Umbrella insurance - boglehead way

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How much Umbrella do you carry ?

0
19
17%
1M
41
37%
2M
34
30%
3M
9
8%
4M
0
No votes
5M
9
8%
>5M
0
No votes
 
Total votes: 112

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rex
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Umbrella insurance - boglehead way

Post by rex »

I'm still wondering about how much insurance is enough and thought a nice way would be to collect some stats on what type of coverage bogleheads carry. Please provide some perspective into the amount you carry vis-a-vis your net worth.
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Quasimodo
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Re: Umbrella insurance - boglehead way

Post by Quasimodo »

We carry $1million umbrella despite our low net worth partly because having the insurance company interested in defending us against a large lawsuit, even if frivolous, seems worthwhile to me.

We drive a car, so a bad accident with a large lawsuit is a possibility, and the umbrella cost of $105 per year is negligible in the context of the expense of driving a car.

I'm not trying to say a higher premium would make the umbrella not worthwhile. A higher premium would mean we have a higher likelihood of being the target of a large lawsuit, perhaps because we have a swimming pool, large dog, teenage drivers, multiple homes and autos, a boat, bad driving history, etc.

John
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CaliJim
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Re: Umbrella insurance - boglehead way

Post by CaliJim »

How much is conditional on your situation. One size does not fit all. This does get discussed from time to time. I used the Giigle search box to find these prior threads (partial list):

http://www.bogleheads.org/forum/viewtopic.php?t=41505

http://www.bogleheads.org/forum/viewtopic.php?t=79550

http://www.bogleheads.org/forum/viewtopic.php?t=62919

http://www.bogleheads.org/forum/viewtopic.php?t=41505
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mike143
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Re: Umbrella insurance - boglehead way

Post by mike143 »

Quasimodo wrote:We carry $1million umbrella despite our low net worth partly because having the insurance company interested in defending us against a large lawsuit, even if frivolous, seems worthwhile to me.
Same here. $178.29 a year for $1m with Amica, Central Florida. Will increase as assets and potential future earning increase.
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Watty
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Re: Umbrella insurance - boglehead way

Post by Watty »

To me it seems like having a million like I do will cover most possible things and increasing it to two million will not help me a lot if there is a three million dollar, or more, lawsuit that I lose.
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Re: Umbrella insurance - boglehead way

Post by Call_Me_Op »

I have never heard of an accepted formula.
Last edited by Call_Me_Op on Sat Dec 01, 2012 4:23 pm, edited 2 times in total.
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baw703916
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Re: Umbrella insurance - boglehead way

Post by baw703916 »

If having more coverage just means that you will be sued for more money, I'm not sure how that is useful. Likewise, I'm not sure how one arrives at a coverage amount based on net worth, if the plaintiff's lawyers will just set the amount of damages sought to your coverage + net worth + some additional amount. It does seem that you want to keep the existence of any applicable insurance an absolute secret if possible.
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JDCPAEsq
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Re: Umbrella insurance - boglehead way

Post by JDCPAEsq »

I'm always amazed at people talking about the amount of their umbrella coverage. You're really making yourself a target for the litigious in our society.
John
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Re: Umbrella insurance - boglehead way

Post by Call_Me_Op »

There have been some detailed discussion on this in the past. Suggest they be read.
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grabiner
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Re: Umbrella insurance - boglehead way

Post by grabiner »

baw703916 wrote:If having more coverage just means that you will be sued for more money, I'm not sure how that is useful. Likewise, I'm not sure how one arrives at a coverage amount based on net worth, if the plaintiff's lawyers will just set the amount of damages sought to your coverage + net worth + some additional amount. It does seem that you want to keep the existence of any applicable insurance an absolute secret if possible.
You can be sued for any amount, but having an umbrella which is more than your net worth makes it more likely that the plaintiff will settle. If you have $500K of assets subject to judgement and $1M in insurance, and you are sued for a huge amount, you can offer to settle for $1M. The plaintiff can take a sure $1M now, or go ahead with the suit for the chance at $1.5M in several years; a settlement is likely. If you have $2M of assets subject to judgement, the plaintiff is more likely to go ahead with a suit in which he expects to get $3M, so you need a larger umbrella.
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baw703916
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Re: Umbrella insurance - boglehead way

Post by baw703916 »

At what point is one forced to reveal financial information to a plaintiff in a lawsuit?
Most of my posts assume no behavioral errors.
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Re: Umbrella insurance - boglehead way

