Should I get umbrella liability insurance?

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Topic Author
yosemite_mountain
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Joined: Tue Oct 02, 2018 8:44 pm

Should I get umbrella liability insurance?

Post by yosemite_mountain » Thu Jan 10, 2019 3:21 pm


Questions

-Should I get umbrella liability insurance in case I get sued and someone comes after my retirement assets? I do not have rental insurance. In addition, I do not have home insurance since I do not own a home. I only have car insurance.

Stats
Emergency funds: yes (6 months)
Debt: 0
Do not own home
No kids
Single
Tax Filing Status: Single, no kids
Tax Rate: 30% Federal, 10% State
State of Residence: California
Age: 30
Income: 200k a year before taxes. This includes RSUs and bonuses.

Current retirement assets: $300k, all in Vanguard stocks and bonds

Taxable at Vanguard
70% Vanguard Total Stock Market Index Fund Admiral Shares (ER =0.04%)

Roth IRA at Vanguard
10% Vanguard Total Stock Market Index Fund Admiral Shares (ER =0.04%)

401k with employer
20% Vanguard Institutional Total Bond Market Index Trust (ER = 0.029%)

wolf359
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Re: Should I get umbrella liability insurance?

Post by wolf359 » Thu Jan 10, 2019 3:40 pm

Actually, you should check your state laws. Your retirement accounts (IRA and 401k) should be judgement proof, but the status of the IRA varies by state.

Your taxable assets and income are fair game if you get sued.

Umbrella liability insurance is cheap, because it is unlikely to be used. On the other hand, if it is needed, you will be very happy you have it.

Why don't you have rental insurance? Are you willing to re-buy everything if you have a fire or other calamity? (Self-insurance is certainly a reasonable approach, just make sure it's a deliberate choice.)

Ndop
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Re: Should I get umbrella liability insurance?

Post by Ndop » Thu Jan 10, 2019 3:59 pm

Yes you should have umbrella insurance. A very cheap form of asset protection. The insurance company will probably require you to have renter's insurance in order to have the umbrella policy.

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BolderBoy
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Re: Should I get umbrella liability insurance?

Post by BolderBoy » Thu Jan 10, 2019 4:12 pm

yosemite_mountain wrote:
Thu Jan 10, 2019 3:21 pm
State of Residence: California
Yes, you should get an umbrella policy. 401k plans are completely shielded at the federal level (and therefore from state lawsuits as well, but the last time I looked California only affords protection to $100k of IRA holdings. This may have changed (doubtful).
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect

cadreamer2015
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Re: Should I get umbrella liability insurance?

Post by cadreamer2015 » Thu Jan 10, 2019 4:20 pm

You should probably get renters insurance first, not so much to replace stuff that might get stolen or burn up but to get the first layer of liability insurance / protection. Umbrella would come on top of the liability limits of your renters insurance.
De gustibus non est disputandum

Daryl
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Re: Should I get umbrella liability insurance?

Post by Daryl » Thu Jan 10, 2019 4:34 pm

Renter's Insurance + Excess Liability will probably increase your current premiums by a couple hundred dollars.

Driving is risky, and I believe we all have the responsibility to pay for the damages we cause. That is why I carry liability coverage in excess of the state minimums (well in excess!).

euroswiss
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Re: Should I get umbrella liability insurance?

Post by euroswiss » Thu Jan 10, 2019 4:59 pm

Yes, you should have some umbrella liability and also renter insurance. Check your lease - depending on your location, it is very likely that it contains a clause that requires you to carry renter insurance.

Topic Author
yosemite_mountain
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Joined: Tue Oct 02, 2018 8:44 pm

Re: Should I get umbrella liability insurance?

Post by yosemite_mountain » Thu Jan 10, 2019 5:49 pm

BolderBoy wrote:
Thu Jan 10, 2019 4:12 pm
Yes, you should get an umbrella policy. 401k plans are completely shielded at the federal level (and therefore from state lawsuits as well, but the last time I looked California only affords protection to $100k of IRA holdings. This may have changed (doubtful).
Thanks BolderBoy!

Questions:

-Are 401k plans shield at the state level?
-Are Roth and traditional IRAS shielded at the federal level?
-Are Roth and transitional IRAs shielded at the state level?
-How much should I expect to pay for an umbrella policy per year? Any recommendation of vendor?

OregonDucksFan
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Re: Should I get umbrella liability insurance?

Post by OregonDucksFan » Thu Jan 10, 2019 6:01 pm

The amount of umbrella insurance depends on how much protection you need — all asset values minus protected assets (401k). Round up to the next higher million

Umbrella insurance costs 200-250 or so for the first 1 million and scales up nonlinearly by little for each incremental million (2 million umbrella insurance is 250-300, etc)

Iridium
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Re: Should I get umbrella liability insurance?

Post by Iridium » Thu Jan 10, 2019 6:17 pm

While asset-wise, you are essentially judgement-proof (your IRAs are protected up to a bit over a million dollars and your 401ks are totally covered for bankruptcy), you have plenty of income to be garnished, until you file for Chapter 13 bankruptcy, which grants your creditors the vast majority of your disposable income for 5 years. Roughly speaking, I would say that a plaintiff could potentially get $500k-750k out of you, should they get a judgement and collect out of bankruptcy. This is probably around the threshold for whether you need an umbrella. There are good arguments both ways.

