No home - do I need Umbrella Insurance?

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Thom
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No home - do I need Umbrella Insurance?

Post by Thom » Mon Mar 25, 2013 5:10 pm

I'm shopping around for new auto insurance and thought I'd start asking about umbrella insurance. I don't own a home (I'm renting an apartment and will be for at least the next couple of years), don't have my own business, my daughter won't be driving for another 14 years, and my wife and I don't have any boats, jet skis, ATVs, etc. Our net worth is still negative. I just got off of the phone with a State Farm agent and he suggested that it makes more sense to increase the liability on my auto insurance to 1 million dollars rather than try to get an umbrella policy. I'm not concerned about my current assets being taken away, since all I really have (aside from my wonderful family) is my 20-year old car but I do worry about my future earnings. I make about 200k per year.

State Farm is the first insurance company I've talked to and I plan to speak to quite a few more, but he quoted an additional $16/month to bring my auto insurance liability up to 1 million. It seems relatively comparable to the cost of an umbrella policy.

Should I wait until buying a home before purchasing umbrella insurance? My wife and I don't have people over that often but I have this (possibly unreasonable) fear that our friends with kids could stop by and one of the kids could stick his finger in an electrical socket or have some other unfortunate accident that leads to a lawsuit. I don't carry renter's insurance, so maybe I should start there? I'm curious about people's thoughts. Thanks.

Dopey
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Re: No home - do I need Umbrella Insurance?

Post by Dopey » Mon Mar 25, 2013 5:33 pm

I'm not knowledgeable enough to tell you whether you need it or not but I recently received a $1M umbrella policy for $1.93/month through State Farm. It actually costs more, but through the discounts I received on my existing coverages by adding this additional coverage, my monthly bill only went up $1.93.

Edit: I should add, my net worth is also negative. I chose to sign up for the coverage because I live on a high traffic side walk and my rescue dog is registered as a pit bull mix.

lwfitzge
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Re: No home - do I need Umbrella Insurance?

Post by lwfitzge » Mon Mar 25, 2013 6:09 pm

Can't really tell you what to do as it's personal call. For me it entailed an assessment of the risks I incur w my particular lifestyle/family life, what $$ I could stand to lose, and cost to protect. When I has lower net worth, no kids, no remarkably unusual lifestyle risks and only a higher salary, I chose not to worry about an umbrella. Another person my choose to protect against loss of future wages. When I got a sizable net worth, and had kids approaching driving age, I thought differently and chose to protect.

hicabob
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Re: No home - do I need Umbrella Insurance?

Post by hicabob » Mon Mar 25, 2013 7:09 pm

With negative net worth you probably should avoid it. "Don't buy insurance you don't need" should be a boglehead principle imho.

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Quasimodo
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Re: No home - do I need Umbrella Insurance?

Post by Quasimodo » Mon Mar 25, 2013 7:40 pm

Hi Thom;

With your income, and a daughter you'll likely want to help with college someday, I'd buy an umbrella liability policy. The cost is trivial compared to what you spend on gas for your car. The umbrella liability insurer will defend you if you get sued (instead of you having to hire and pay for an attorney), and the possibility of your future salary going to pay a judgement becomes much less likely.

I'm retired, not an insurance salesperson, and this is a personal opinion.

According to this website, your income puts you in the top 0.01% of the wealthiest people in the world:

http://www.globalrichlist.com

Good luck whatever you decide!

John
Many wealthy people are little more than janitors of their possessions. | | Frank Lloyd Wright, architect (1867-1959)

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patriciamgr2
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Re: No home - do I need Umbrella Insurance?

Post by patriciamgr2 » Mon Mar 25, 2013 7:50 pm

It seems that your ins. agent is implying that judgments are only payable out of assets; that's not true, wages can be garnished in most states. Given how cheap umb. coverage is, I have kept mine in force even during times when I don't own real estate or a dog. I was always concerned about e.g. an injury to a temporary household employee (window washer/ cleaning person). Just make sure your auto coverage is coordinated: ie that the umbrella coverage amt is on top of your auto liability. (I'm not an ins agent, so this is my opinion only).

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Re: No home - do I need Umbrella Insurance?

Post by Call_Me_Op » Tue Mar 26, 2013 5:38 am

If you have an income, it is subject to attachment. Whether you need UI has nothing to do with whether you own a home and your net worth is just one factor.
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein

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kramer
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Re: No home - do I need Umbrella Insurance?

Post by kramer » Tue Mar 26, 2013 6:34 am

I agree with the poster that said it is something that everyone has to personally weigh.

I don't have statistics, but I suspect that in your situation the risk of driving an automobile overshadows the other risks by over a factor of 10, maybe even 100. I would concentrate on getting that protection up to $1 Million.

I was in your situation 10 or 15 years ago (but just a single guy). I didn't want to get rental insurance, which would have been mostly a waste for me with my hand-me-down possessions and boring lifestyle so I avoided getting an umbrella (which required the rental insurance). I did ramp up my auto liability to the highest limit. My problem was that, at that time, I could not get the auto liability as high as I liked. But the $1 million you quoted is a decent amount.

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Re: No home - do I need Umbrella Insurance?

Post by Grt2bOutdoors » Tue Mar 26, 2013 7:46 am

With your earnings stream, I would definitely get the umbrella insurance. At the minimum, raise the liability on your auto policy.
I would shop around - call Geico and see if they can meet or beat the quote for both auto and umbrella.
The biggest fear I would have is me having losing a judgement and then having to work for someone else for a very long time.
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Thom
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Re: No home - do I need Umbrella Insurance?