Post by Call_Me_Op »

grabiner wrote:
baw703916 wrote:If having more coverage just means that you will be sued for more money, I'm not sure how that is useful. Likewise, I'm not sure how one arrives at a coverage amount based on net worth, if the plaintiff's lawyers will just set the amount of damages sought to your coverage + net worth + some additional amount. It does seem that you want to keep the existence of any applicable insurance an absolute secret if possible.
You can be sued for any amount, but having an umbrella which is more than your net worth makes it more likely that the plaintiff will settle. If you have $500K of assets subject to judgement and $1M in insurance, and you are sued for a huge amount, you can offer to settle for $1M. The plaintiff can take a sure $1M now, or go ahead with the suit for the chance at $1.5M in several years; a settlement is likely. If you have $2M of assets subject to judgement, the plaintiff is more likely to go ahead with a suit in which he expects to get $3M, so you need a larger umbrella.
You are suggesting that the policyholder can decide to settle. Isn't that the decision of the insurance company?
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein
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serbeer
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Re: Umbrella insurance - boglehead way

Post by serbeer »

Don't forget that assets in all 401K accounts and rollover IRA accounts, and most of 529 accounts, and at least some of the assets in regular IRA accounts are fully protected from creditors and legal claims by non-spouse (not sure about IRS).

You may not need large umbrella as a result.
Woodshark
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Re: Umbrella insurance - boglehead way

Post by Woodshark »

serbeer wrote:Don't forget that assets in all 401K accounts and rollover IRA accounts, and most of 529 accounts, and at least some of the assets in regular IRA accounts are fully protected from creditors and legal claims by non-spouse (not sure about IRS).
Thanks. I was not aware of this.
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Re: Umbrella insurance - boglehead way

Post by Grt2bOutdoors »

grabiner wrote:
baw703916 wrote:If having more coverage just means that you will be sued for more money, I'm not sure how that is useful. Likewise, I'm not sure how one arrives at a coverage amount based on net worth, if the plaintiff's lawyers will just set the amount of damages sought to your coverage + net worth + some additional amount. It does seem that you want to keep the existence of any applicable insurance an absolute secret if possible.
You can be sued for any amount, but having an umbrella which is more than your net worth makes it more likely that the plaintiff will settle. If you have $500K of assets subject to judgement and $1M in insurance, and you are sued for a huge amount, you can offer to settle for $1M. The plaintiff can take a sure $1M now, or go ahead with the suit for the chance at $1.5M in several years; a settlement is likely. If you have $2M of assets subject to judgement, the plaintiff is more likely to go ahead with a suit in which he expects to get $3M, so you need a larger umbrella.
Or you can choose not to settle unless culpability on your part is 100% obvious and let the insurance company wear them down over time. Insurance companies are not in the business of instantly handing out settlement monies.
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Re: Umbrella insurance - boglehead way

Post by Call_Me_Op »

Grt2bOutdoors wrote:
grabiner wrote:
baw703916 wrote:If having more coverage just means that you will be sued for more money, I'm not sure how that is useful. Likewise, I'm not sure how one arrives at a coverage amount based on net worth, if the plaintiff's lawyers will just set the amount of damages sought to your coverage + net worth + some additional amount. It does seem that you want to keep the existence of any applicable insurance an absolute secret if possible.
You can be sued for any amount, but having an umbrella which is more than your net worth makes it more likely that the plaintiff will settle. If you have $500K of assets subject to judgement and $1M in insurance, and you are sued for a huge amount, you can offer to settle for $1M. The plaintiff can take a sure $1M now, or go ahead with the suit for the chance at $1.5M in several years; a settlement is likely. If you have $2M of assets subject to judgement, the plaintiff is more likely to go ahead with a suit in which he expects to get $3M, so you need a larger umbrella.
Or you can choose not to settle unless culpability on your part is 100% obvious and let the insurance company wear them down over time. Insurance companies are not in the business of instantly handing out settlement monies.
Does the policyholder typically have the right to force a settlement?
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein
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bertilak
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Re: Umbrella insurance - boglehead way

Post by bertilak »

baw703916 wrote:At what point is one forced to reveal financial information to a plaintiff in a lawsuit?
The plaintiff can demand a "statement of assets" and that is under penalty of perjury. Private investigators can check into that for a reasonable fee. This is a pretrial exercise. Not sure if/when/what paperwork needs to be filed with the court to get that rolling.