Definitely get the renter's insurance and get at least $300K liability limit (ideally, $500K). Make sure your auto covers at least 250/500, though I would consider upping that to 500/500.

A common misunderstanding is that homeowner/renter insurance liability only relates to the property. In fact, it covers you for pretty much all bodily injury and property damage unrelated to driving; for example, if you hit something or someone with a golf ball or if you have a boat accident (on a small boat), renter's insurance would take care of it. It also takes care of unexpected property liabilities such as if a leak in something you own damages a lower unit.

Jeff Albertson
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Re: Should I get umbrella liability insurance?

Post by Jeff Albertson » Thu Jan 10, 2019 6:48 pm

Here's what Nolo says: https://www.nolo.com/legal-encyclopedia ... ounts.html
If a creditor gets a judgment against you and you have a retirement account, then the judgment creditor may be able to seize all or part of the account. This will depend on whether your account is an ERISA-qualified retirement acount or a non-ERISA account. ERISA accounts are generally protected from judgment creditors, as are employee welfare benefits (like medical insurance, HSAs, and employer disability benefits).
Read on to learn the difference between ERISA and non-ERISA retirement accounts, and when your retirement account is safe from judgment creditors, and when it might not be.

...

Common Types of Non-ERISA Retirement Accounts
A great deal of retirement plans and accounts are non-ERISA and may be at risk, including:
traditional Individual Retirement Accounts (IRAs)
Roth IRAs
Simplified Employee Pension (SEP) Plans
SIMPLE IRAs
Keogh Plans
403(b) plans for employees of a public school or university
plans that do not benefit employees, or “employer-only” plans
government plans, and
church plans.

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ClevrChico
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Re: Should I get umbrella liability insurance?

Post by ClevrChico » Thu Jan 10, 2019 7:55 pm

You should consider it. Or purchase high limit renters/liability and car insurance as Iridium suggested. Or both.

I know two young people (at the time) that had no assets and now have long-term wage garnishment due to settlements against them. All it takes is a really bad day and a moment of misjudgment.

I also know a third person that had a $100k+ settlement against them because a person faked an injury in an auto accident with their kid.

All of them could have insured against these risks for very little money.

magicbunny
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Re: Should I get umbrella liability insurance?

Post by magicbunny » Thu Jan 10, 2019 8:18 pm

Umbrella insurance is not just for liability protection, it can save you money or give more freedom of action. The excellent book Insurance for Dummies has several examples. I have personally saved a lot waving around my umbrella insurance policy to be able to do more things or in lieu of more specialized (expensive) coverage.

1) You are renting a park area for a large family gathering. The venue doesn't want to rent to you unless there is sufficient liability coverage. You show them the umbrella policy, and save the cost of a last minute one-time insurance policy.

2) Yoga teachers sometimes do community yoga classes for free. The different venues will not allow it unless there is sufficient liability insurance. The umbrella insurance ($150+/year) saves $$$ from buying specific yoga teacher liability insurance ($50/month=$600/year)

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abuss368
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Re: Should I get umbrella liability insurance?

Post by abuss368 » Thu Jan 10, 2019 9:55 pm

Umbrella insurance is very cheap and in my opinion everyone should have it. If there is ever a need you will be happy you did.
John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!" | | Disclosure: Three Fund Portfolio + U.S. & International REITs

CurlyDave
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Re: Should I get umbrella liability insurance?

Post by CurlyDave » Fri Jan 11, 2019 12:28 am

The other thing that an umbrella policy does is it incentivizes your insurance company to provide the very best lawyers they have in the case of any lawsuit against you where they might have to pay up.

Your agent may well ask a question along the lines of: "how many assets are you protecting?" and imply that the amount of an umbrella policy should be close to that. Don't believe it. A potential judgement is not limited by your assets.

The correct size for an umbrella policy is "ample".

SimonJester
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Re: Should I get umbrella liability insurance?

Post by SimonJester » Fri Jan 11, 2019 9:09 am

CurlyDave wrote:
Fri Jan 11, 2019 12:28 am
The other thing that an umbrella policy does is it incentivizes your insurance company to provide the very best lawyers they have in the case of any lawsuit against you where they might have to pay up.

Your agent may well ask a question along the lines of: "how many assets are you protecting?" and imply that the amount of an umbrella policy should be close to that. Don't believe it. A potential judgement is not limited by your assets.

The correct size for an umbrella policy is "ample".
This +1000, lets say you shell out $200 -$250 per year, I'd bet a lawyer's hourly rate to defend you in a suite will eat up $250 in no time...
"They who can give up essential liberty to obtain a little temporary safety, deserve neither liberty nor safety." - Benjamin Franklin

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Raybo
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Re: Should I get umbrella liability insurance?

Post by Raybo » Fri Jan 11, 2019 9:35 am

I, too, agree that you should have both renter's insurance and an umbrella policy.

