrella insurance

[Time2re]

Apparently Amica does not. At least that's what the guy told me :/

I would ask to see the actual policy wording.

 

[JoeWras]

Gave up my position as treasurer of a scout troop over a year ago as the last vestige of involvement so my exposure to liability is much much less. I found that, with my insurance, it was much cheaper to increase the auto and home liability to the max than to continue an umbrella add-on.

It is important that the board you serve on has Director and Officer coverage. Personal liability probably won't cover many issues from board service. I won't serve on a board that doesn't have it.

 

[erkevin]

After retiring, I did a stint in volunteer law enforcement. That was my initial reason for carrying umbrella. After I left that gig, I dropped the insurance but have since renewed it as our net-worth has moved significantly upward.

 

[Buckeye]

In order to have the umbrella, we had to take our auto limits to the max.

Yes, raising the limits on our auto policy to mesh with where an umbrella policy kicks in was more expensive than the umbrella policy, I think. The auto policy provides the first $500k in coverage.

 

[Dash man]

Yes, raising the limits on our auto policy to mesh with where an umbrella policy kicks in was more expensive than the umbrella policy, I think. The auto policy provides the first $500k in coverage.

Our umbrella policy with USAA will let us go as low as $300,000 with the underlying policies, but we chose to keep it at $1M, for a total of $6M. We have a Jersey Shore property we use for short term rentals in the summer. That alone is enough reason to max out our umbrella coverage.

For those who don’t know, remember 401k plans and pensions are protected from lawsuits and creditors. My state, Pennsylvania, also fully protects IRAs. I believe Federal law also protects IRAs up to $1M from lawsuits ( or is it creditors?), one of them applies.

 

[Buckeye]

Our umbrella policy with USAA will let us go as low as $300,000 with the underlying policies, but we chose to keep it at $1M, for a total of $6M. We have a Jersey Shore property we use for short term rentals in the summer. That alone is enough reason to max out our umbrella coverage.

For those who don’t know, remember 401k plans and pensions are protected from lawsuits and creditors. My state, Pennsylvania, also fully protects IRAs. I believe Federal law also protects IRAs up to $1M from lawsuits ( or is it creditors?), one of them applies.

Yes, a high limit policy is definitely a requirement with a short term rental property! USAA allows $300k on our homeowners insurance but I thought auto liability had to be a minimum of $500,000. And property damage $100,000.

 

[Scratchy]

I was carrying $2M until yesterday when Amica told me umbrella does not cover assets held in a trust. So I went back down to $1M.

I’ve only got a car at this point so seems prudent enough.

This is confusing to me. If you have a $2 million umbrella, it will apply against any covered loss. This is regardless of what assets you have personally, or in a trust.

If there is a loss above the limits of the umbrella policy, or an uncovered loss (criminal act, professional negligence for example) which assets may be seized or not (perhaps assets in an IRA or irrevocable trust) would be a separate issue.

 

[Dash man]

Yes, a high limit policy is definitely a requirement with a short term rental property! USAA allows $300k on our homeowners insurance but I thought auto liability had to be a minimum of $500,000. And property damage $100,000.

I don’t know about the minimum on auto liability because it’s been a long time since I inquired about that level. I know the maximum I can get on property coverage on an auto policy is $100,000. I never understood that.

 

[Dash man]

This is confusing to me. If you have a $2 million umbrella, it will apply against any covered loss. This is regardless of what assets you have personally, or in a trust.



If there is a loss above the limits of the umbrella policy, or an uncovered loss (criminal act, professional negligence for example) which assets may be seized or not (perhaps assets in an IRA or irrevocable trust) would be a separate issue.

Each property and vehicle has to be included in the coverage of the umbrella policy, so it’s not regardless of what assets you own.

 

[Sunset]

This is confusing to me. If you have a $2 million umbrella, it will apply against any covered loss. This is regardless of what assets you have personally, or in a trust.

If there is a loss above the limits of the umbrella policy, or an uncovered loss (criminal act, professional negligence for example) which assets may be seized or not (perhaps assets in an IRA or irrevocable trust) would be a separate issue.

That was also my first thought.

However, if the trust owns a property then the trust itself could be sued for someone slipping on the stairs. At least that's how I think it would work for irrevocable trusts.

 

[Scratchy]

Each property and vehicle has to be included in the coverage of the umbrella policy, so it’s not regardless of what assets you own.

There is a common confusion that umbrella policies are protecting specific assets rather than providing a layer of protection that comes between a judgement and ANY assets you own.

This confusion is what I was responding to as someone stated:

"I was carrying $2M until yesterday when Amica told me umbrella does not cover assets held in a trust. So I went back down to $1M."