I know this because I am the plaintiff in a lawsuit right now and the above is what my attorney did, including the private investigator. If it makes a difference, the jurisdiction is California.
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Toons
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Re: Umbrella insurance - boglehead way

Post by Toons »

1 million :happy
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Re: Umbrella insurance - boglehead way

Post by jwa »

Call_Me_Op wrote:
Grt2bOutdoors wrote:
grabiner wrote:
baw703916 wrote:If having more coverage just means that you will be sued for more money, I'm not sure how that is useful. Likewise, I'm not sure how one arrives at a coverage amount based on net worth, if the plaintiff's lawyers will just set the amount of damages sought to your coverage + net worth + some additional amount. It does seem that you want to keep the existence of any applicable insurance an absolute secret if possible.
You can be sued for any amount, but having an umbrella which is more than your net worth makes it more likely that the plaintiff will settle. If you have $500K of assets subject to judgement and $1M in insurance, and you are sued for a huge amount, you can offer to settle for $1M. The plaintiff can take a sure $1M now, or go ahead with the suit for the chance at $1.5M in several years; a settlement is likely. If you have $2M of assets subject to judgement, the plaintiff is more likely to go ahead with a suit in which he expects to get $3M, so you need a larger umbrella.
Or you can choose not to settle unless culpability on your part is 100% obvious and let the insurance company wear them down over time. Insurance companies are not in the business of instantly handing out settlement monies.


Does the policyholder typically have the right to force a settlement?
NO. That is unless one wants to settle it on there own without the benefit of the insurance companies help and financial resources. If one turns a liability claim over to an insurance company you not only get the benefit of the limit of coverage but defense costs as well. Defense costs can be quite expensive and this coverage is provided above and beyond the policy limit.

To get back to your original question. Once the claim has been turned over to the insurance company, they essentially stand in front of you for your financial protection and the policyholder loses control. The insurance company takes full and complete control. If a liability claim is turned in to the insurance company and the policyholder continues with their own efforts then the policholder runs a very high probability of having their insurance coverage to be null and void. The insurance contract is written that way. An insurance policy is a legal contract.
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Re: Umbrella insurance - boglehead way

Post by Call_Me_Op »

jwa wrote:
Call_Me_Op wrote:
Grt2bOutdoors wrote:
grabiner wrote:
baw703916 wrote:If having more coverage just means that you will be sued for more money, I'm not sure how that is useful. Likewise, I'm not sure how one arrives at a coverage amount based on net worth, if the plaintiff's lawyers will just set the amount of damages sought to your coverage + net worth + some additional amount. It does seem that you want to keep the existence of any applicable insurance an absolute secret if possible.
You can be sued for any amount, but having an umbrella which is more than your net worth makes it more likely that the plaintiff will settle. If you have $500K of assets subject to judgement and $1M in insurance, and you are sued for a huge amount, you can offer to settle for $1M. The plaintiff can take a sure $1M now, or go ahead with the suit for the chance at $1.5M in several years; a settlement is likely. If you have $2M of assets subject to judgement, the plaintiff is more likely to go ahead with a suit in which he expects to get $3M, so you need a larger umbrella.
Or you can choose not to settle unless culpability on your part is 100% obvious and let the insurance company wear them down over time. Insurance companies are not in the business of instantly handing out settlement monies.


Does the policyholder typically have the right to force a settlement?
NO. That is unless one wants to settle it on there own without the benefit of the insurance companies help and financial resources. If one turns a liability claim over to an insurance company you not only get the benefit of the limit of coverage but defense costs as well. Defense costs can be quite expensive and this coverage is provided above and beyond the policy limit.

To get back to your original question. Once the claim has been turned over to the insurance company, they essentially stand in front of you for your financial protection and the policyholder loses control. The insurance company takes full and complete control. If a liability claim is turned in to the insurance company and the policyholder continues with their own efforts then the policholder runs a very high probability of having their insurance coverage to be null and void. The insurance contract is written that way. An insurance policy is a legal contract.
The reason I asked this is because grabiner wrote:

"You can be sued for any amount, but having an umbrella which is more than your net worth makes it more likely that the plaintiff will settle. If you have $500K of assets subject to judgement and $1M in insurance, and you are sued for a huge amount, you can offer to settle for $1M. The plaintiff can take a sure $1M now, or go ahead with the suit for the chance at $1.5M in several years; a settlement is likely. If you have $2M of assets subject to judgement, the plaintiff is more likely to go ahead with a suit in which he expects to get $3M, so you need a larger umbrella."


This seems to imply that the policyholder can decide if he or she wants to settle. That apparently is not correct.
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein
jwa
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Re: Umbrella insurance - boglehead way

Post by jwa »

The policyholder has no control on the handling or settlement of a claim.