While umbrella liability policies are inexpensive (I pay $135/year for $1 million in coverage), to qualify for them, you have to increase your other insurance limits. So, my home owners and auto policies are now much pricier as I had to double the liability limits on those policies before my insurance company would offer me the umbrella policy.

I'd estimate that my overall insurance costs rose about 40%.

Note that you should check with your insurance company to see if they will even write an umbrella policy without a home owners (or renter's insurance).
No matter how long the hill, if you keep pedaling you'll eventually get up to the top.

maxq
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Re: Should I get umbrella liability insurance?

Post by maxq » Fri Jan 11, 2019 10:09 am

I read this thread with interest. I have an umbrella policy that meets my needs, but the mentions of asset protection got me thinking.....

I understand each state varies on what assets you can shelter from creditors (primary residence, IRAs, etc), but I'm curious how it actually works in practice. If my home happens to be in a state where it is protected, that's great. But if I needed to sell it for some reason, it seems that the proceeds would then be vulnerable. Likewise, if I cash in an IRA or withdraw funds from my 401k, wouldn't it then be subject to the creditor's judgement?

krafty81
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Re: Should I get umbrella liability insurance?

Post by krafty81 » Fri Jan 11, 2019 10:53 am

I have umbrella insurance from USAA, but to get it I had to increase some of my auto insurance coverages. So that added to the cost of umbrella IMO.

SovereignInvestor
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Re: Should I get umbrella liability insurance?

Post by SovereignInvestor » Fri Jan 11, 2019 11:44 am

I most state insurance regulation forces insurers to have a duty to defend the insured even if the claim will exceed the policy limit. So if the limit is 300k and it is clearly over 1M then the insurer can't just screw defending you because they would rather just payout 300k and be done wasting their time and expense.

With that said it is better to have the umbrella.

The theory of scaling limit with assets is that if they see the defender has large assets the judgement may be biased higher.

Still I agree with above points that it is good to have and one needs ample coverage.

zubinh
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Re: Should I get umbrella liability insurance?

Post by zubinh » Fri Jan 11, 2019 11:54 am

I believe that everyone should have liability coverage that is at least equivalent to one's total net worth. We live in the most litigious society in the world so why not protect yourself?

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BolderBoy
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Re: Should I get umbrella liability insurance?

Post by BolderBoy » Fri Jan 11, 2019 12:13 pm

yosemite_mountain wrote:
Thu Jan 10, 2019 5:49 pm
Questions:

1-Are 401k plans shield at the state level?
2-Are Roth and traditional IRAS shielded at the federal level?
3-Are Roth and transitional IRAs shielded at the state level?
4-How much should I expect to pay for an umbrella policy per year? Any recommendation of vendor?
1. Yes
2. No
3. Depends on the state. In Colorado, yes (no matter the size). In most states at least some of a tIRA or rIRA is shielded.
4. Varies a fair amount depending on the insurer. $200-300/yr for a $1mil policy is not unusual. I know someone whose recent renewal was $400ish for a $3mil policy (with Chubb).
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect

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goingup
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Re: Should I get umbrella liability insurance?

Post by goingup » Fri Jan 11, 2019 12:52 pm

I'm less enthusiastic about insurance than others apparently. I only buy insure to protect myself from liability I can't afford to pay.

Renter's insurance? Why? Umbrella Insurance at your level of exposed net worth? No.

What you need is excellent car insurance with high coverage amounts. We have $1M liability and uninsured motorist through USAA with a $1K deductible.

Iridium
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Re: Should I get umbrella liability insurance?

Post by Iridium » Fri Jan 11, 2019 1:24 pm

goingup wrote:
Fri Jan 11, 2019 12:52 pm
I'm less enthusiastic about insurance than others apparently. I only buy insure to protect myself from liability I can't afford to pay.

Renter's insurance? Why?
Because it protects you from liabilities you cannot afford. While it is true that driving is the most dangerous thing you do, that does not mean it is impossible to severely injure or kill someone through other means, and getting liability insurance for non-auto is far cheaper than liability for auto (which reflects their likelihood).
goingup wrote:
Fri Jan 11, 2019 12:52 pm
Umbrella Insurance at your level of exposed net worth? No.
While I do not necessary say OP needs an umbrella, the analysis has to go deeper than just assets. OP has plenty of income to be garnished until bankruptcy is declared and OP would not qualify for chapter 7. If I was a plaintiff, I would not settle for a trivial sum on the idea that one cannot get blood out of a turnip; there is plenty of money, just inconvenient to access.
goingup wrote:
Fri Jan 11, 2019 12:52 pm
What you need is excellent car insurance with high coverage amounts. We have $1M liability and uninsured motorist through USAA with a $1K deductible.
It is uncommon for liability or uninsured motorist coverage to have a deductible. Is it possible that your insurance company quoted you comprehensive or collision without your knowledge? You might be able to save some more on your car insurance :moneybag

SimonJester
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Re: Should I get umbrella liability insurance?

