Who has needed to use their umbrella insurance?

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
ThankYouJack
Posts: 1788
Joined: Wed Oct 08, 2014 7:27 pm

Who has needed to use their umbrella insurance?

Post by ThankYouJack » Wed Jun 15, 2016 7:40 pm

It seems like most on here advocate for umbrella insurance (I have it myself). Who has used their umbrella insurance (and if you care to share) what was the circumstance when you needed to use it?

TOJ
Posts: 325
Joined: Wed Mar 02, 2016 9:19 pm

Re: Who has needed to use their umbrella insurance?

Post by TOJ » Wed Jun 15, 2016 8:55 pm

I wonder if they drop you or jack your rates sky high if you ever have to use it. May be a one time use thing.

daveydoo
Posts: 855
Joined: Sun May 15, 2016 1:53 am

Re: Who has needed to use their umbrella insurance?

Post by daveydoo » Wed Jun 15, 2016 9:22 pm

ThankYouJack wrote:It seems like most on here advocate for umbrella insurance


GREAT question for the forum. I have it and wouldn't do without it, but I have NO idea how likely I am to need it. I see 200 reads and no affirmatives yet. I'm likin' those odds...

tbradnc
Posts: 1472
Joined: Wed Apr 02, 2008 8:30 am

Re: Who has needed to use their umbrella insurance?

Post by tbradnc » Wed Jun 15, 2016 9:26 pm

Never... haven't used my life insurance policy either but I still pay it. :)

dustyroyal819
Posts: 11
Joined: Wed Jun 15, 2016 11:22 am

Re: Who has needed to use their umbrella insurance?

Post by dustyroyal819 » Wed Jun 15, 2016 9:34 pm

daveydoo wrote:I see 200 reads


Am I blind?!? Where do you see how many reads?

samsmith
Posts: 98
Joined: Sun Mar 15, 2015 9:33 am

Re: Who has needed to use their umbrella insurance?

Post by samsmith » Wed Jun 15, 2016 9:39 pm

I just increased my umbrella coverage. Never used it.

jasc15
Posts: 351
Joined: Wed Dec 19, 2012 1:36 pm

Re: Who has needed to use their umbrella insurance?

Post by jasc15 » Wed Jun 15, 2016 9:40 pm

dustyroyal819 wrote:Am I blind?!? Where do you see how many reads?


Image

clast
Posts: 104
Joined: Thu Oct 04, 2012 12:50 am

Re: Who has needed to use their umbrella insurance?

Post by clast » Wed Jun 15, 2016 10:08 pm

Great question. Since the cost is about $400/year for up to $5 million liability, that works out to a pretty low statistic of folks having to use it. Actuaries correct me if I'm wrong, but I think this thread will probably have to get on the order of 10,000 views before someone reads it who has had to "use" their umbrella insurance.

ThankYouJack
Posts: 1788
Joined: Wed Oct 08, 2014 7:27 pm

Re: Who has needed to use their umbrella insurance?

Post by ThankYouJack » Wed Jun 15, 2016 10:25 pm

clast wrote:Great question. Since the cost is about $400/year for up to $5 million liability, that works out to a pretty low statistic of folks having to use it. Actuaries correct me if I'm wrong, but I think this thread will probably have to get on the order of 10,000 views before someone reads it who has had to "use" their umbrella insurance.


Would be neat to have any actuaries respond. Are you guessing that 1 out of 10,000 people use it? If so, the insurance company is making a killing on it.

Total views is up to ~500, but I'm guessing even more people have viewed the title too and didn't bother to click on the link.

User avatar
siamond
Posts: 3322
Joined: Mon May 28, 2012 5:50 am

Re: Who has needed to use their umbrella insurance?

Post by siamond » Wed Jun 15, 2016 11:01 pm

I am going to sign up for one by the end of June, because I got caught in the paranoia and it sure is pretty cheap for a retiree to protect his nest-egg, but yes, this very fact proves that the risk is extremely minimal. In other words, it's another of those things fostered by lawyers and insurers that should never have existed.