Post by Thom » Tue Mar 26, 2013 8:17 am

Thank you everyone for your replies.

I still have a few more companies to contact but Geico seems to offer the most affordable combination of auto/renter's/umbrella. They'll require that I get renter's insurance if I want umbrella insurance but it looks like I can get all 3 and pay a little over 2/3's the price of what I'm paying for auto insurance alone through Progressive.

Geico is offering:
Auto insurance 500/500/300
Renters 10,000 for my belongings and 100,000 personal liability
Umbrella 1 million

All for about $110/month. Paying less for more coverage and much more piece of mind? Sounds good to me. Not sure why I didn't look into this before.

Thanks again.

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Re: No home - do I need Umbrella Insurance?

Post by Mudpuppy » Tue Mar 26, 2013 6:13 pm

You should add renter's insurance at a minimum. Given your income level and future income to protect, umbrella is not a bad idea. But don't skimp on the renter's insurance. Edit: You should make sure the belongings coverage covers your actual belongings, which is likely more than $10k. You don't want to be stuck replacing all of your belongings out of pocket if the next unit over accidentally leaves something on the stove that catches fire or the kids two blocks over playing with fireworks set your roof on fire.

2comma
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Re: No home - do I need Umbrella Insurance?

Post by 2comma » Tue Mar 26, 2013 7:41 pm

My wife, before we were married, had her apt burglarized. The insurance tried to low ball her - not advisable to try on a Southern European gal. She had to go through old pictures and receipts to prove what she owned. For that reason it is a good idea to do a household inventory or at least take pictures of everything you own of value (with brand, model info discernable). We were a bit surprised what it cost to replace all of her junk and how we tend to forget what junk we actually have. I was surprised what she made them pay for their mistake!
If I am stupid I will pay.

northstar22
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Re: No home - do I need Umbrella Insurance?

Post by northstar22 » Tue Mar 26, 2013 8:01 pm

I'm in a similar situation- relatively high income and negative net worth. I just increased my umbrella to 2 million because of not wanting to expose my future income stream.

You do want renter's insurance, not just for your belongings but for liability in your apartment.

I read an example once that if you accidentally trip someone in a bar and they injure themselves and sue you, your auto insurance isn't going to cover it and your future wages can be targeted. Hence the importance of umbrella insurance.

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Re: No home - do I need Umbrella Insurance?

Post by lazylarry » Sun Jan 22, 2017 2:52 pm

http://whitecoatinvestor.com/umbrella-insurance/

in case you had not read already
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Swansea
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Re: No home - do I need Umbrella Insurance?

Post by Swansea » Sun Jan 22, 2017 3:22 pm

My one million dollar umbrella policy with SF comes in cheaper than $16 a month...$154 annually. Now personal circumstances and/or geography probably enter into it, but check into what the umbrella policy would cost, particularly as it has more extensive coverage than just upping your auto insurance liability.

afan
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Re: No home - do I need Umbrella Insurance?

Post by afan » Sun Jan 22, 2017 4:54 pm

I assume your SF agent was saying that driving represents almost all of your liability risk, so just get plenty of protection there. That is probably true, but adding umbrella protects you from any other events for which you could be sued. With your income I would shop for all three coverages renters, auto umbrella from the same company. Usually the underlying liability requirement on the auto policy are less.than what you quote. I would double check that.
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Loik098
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Re: No home - do I need Umbrella Insurance?

Post by Loik098 » Sun Jan 22, 2017 6:27 pm

Thom wrote: I still have a few more companies to contact but Geico seems to offer the most affordable combination of auto/renter's/umbrella. They'll require that I get renter's insurance if I want umbrella insurance
I don't believe this is correct. I believe you need only to have auto insurance with GEICO in order to qualify for umbrella insurance with them.

About your thread title: Umbrella insurance is as much for auto incidents as it is for incidents at/around your home, or any other incident somewhere that you might be involved in, for that matter. Even being accused of slandering someone on social media can be protected. I'd advise you take the entire picture of your life into account when deciding, not just primarily whether you own a home.

Katietsu
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Re: No home - do I need Umbrella Insurance?

Post by Katietsu » Sun Jan 22, 2017 8:03 pm

You need to think broader in terms of liability. For instance, what happens if you accidentally leave the water running in the tub and it overflows causing damage to multiple units?

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burgrat
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Re: No home - do I need Umbrella Insurance?

Post by burgrat » Sun Jan 22, 2017 8:41 pm

Loik098 wrote:
Thom wrote: I still have a few more companies to contact but Geico seems to offer the most affordable combination of auto/renter's/umbrella. They'll require that I get renter's insurance if I want umbrella insurance
I don't believe this is correct. I believe you need only to have auto insurance with GEICO in order to qualify for umbrella insurance with them.
I only had auto insurance through Geico and I recently purchased a $1 million umbrella policy from them for $154 for the year.

btenny
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Re: No home - do I need Umbrella Insurance?

Post by btenny » Sun Jan 22, 2017 8:44 pm

I think you need a renter policy with some protection for your stuff and a big $500K liability rider as a part of that policy. Then increase you liability coverage on your cars to $500K as well. That should be enough for now.

Good Luck

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