Post by SimonJester » Fri Jan 11, 2019 2:45 pm

Iridium wrote:
Fri Jan 11, 2019 1:24 pm
goingup wrote:
Fri Jan 11, 2019 12:52 pm
What you need is excellent car insurance with high coverage amounts. We have $1M liability and uninsured motorist through USAA with a $1K deductible.
It is uncommon for liability or uninsured motorist coverage to have a deductible. Is it possible that your insurance company quoted you comprehensive or collision without your knowledge? You might be able to save some more on your car insurance :moneybag

AMICA also has added a $500 deductible to their umbrella policy. Since the umbrella stacks on top of the normal liability I'm not too worried, should I ever need this coverage I am going to have a lot of other issues to worry about... I figure $500 is about 2 hours of a lawyer's time...
"They who can give up essential liberty to obtain a little temporary safety, deserve neither liberty nor safety." - Benjamin Franklin

criticalmass
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Re: Should I get umbrella liability insurance?

Post by criticalmass » Sat Jan 12, 2019 12:56 am

I'm thinking of getting umbrella liability insurance. I currently have auto and homeowner policies. What is the minimum liability limits for these policies to get an umbrella? I'm guessing $100k/300k for auto isn't enough to get an umbrella, but maybe $250k/500k is enough? Or does it vary case-by-case?

Is there a benefit from getting the umbrella policy from the same company (e.g. better rates) as my other policies or do certain insurance companies specialize in umbrella policies?

Iridium
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Re: Should I get umbrella liability insurance?

Post by Iridium » Sat Jan 12, 2019 1:14 am

criticalmass wrote:
Sat Jan 12, 2019 12:56 am
I'm thinking of getting umbrella liability insurance. I currently have auto and homeowner policies. What is the minimum liability limits for these policies to get an umbrella? I'm guessing $100k/300k for auto isn't enough to get an umbrella, but maybe $250k/500k is enough? Or does it vary case-by-case?

Is there a benefit from getting the umbrella policy from the same company (e.g. better rates) as my other policies or do certain insurance companies specialize in umbrella policies?
Depends on the umbrella. Annoyingly, sometimes even though the contract says $100/300 is okay, there is a premium surcharge associated with it that exceeds the cost of just upgrading your auto. Then again, sometimes not. So, you really need to interact with someone to figure out how to get the best rate. In general, I would probably plan on an umbrella meaning you need to increase to 250/500.

Most insurance companies will only do an umbrella if they are covering you for auto. In the event of a claim (~80% of umbrella claims are auto), most companies don't want to have to deal with two different insurers attempting to control the defense. There are some specialty companies, but on a simple $1MM umbrella with no special underwriting concerns, they would usually be more expensive than your auto insurer.

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tadamsmar
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Re: Should I get umbrella liability insurance?

Post by tadamsmar » Sat Jan 12, 2019 2:20 am

You can find an example of an application here:

https://www.rlicorp.com/pup-apps-rates

There are different options for auto limits with RLI.

I have mine with them. Just filling out the application caused me to eliminate some liability risks.

Probably worth having 1M worth just for the education and effect on your behavior.

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Watty
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Re: Should I get umbrella liability insurance?

Post by Watty » Sat Jan 12, 2019 7:06 am

You also have to consider the limits of your car insurance. If it is only a couple of hundred thousand dollars you could exceed that if there is a minor injury in a car accident. If you have low limits then you also have to consider that you could hit a very expensive car and exceed the amounts that your car insurance would cover.

There is absolutely no reason not to get quotes to find out how much the renters insurance and an umbrella policy would cost.

If you have a bad driving record the umbrella policy may not be as inexpensive as you sometimes hear so you need to get an actual quote before you can decide if it is worth it or not.

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BogleFanGal
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Re: Should I get umbrella liability insurance?

Post by BogleFanGal » Sat Jan 12, 2019 10:04 am

2) Yoga teachers sometimes do community yoga classes for free. The different venues will not allow it unless there is sufficient liability insurance. The umbrella insurance ($150+/year) saves $$$ from buying specific yoga teacher liability insurance ($50/month=$600/year)

Be aware that some umbrella policies exclude coverage on any activities related to one's occupation or commercial use (even if not earning income from it). Mine does. (If your policy has a similar exclusion, an umbrella may not protect you if a student gets hurt and decides to sue.)

sketchy9
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Re: Should I get umbrella liability insurance?

Post by sketchy9 » Sat Jan 12, 2019 12:50 pm

I guess I'll be the contrarian and say that "everyone" does not need umbrella insurance. IMO you need to make an honest assessment of your exposure to liability in your life and make a decision based on that. In my case, I go without because:

1. I drive <4k miles/year. I have maxed out auto liability insurance. No one else drives this car.
2. I own a condo, not a house. No yard, pool, trampoline, etc. I have high limits for my homeowner's policy
3. I'm single with no kids or pets
4. My job exposes me to significant professional liability, and I have appropriate insurance for that. Umbrella insurance would not be helpful

The likelihood of a million-dollar judgment against me (outside of my job) simply isn't high enough to justify the (low) cost of umbrella insurance. Some here will chime in with "you never know" or something along those lines, and while that is technically correct, my lifestyle just doesn't expose me to significant liability. I don't feel like giving the insurance company $200 a year for no good reason. Also, the fact that umbrella insurance is a profitable product at such low premiums despite high coverages should tell you how often it is used.

EDIT: all of which is to say that you should really do a risk assessment of yourself and base your decision on that, and not simply follow the crowd.

