Umbrella Insurance:How much & when to increase?

[Sunset]

Jumping on to this thread as it touches some of my concerns. I continue to hear mixed advice as to what is enough coverage. I have heard from 2X to 3X NW to enough to cover a good lawyer or perhaps a "typical" settlement amount... whatever that is. I have to admit I have been lazy in considering a policy above $5M, despite my NW being significantly higher, but have started to question should certain trust and or asset titling structures be a bigger part of the strategy, and thus dictate what is the right amount of coverage.

Has anyone really gone this deep to retitle assets from a liability perspective? Any good recommended resources you have found to help guide you (other than a good insurance agent/estate attorney?

Nope, but we are keeping 401K as 401K since it's well protected, and everything is individually owned except the house. So if I do something dumb and get sued, DW's assets are not mine, so could be immune to claim.

 

[Ready]

My new agent said essentially the same thing. Lawyers typically find out your insured limit and work with that number. So we lowered our limit to 1 M.

If my agent said this to me I would get a new agent. The difference in cost between $1M and $5M was a few hundred dollars a year for me. This seems like a very small amount of savings for a potentially huge exposure.

 

[sunnysideup]

If my agent said this to me I would get a new agent. The difference in cost between $1M and $5M was a few hundred dollars a year for me. This seems like a very small amount of savings for a potentially huge exposure.

With all respect, you do not know my situation or my risk. Also, I have seen that lawyers DO ascertain the liability limits and based their decisions on that amount.

It’s not about the premium. You are correct, the up charge is minimal.

I am confident this was good advice for me.

It may not be right for you.

 

[TrvlBug]

We insure for catastrophic events. Several years ago, discussed this with our agent and she stated the largest award she's seen was for $9M in a case where an elderly driver hit the gas instead of brake pedal and either killed or seriously maimed others. We recently increased our coverage to our NW.

 

[sunnysideup]

We insure for catastrophic events. Several years ago, discussed this with our agent and she stated the largest award she's seen was for $9M in a case where an elderly driver hit the gas instead of brake pedal and either killed or seriously maimed others. We recently increased our coverage to our NW.

Just a comment. A good friend of mine actually had this happen to them. They were hit broadside by a driver who was not paying attention. Their medical bill total was about 50k based on a medicare rates. The driver was insured for 100 k. The lawyer recommended asking for the entire amount, not a penny more.

I believe that you can rely on experience and common sense of the person representing you…..most lawyers will not sue for more than the liability coverage, unless it’s ridiculously under-covered, and what good would it do you to sue someone for 300,000 if they make 40,000 a year? Lawyers want a quick payout, (less work) and that’s what works. It’s similar to realtors trying to underprice your home, they want a quick payout and a lower price will sell quickly.

Yes, the situation you refer to can happen, but what is your risk that you will allow it to happen, (are you dumb enough to drive when you shouldnt) and what are the odds that a lawyer will go to extreme measures? (The odds are that this was at the far end of a bell curve.)

 

[Ready]

With a $5 million policy, a lawyer might try to go for the entire $5 million, but the insurance company is going to litigate before handing over that much money. So unless the case is serious enough to warrant such a payout, the lawyer will likely settle for something less than the full policy amount rather than taking a chance with a lengthy trial and getting less. In any case it shields me from any additional exposure.

As Sunset stated, with only $1 million, the company could settle the case for $2 million and leave me exposed to cover the remaining $1 million out of pocket.

I’m not concerned about how much my insurance company might pay out. I’m concerned about covering the excess.

 

[ncbill]

It also depends on where your seven figures in assets are located...big difference between $5 million in an IRA rolled over from a 401k plan & $5 million in a taxable account, e.g. after selling your business of 20+ years.

Plus the vagaries of state law...e.g. in my state jointly-owned real estate is automatically titled in such a way that it is not accessible by a judgment against either owner...plus any degree of fault on the plaintiff's part means monetary damages can't be awarded.

BTW, even if you have only a "measly" $1 million umbrella, the insurance company can't simply pay out & walk away w/o your permission.

I would hope it would never happen to an individual, but I've seen a business fire the insurance company's lawyer & hire their own when the insurer wanted to pay out & leave the business hanging for anything above the $1 million liability limit...the insurer did pay legal bills up to the limit, minus deductible, of course.

 

[rodi]

We haven't changed anything and our umbrella insurance cost under Allstate doubled this year. No changes, no claims, no nuthin'.

This happened to us this year also. I called the agent's office and was told California insurance commission had approved an average of 30% increase on umbrella policies. Our increase was about 45%.
Our insurer is farmers, though

 

[Sunset]

Just a comment. A good friend of mine actually had this happen to them. They were hit broadside by a driver who was not paying attention. Their medical bill total was about 50k based on a medicare rates. The driver was insured for 100 k. The lawyer recommended asking for the entire amount, not a penny more.

..

If your good friend had been seriously hurt, or permanently crippled by the collision, would his lawyer have still asked for only $100K ?

 

[Tadpole]

This happened to us this year also. I called the agent's office and was told California insurance commission had approved an average of 30% increase on umbrella policies. Our increase was about 45%.
Our insurer is farmers, though

Got this email from Allstate this morning. Possibly has something to do with my sudden increase. If so I wonder if my home owner and auto insurance is going to provide the same shock.

Temporary Prohibition of Use of Credit History – Washington This notice is to inform you that Allstate will temporarily pause the use of credit history as one of the many factors used to determine personal insurance rates, premiums, or eligibility for coverage for this policy, due to the Washington Insurance Commissioner’s Emergency Rule adopted on March 22, 2021. Allstate is making this change effective on new and existing policies processed on or after June 14, 2021. Because we are not using credit history as a contributing factor to how your policy is rated, you may see an increase or decrease in your policy’s premium. During this temporary prohibition, we may still order credit; however, the credit order will not impact your rates, premiums, or eligibility for coverage. If you have any questions regarding this change, or your policy in general, please contact your Allstate agent or office.