This implies that there is some connection between the umbrella and the assets he was holding in a Trust. My point was there is no connection.

Example: I have a $1 million umbrella policy, home and vehicle insurance and I also have a few million in a combination of revocable and irrevocable trusts, which are not mentioned in any of these policies. I am sued because I run over a pedestrian. The umbrella policy will apply and be a layer of protection before anyone can get to my trust assets. And obviously, the bigger the umbrella the better.

Now it's true that if you have a home or vehicle that are not covered by any underlying policy, an umbrella policy may not cover losses related to them. That's a different issue and not what I or the person I was responding to were referencing.

 

[Scratchy]

That was also my first thought.

However, if the trust owns a property then the trust itself could be sued for someone slipping on the stairs. At least that's how I think it would work for irrevocable trusts.

This is how it worked for me: I own my home via my revocable living trust and have homeowner's insurance and an umbrella. When I placed my home in the trust, I notified the insurance carrier which added the trust as being the owner. The premium did not change. I also verified the umbrella would apply and was told that it would, as it was excess coverage over the underlying policy, although the trust is not mentioned in the umbrella policy.

If my home was owned by an irrevocable trust I'm not sure how it would work. Maybe a homeowner's policy would have to be purchased by the trust, as the trust would be an entity separate from myself. I'm not sure if an umbrella policy could be purchased by an irrevocable trust.

 

[bobandsherry]

All this talk about how much coverage, curious...... Anyone ever had to rely on umbrella policy to cover a monetary judgement? If so, how much? I'll bet there's few, if any, that have.

 

[COcheesehead]

All this talk about how much coverage, curious...... Anyone ever had to rely on umbrella policy to cover a monetary judgement? If so, how much? I'll bet there's few, if any, that have.

As I mentioned up thread, a friend had a claim when she struck a pedestrian with her car.

 

[gamboolman]

We have $5M for all of the many good reasons already posted in this thread.

 

[SecondCor521]

My umbrella limit is based on the likely maximum award in my state for "run-of-the-mill" lawsuits. It is not related to my net worth. I don't have any particularly risky attributes to my life; in fact I'm probably on the lower end of risk in this context.

 

[eyenitnoy]

How did you arrive at the amount of coverage you believed you need?

What considerations should be taken into account

Thank you!

In my opinion, the amount doesn't really matter because the most important part of the insurance is NOT the dollar amount, but the fact that any amount you have means the insurance company will pay for your defense.

This is the reason to have the insurance-the costs of lawyers is the real risk of lawsuits and you pay that, win or lose.

I'd say $1 million is fine for almost everyone unless you have a swimming pool or drive drunk.

Generally, it's pretty cheap. I have $3 million.

 

[roh3]

If you live in a state that has no-fault auto liability, does that factor in to the decision of the amount of umbrella coverage you would have?

I have a 1 million policy, but those lawyer commercials cause me to worry a little.

 

[template]

I have State Farm and originally bought a $1 million umbrella policy, then doubled it to $2 million a few years later. After retiring, I cut it back down to $1 million when I saw the cost was more than I was willing to spend. Just received a bill for the $1 million policy for 2022 and the price will be $234.

 

[SunnyOne]

I've been reconsidering how much I really need once I realized that bulk of my assets are in retirement accounts and my understanding is those would be exempt from any possible judgements....or at least that's the part I am running down to confirm.

 

[KarenF]

We originally got a $1M umbrella policy when my husband was coaching and I was on the boards of a couple of nonprofits. The cost of the policy went up quite a bit when our kids were teenage drivers and dropped down again when they came off our policy. We just moved from SC to GA and the umbrella policy is significantly more - same company and agent.

 

[SunnyOne]

I moved to Florida this year. The injury lawyer commercials are unbelievable. I never saw such when I lived farther north.

They run 24 x 7 every few minutes, bragging about free concerts and other free events they sponsor.

 

[bobandsherry]

I'm in Florida and agree with you. However after visiting my son in Chicago and daughter in Arizona, it looks like every location is open game for these sleaze bag type of ambulance chasers.

 

[eyenitnoy]

I've been reconsidering how much I really need once I realized that bulk of my assets are in retirement accounts and my understanding is those would be exempt from any possible judgements....or at least that's the part I am running down to confirm.

Not all retirement accounts are protected. IRA's held by individuals have protection that varies by state.

https://assetprotectionplanners.com/planning/ira-by-state/

 

[GoodWishes]

Some companies require to name the trust as an additional insured. I’d shop around if they don’t cover it.

We had to do something like that so that our policies insure us and our trust.