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abuss368
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Re: Should I get umbrella liability insurance?

Post by abuss368 » Sat Jan 12, 2019 1:11 pm

yosemite_mountain wrote:
Thu Jan 10, 2019 3:21 pm

Questions

-Should I get umbrella liability insurance in case I get sued and someone comes after my retirement assets? I do not have rental insurance. In addition, I do not have home insurance since I do not own a home. I only have car insurance.

Stats
Emergency funds: yes (6 months)
Debt: 0
Do not own home
No kids
Single
Tax Filing Status: Single, no kids
Tax Rate: 30% Federal, 10% State
State of Residence: California
Age: 30
Income: 200k a year before taxes. This includes RSUs and bonuses.

Current retirement assets: $300k, all in Vanguard stocks and bonds

Taxable at Vanguard
70% Vanguard Total Stock Market Index Fund Admiral Shares (ER =0.04%)

Roth IRA at Vanguard
10% Vanguard Total Stock Market Index Fund Admiral Shares (ER =0.04%)

401k with employer
20% Vanguard Institutional Total Bond Market Index Trust (ER = 0.029%)
Welcoming to the Bogleheads! I responded earlier and provided my opinion regarding umbrella insurance. I did want to follow up and mention that it is my understanding that insurance companies will typically provide an attorney to defend the case (and thus the insurance companies economic interest). Our insurance agent recommends that the umbrella policy cover the insured assets as a rule of thumb.

Regarding your rental situation, I would consider renters insurance. Like many things in life anything unfortunate could happen in a moments time when one least expects it. Your rental agreement may have an insurance requirement.
John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!" | | Disclosure: Three Fund Portfolio + U.S. & International REITs

Blake7
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Re: Should I get umbrella liability insurance?

Post by Blake7 » Sat Jan 12, 2019 1:26 pm

As others have mentioned, one of the "hidden" values of umbrella liability insurance is the legal representation you get that is included in the cost. Umbrella liability insurance is probably one of the best values in insurance out there.

BeTheMatch
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Re: Should I get umbrella liability insurance?

Post by BeTheMatch » Sat Jan 12, 2019 1:48 pm

Everyone should have umbrella insurance, IMO.

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StevieG72
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Re: Should I get umbrella liability insurance?

Post by StevieG72 » Sat Jan 12, 2019 3:02 pm

I just pulled the trigger on an umbrella policy. Should have done this earlier but better late than never!

For my situation 1 driver household a 1 mill policy is $153 per year with Geico.
Fools think their own way is right, but the wise listen to others.

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LilyFleur
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Re: Should I get umbrella liability insurance?

Post by LilyFleur » Sat Jan 12, 2019 4:10 pm

Never rolling your 401k into an IRA is actually a form of liability insurance.

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TomatoTomahto
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Re: Should I get umbrella liability insurance?

Post by TomatoTomahto » Sat Jan 12, 2019 8:06 pm

BeTheMatch wrote:
Sat Jan 12, 2019 1:48 pm
Everyone should have umbrella insurance, IMO.
And even those of us who have it might consider raising the limits. I will call my agent next week. We set the limit, iirc, at $3M some time ago. I don’t think raising it will be expensive.
Okay, I get it; I won't be political or controversial. The Earth is flat.

wootwoot
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Re: Should I get umbrella liability insurance?

Post by wootwoot » Sat Jan 12, 2019 9:20 pm

LilyFleur wrote:
Sat Jan 12, 2019 4:10 pm
Never rolling your 401k into an IRA is actually a form of liability insurance.
How?

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abuss368
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Re: Should I get umbrella liability insurance?

Post by abuss368 » Sat Jan 12, 2019 10:25 pm

StevieG72 wrote:
Sat Jan 12, 2019 3:02 pm
I just pulled the trigger on an umbrella policy. Should have done this earlier but better late than never!

For my situation 1 driver household a 1 mill policy is $153 per year with Geico.
:sharebeer
John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!" | | Disclosure: Three Fund Portfolio + U.S. & International REITs

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BolderBoy
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Re: Should I get umbrella liability insurance?

Post by BolderBoy » Sat Jan 12, 2019 10:34 pm

goingup wrote:
Fri Jan 11, 2019 12:52 pm
I'm less enthusiastic about insurance than others apparently. I only buy insure to protect myself from liability I can't afford to pay.
I have a friend who was crashed into by a driver who crossed the median on an interstate. At the defendant's bankruptcy hearing my friend asked the judge to NOT discharge the court judgment requiring the defendant to pay my friend $1500/month in compensation for his destroyed foot.

The judge agreed and 25 years later the defendant is still paying, every month.

I suppose one could afford to pay that monthly judgment until one dies, but...
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect

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LilyFleur
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Re: Should I get umbrella liability insurance?