Through discovery the plaintiff and the plaintiff's attorney most likely will know what assets are available. If there is an underlying auto policy limit of $500,000 and an umbrella with a policy limit of $1,000,000 they may decide to make a case that falls at or within those limits and ignore one's personal assets. Then again they may want more than the insurance limits but that would depend upon the gravity of the injury.

Also, if I have $1.500,000 of liability insurance available and the plaintiff decides they want all or a portion of it, that doesn't mean they will get it. The final settlement will still come down to negotiation between the plaintiff and the insurance company and if that fails by the legal system.

I carry an umbrella. I feel why take a chance that any of my assets are available. If anything happens where I am negligent, then I have enough insurance coverage that I am comfortable none of my personal assets are at risk.

How much liability coverage does one need? I don't know. Tell me how much you are going to be sued for and then we go from there.
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serbeer
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Re: Umbrella insurance - boglehead way

Post by serbeer »

Hm, what if your umbrella + auto is for $1.3M and the claim is for $2.5M?
Can insurance company force you to settle for 2M? In this case, it is not just their 1.3M at stake but your 700K, right?

What if the claim is for 7M? How can insurance company agree to settle on your behalf in this case if majority of money in question are yours?
Would in this case your umbrella be to your detriment actually?
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FNK
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Re: Umbrella insurance - boglehead way

Post by FNK »

DO NOT ADD umbrella and underlying policy limits. Umbrella treats underlying policies as a deductible and only kicks in when they are exhausted (if they apply at all; it also has coverage for slander etc.). A $1M umbrella on top of a $300K auto is $1M of coverage. That's why it's so cheap.
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Drain
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Re: Umbrella insurance - boglehead way

Post by Drain »

FNK wrote:Umbrella treats underlying policies as a deductible and only kicks in when they are exhausted (if they apply at all; it also has coverage for slander etc.).
True.
A $1M umbrella on top of a $300K auto is $1M of coverage.
This is true for some insurers and not for others. You have to ask. With USAA, the umbrella coverage is exclusive of the underlying liability coverage, so $300K on an auto policy and $1M on an umbrella is $1.3M of coverage.
That's why it's so cheap.
It's "cheap" because of the first thing you stated. The second...sometimes.
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jwa
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Re: Umbrella insurance - boglehead way

Post by jwa »

Serbeer, if anyone is negligent and the amount of settlement is 7 million, the insurance company pays their limit of coverage and walks away. If one has a total liabilty limit of $1,500,000 of underlying coverage (auto or homeowners) and umbrella then the policyholder would be liable for 5.5 million and they are on their own. I doubt that would ever happen in a personal situation for that large of a claim but for a larger business or medical professional that could be the case. As an example, I've seen franchisors require their franchisees carry a ten million umbrella in excess of high underlying limits and in some cases I've seen a umbrella limit of 15 million required. I'm sure others here have seen similar situations.

FNK, virtually all umbrellas are written on a "follow form" basis which means the underlying policies have to pay before the umbrella kicks in and generally only if the underlying policies respond to the situation. You are right that there are some extra coverages that might pop up after a $10,000 SIR (deductible) but there aren't many. Many of us in the industry don't call them umbrella policies anymore but instead excess liability coverage over the top of your other liability coverages. For a personal situation this would be the homeowners and auto policies.

If there is a underlying liability policy for $300,000 and a million dollar umbrella over it all of my companies would have a total limit of $1,300,000 for the policyholder.
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Re: Umbrella insurance - boglehead way

Post by sscritic »

CaliJim wrote: I used the Giigle search box to find these prior threads (partial list):
I googled giigle and found this talk about the transition of google to giigle.

If Google Becomes "Giigle"
http://www.youtube.com/watch?v=RIUSLeqyIsE

The Joan Ganz Cooney Center participated in a study with the Human-Computer Interaction Lab at the UofM (one of them) :
Giigle Study
...
Dr. Allison Druin at the University of Maryland's Human-Computer Interaction Lab (HCIL) led an investigation of the Internet search habits and strategies of children aged 7 to 11 years old. She initiated her research with interface designers at Google to raise their awareness of the search experiences of their youngest users.
...
As a result of these studies, Giigle researchers identified seven search roles children display as information seekers using Internet keyword interface: Developing, Content, Power, Non-motivated, Distracted, Visual, and Rule-bound.
I assume your giigling was a result of your own human-computer interaction.
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CaliJim
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Re: Umbrella insurance - boglehead way

Post by CaliJim »

Yes - it came natrually. :P
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