Post by LilyFleur » Sun Jan 13, 2019 7:48 pm

wootwoot wrote:
Sat Jan 12, 2019 9:20 pm
LilyFleur wrote:
Sat Jan 12, 2019 4:10 pm
Never rolling your 401k into an IRA is actually a form of liability insurance.
How?
You would need to check the laws in your state, but in my state, California, my 401k would be protected in bankruptcy and against all creditors; an IRA does not have the same level of protection. Also, in California, there is a certain amount of house equity that is protected in a bankruptcy situation (under "System 1" it is $75,000 for a single person and $100,000 for a family.) Depending on your age and how much you owe on your house, many of us in California have a great deal of equity in our houses that could be lost in the case of medical bankruptcy. (And, remember, the leading cause of bankruptcy in the United States is medical bills, even for folks with medical insurance.) So, keeping as much as possible in your 401k, I think, is a wise decision. At least, even if you lost your house, you could use 401k withdrawals to pay rent so you wouldn't be homeless. I know, this is drastic thinking, but the possibility of drastic circumstances are why one buys insurance. I am not recommending not getting umbrella insurance. In fact, it is on my list of things to do.

DrGoogle2017
Posts: 1763
Joined: Mon Aug 14, 2017 12:31 pm

Re: Should I get umbrella liability insurance?

Post by DrGoogle2017 » Mon Jan 14, 2019 12:37 am

No, but do increase your car insurance to $1 million, very cheap. Both of my kids have it. I’m not sure my kids have renters insurance or not, I have to ask them.

User avatar
tadamsmar
Posts: 8005
Joined: Mon May 07, 2007 12:33 pm

Re: Should I get umbrella liability insurance?

Post by tadamsmar » Mon Jan 14, 2019 5:52 am

[*]i
sketchy9 wrote:
Sat Jan 12, 2019 12:50 pm
I guess I'll be the contrarian and say that "everyone" does not need umbrella insurance. IMO you need to make an honest assessment of your exposure to liability in your life and make a decision based on that. In my case, I go without because:

1. I drive <4k miles/year. I have maxed out auto liability insurance. No one else drives this car.
2. I own a condo, not a house. No yard, pool, trampoline, etc. I have high limits for my homeowner's policy
3. I'm single with no kids or pets
4. My job exposes me to significant professional liability, and I have appropriate insurance for that. Umbrella insurance would not be helpful

The likelihood of a million-dollar judgment against me (outside of my job) simply isn't high enough to justify the (low) cost of umbrella insurance. Some here will chime in with "you never know" or something along those lines, and while that is technically correct, my lifestyle just doesn't expose me to significant liability. I don't feel like giving the insurance company $200 a year for no good reason. Also, the fact that umbrella insurance is a profitable product at such low premiums despite high coverages should tell you how often it is used.

EDIT: all of which is to say that you should really do a risk assessment of yourself and base your decision on that, and not simply follow the crowd.
Just want to point that your list is not exhaustive so could be mileading. For instance, owning a watercraft or co-signing a loan exposes one to covered liabilities under my policy.

You say one should do a risk assessment. Just filling out the form was a better risk assessment for me. And the automatic monitoring was like a ongoing automatic risk assessment.

Blake7
Posts: 132
Joined: Fri Mar 30, 2018 2:52 pm
Location: USA

Re: Should I get umbrella liability insurance?

Post by Blake7 » Mon Jan 14, 2019 8:15 am

LilyFleur wrote:
Sun Jan 13, 2019 7:48 pm
wootwoot wrote:
Sat Jan 12, 2019 9:20 pm
LilyFleur wrote:
Sat Jan 12, 2019 4:10 pm
Never rolling your 401k into an IRA is actually a form of liability insurance.
How?
You would need to check the laws in your state, but in my state, California, my 401k would be protected in bankruptcy and against all creditors; an IRA does not have the same level of protection. Also, in California, there is a certain amount of house equity that is protected in a bankruptcy situation (under "System 1" it is $75,000 for a single person and $100,000 for a family.) Depending on your age and how much you owe on your house, many of us in California have a great deal of equity in our houses that could be lost in the case of medical bankruptcy. (And, remember, the leading cause of bankruptcy in the United States is medical bills, even for folks with medical insurance.) So, keeping as much as possible in your 401k, I think, is a wise decision. At least, even if you lost your house, you could use 401k withdrawals to pay rent so you wouldn't be homeless. I know, this is drastic thinking, but the possibility of drastic circumstances are why one buys insurance. I am not recommending not getting umbrella insurance. In fact, it is on my list of things to do.
FWIW, California had a court ruling in 2015 (McMullen v. Haycock) that gives IRA funds full creditor protection, but it only applies to rollover funds in the IRA that can be traced back to a private employer retirement plan, like a 401k.

DrGoogle2017
Posts: 1763
Joined: Mon Aug 14, 2017 12:31 pm

Re: Should I get umbrella liability insurance?

Post by DrGoogle2017 » Mon Jan 14, 2019 2:56 pm

Blake7 wrote:
Mon Jan 14, 2019 8:15 am
LilyFleur wrote:
Sun Jan 13, 2019 7:48 pm
wootwoot wrote:
Sat Jan 12, 2019 9:20 pm
LilyFleur wrote:
Sat Jan 12, 2019 4:10 pm
Never rolling your 401k into an IRA is actually a form of liability insurance.
How?
You would need to check the laws in your state, but in my state, California, my 401k would be protected in bankruptcy and against all creditors; an IRA does not have the same level of protection. Also, in California, there is a certain amount of house equity that is protected in a bankruptcy situation (under "System 1" it is $75,000 for a single person and $100,000 for a family.) Depending on your age and how much you owe on your house, many of us in California have a great deal of equity in our houses that could be lost in the case of medical bankruptcy. (And, remember, the leading cause of bankruptcy in the United States is medical bills, even for folks with medical insurance.) So, keeping as much as possible in your 401k, I think, is a wise decision. At least, even if you lost your house, you could use 401k withdrawals to pay rent so you wouldn't be homeless. I know, this is drastic thinking, but the possibility of drastic circumstances are why one buys insurance. I am not recommending not getting umbrella insurance. In fact, it is on my list of things to do.
FWIW, California had a court ruling in 2015 (McMullen v. Haycock) that gives IRA funds full creditor protection, but it only applies to rollover funds in the IRA that can be traced back to a private employer retirement plan, like a 401k.
This is private information anyway. They have no way of knowing how much you have. However, if you own real estate, I think they can easily find out. That’s why you get umbrella insurance if you own real estate.

Blake7
Posts: 132
Joined: Fri Mar 30, 2018 2:52 pm
Location: USA

Re: Should I get umbrella liability insurance?

Post by Blake7 » Mon Jan 14, 2019 4:34 pm

DrGoogle2017 wrote:
Mon Jan 14, 2019 2:56 pm
Blake7 wrote:
Mon Jan 14, 2019 8:15 am
LilyFleur wrote:
Sun Jan 13, 2019 7:48 pm
wootwoot wrote:
Sat Jan 12, 2019 9:20 pm
LilyFleur wrote:
Sat Jan 12, 2019 4:10 pm
Never rolling your 401k into an IRA is actually a form of liability insurance.
How?
You would need to check the laws in your state, but in my state, California, my 401k would be protected in bankruptcy and against all creditors; an IRA does not have the same level of protection. Also, in California, there is a certain amount of house equity that is protected in a bankruptcy situation (under "System 1" it is $75,000 for a single person and $100,000 for a family.) Depending on your age and how much you owe on your house, many of us in California have a great deal of equity in our houses that could be lost in the case of medical bankruptcy. (And, remember, the leading cause of bankruptcy in the United States is medical bills, even for folks with medical insurance.) So, keeping as much as possible in your 401k, I think, is a wise decision. At least, even if you lost your house, you could use 401k withdrawals to pay rent so you wouldn't be homeless. I know, this is drastic thinking, but the possibility of drastic circumstances are why one buys insurance. I am not recommending not getting umbrella insurance. In fact, it is on my list of things to do.
FWIW, California had a court ruling in 2015 (McMullen v. Haycock) that gives IRA funds full creditor protection, but it only applies to rollover funds in the IRA that can be traced back to a private employer retirement plan, like a 401k.
This is private information anyway. They have no way of knowing how much you have. However, if you own real estate, I think they can easily find out. That’s why you get umbrella insurance if you own real estate.
If you are successfully sued, I fairly sure the Court will compel you to disclose all of your financial assets. Yes, umbrella insurance might be needed to protect other assets, such as real estate.

DrGoogle2017
Posts: 1763
Joined: Mon Aug 14, 2017 12:31 pm

Re: Should I get umbrella liability insurance?

Post by DrGoogle2017 » Mon Jan 14, 2019 4:36 pm

Blake7 wrote:
Mon Jan 14, 2019 4:34 pm
DrGoogle2017 wrote:
Mon Jan 14, 2019 2:56 pm
Blake7 wrote:
Mon Jan 14, 2019 8:15 am
LilyFleur wrote:
Sun Jan 13, 2019 7:48 pm
wootwoot wrote:
Sat Jan 12, 2019 9:20 pm


How?
You would need to check the laws in your state, but in my state, California, my 401k would be protected in bankruptcy and against all creditors; an IRA does not have the same level of protection. Also, in California, there is a certain amount of house equity that is protected in a bankruptcy situation (under "System 1" it is $75,000 for a single person and $100,000 for a family.) Depending on your age and how much you owe on your house, many of us in California have a great deal of equity in our houses that could be lost in the case of medical bankruptcy. (And, remember, the leading cause of bankruptcy in the United States is medical bills, even for folks with medical insurance.) So, keeping as much as possible in your 401k, I think, is a wise decision. At least, even if you lost your house, you could use 401k withdrawals to pay rent so you wouldn't be homeless. I know, this is drastic thinking, but the possibility of drastic circumstances are why one buys insurance. I am not recommending not getting umbrella insurance. In fact, it is on my list of things to do.
FWIW, California had a court ruling in 2015 (McMullen v. Haycock) that gives IRA funds full creditor protection, but it only applies to rollover funds in the IRA that can be traced back to a private employer retirement plan, like a 401k.
This is private information anyway. They have no way of knowing how much you have. However, if you own real estate, I think they can easily find out. That’s why you get umbrella insurance if you own real estate.
If you are successfully sued, I fairly sure the Court will compel you to disclose all of your financial assets. Yes, umbrella insurance might be needed to protect other assets, such as real estate.
Right, but before people spend time and energy suing you, first they must make sure you have money, otherwise they get nothing. How do they know you have money or not having money?

Blake7
Posts: 132
Joined: Fri Mar 30, 2018 2:52 pm
Location: USA

Re: Should I get umbrella liability insurance?

Post by Blake7 » Mon Jan 14, 2019 5:02 pm

DrGoogle2017 wrote:
Mon Jan 14, 2019 4:36 pm
Blake7 wrote:
Mon Jan 14, 2019 4:34 pm
DrGoogle2017 wrote:
Mon Jan 14, 2019 2:56 pm
Blake7 wrote:
Mon Jan 14, 2019 8:15 am
LilyFleur wrote:
Sun Jan 13, 2019 7:48 pm

You would need to check the laws in your state, but in my state, California, my 401k would be protected in bankruptcy and against all creditors; an IRA does not have the same level of protection. Also, in California, there is a certain amount of house equity that is protected in a bankruptcy situation (under "System 1" it is $75,000 for a single person and $100,000 for a family.) Depending on your age and how much you owe on your house, many of us in California have a great deal of equity in our houses that could be lost in the case of medical bankruptcy. (And, remember, the leading cause of bankruptcy in the United States is medical bills, even for folks with medical insurance.) So, keeping as much as possible in your 401k, I think, is a wise decision. At least, even if you lost your house, you could use 401k withdrawals to pay rent so you wouldn't be homeless. I know, this is drastic thinking, but the possibility of drastic circumstances are why one buys insurance. I am not recommending not getting umbrella insurance. In fact, it is on my list of things to do.
FWIW, California had a court ruling in 2015 (McMullen v. Haycock) that gives IRA funds full creditor protection, but it only applies to rollover funds in the IRA that can be traced back to a private employer retirement plan, like a 401k.
This is private information anyway. They have no way of knowing how much you have. However, if you own real estate, I think they can easily find out. That’s why you get umbrella insurance if you own real estate.
If you are successfully sued, I fairly sure the Court will compel you to disclose all of your financial assets. Yes, umbrella insurance might be needed to protect other assets, such as real estate.
Right, but before people spend time and energy suing you, first they must make sure you have money, otherwise they get nothing. How do they know you have money or not having money?
That’s a question for a lawyer, and I’m not one. A plaintiff’s attorney can subpoena information, and most people have at least some assets to go after, making it a fairly good bet the plaintiff will get something, even it’s only from the insurance.

PolarBearMarket
Posts: 44
Joined: Thu Sep 13, 2018 11:52 am

Re: Should I get umbrella liability insurance?

Post by PolarBearMarket » Mon Jan 14, 2019 5:11 pm

OregonDucksFan wrote:
Thu Jan 10, 2019 6:01 pm
The amount of umbrella insurance depends on how much protection you need — all asset values minus protected assets (401k). Round up to the next higher million

Umbrella insurance costs 200-250 or so for the first 1 million and scales up nonlinearly by little for each incremental million (2 million umbrella insurance is 250-300, etc)
Know the thread went a different direction, but wanted to briefly come back to this. Umbrella insurance coverage doesn't need to be linked to the amount of assets you have. The insurance coverage amount is the maximum payout for liability, not how much of your assets are covered by insurance.

For example, if you have $1M in assets + $2M in umbrella coverage, you would pay all of your $1M of a $3M lawsuit. If you have $2M in assets + $2M in umbrella coverage, you would still pay $1M in a $3M lawsuit.

In other words, the size of your umbrella policy should be connected to the level of risk you think is appropriate, not your net worth.

DrGoogle2017
Posts: 1763
Joined: Mon Aug 14, 2017 12:31 pm

Re: Should I get umbrella liability insurance?

Post by DrGoogle2017 » Mon Jan 14, 2019 5:19 pm

Blake7 wrote:
Mon Jan 14, 2019 5:02 pm
DrGoogle2017 wrote:
Mon Jan 14, 2019 4:36 pm
Blake7 wrote:
Mon Jan 14, 2019 4:34 pm
DrGoogle2017 wrote:
Mon Jan 14, 2019 2:56 pm
Blake7 wrote:
Mon Jan 14, 2019 8:15 am


FWIW, California had a court ruling in 2015 (McMullen v. Haycock) that gives IRA funds full creditor protection, but it only applies to rollover funds in the IRA that can be traced back to a private employer retirement plan, like a 401k.
This is private information anyway. They have no way of knowing how much you have. However, if you own real estate, I think they can easily find out. That’s why you get umbrella insurance if you own real estate.
If you are successfully sued, I fairly sure the Court will compel you to disclose all of your financial assets. Yes, umbrella insurance might be needed to protect other assets, such as real estate.
Right, but before people spend time and energy suing you, first they must make sure you have money, otherwise they get nothing. How do they know you have money or not having money?
That’s a question for a lawyer, and I’m not one. A plaintiff’s attorney can subpoena information, and most people have at least some assets to go after, making it a fairly good bet the plaintiff will get something, even it’s only from the insurance.
Do you think lawyers work for free? Try to subpoena a homeless person and you’ll find out. Last time I talked to a lawyer I had to put up money up front before they’re willing to take my case.

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