I found a thread on the very exact same topic from a couple of years ago, with some interesting responses:
https://www.bogleheads.org/forum/viewtopic.php?t=128369

Doom&Gloom
Posts: 1384
Joined: Thu May 08, 2014 3:36 pm

Re: Who has needed to use their umbrella insurance?

Post by Doom&Gloom » Wed Jun 15, 2016 11:41 pm

siamond wrote:I am going to sign up for one by the end of June, because I got caught in the paranoia and it sure is pretty cheap for a retiree to protect his nest-egg, but yes, this very fact proves that the risk is extremely minimal. In other words, it's another of those things fostered by lawyers and insurers that should never have existed.

I found a thread on the very exact same topic from a couple of years ago, with some interesting responses:
https://www.bogleheads.org/forum/viewtopic.php?t=128369


And yet another, more recent thread:
https://www.bogleheads.org/forum/viewtopic.php?f=2&t=187773

User avatar
LittleGreenSoldiers
Posts: 21
Joined: Fri Nov 14, 2014 6:59 pm

Re: Who has needed to use their umbrella insurance?

Post by LittleGreenSoldiers » Thu Jun 16, 2016 5:35 am

A very important additional use for umbrella insurance.

Some umbrella policies may be used to augment uninsured motorist. It's a good idea to have an umbrella policy which can augment your UM. Laws very by state and policy by insurer.

example:
"Umbrella policies are often purchased to supplement and augment coverage under a standard automobile policy. Similar to a standard automobile policy, New Hampshire also requires that insurers issuing umbrella policies include uninsured/underinsured motorists coverage (‘UM coverage’) in an amount equal to the coverage for bodily injury to others. Unlike a standard automobile policy, however, the person buying the umbrella policy may waive his or her rights to the UM coverage. While a person may have a right to waive coverage, it is recommended that he or she do not waive the uninsured/underinsured motorists coverage as the benefit provided is well worth the minimal amount saved by waiving the coverage. As indicated in prior articles, UM coverage provides the person buying insurance with a significant benefit of protection from being injured by a person who is uninsured, underinsured, or unidentified. Being involved in a serious automobile accident is a tragic,, life-changing event. This tragedy is compounded when the available insurance coverage is insufficient to assist the injury victim with the financial repercussions of being involved in an automobile accident. UM coverage often provides assistance to minimize financial impact of such a life changing event."

User avatar
JonnyDVM
Posts: 1579
Joined: Wed Feb 12, 2014 6:51 pm
Location: Atlanta, GA

Re: Who has needed to use their umbrella insurance?

Post by JonnyDVM » Thu Jun 16, 2016 5:48 am

There is usually the same list of a couple obscure cases someone posts. One is a nanny having a diabetic crisis while driving resulting in the injury of a child in the vehicle and other references a 15 year old allowed to drive a boat which results in the severe injury to another child in the boat.

I doubt you'll find anyone on the board that's actually had to use their policy. There's a reason a few hundred buys a few million in coverage. As another poster has already replied, however, I haven't had to use my life insurance policy yet, think it's unlikely that I will, and yet i still carry it.

Food for thought- the cost to coverage ratio for the life insurance is greater than the ratio for umbrella insurance. I take that mean my likelihood of tragically dying far exceeds my likelihood of getting sued for millions. Yet somehow on this board we're always preoccupied with the latter.
Sometimes the questions are complicated and the answers are simple. -Dr. Seuss

Call_Me_Op
Posts: 6515
Joined: Mon Sep 07, 2009 2:57 pm
Location: Milky Way

Re: Who has needed to use their umbrella insurance?

Post by Call_Me_Op » Thu Jun 16, 2016 6:31 am

JonnyDVM wrote:Food for thought- the cost to coverage ratio for the life insurance is greater than the ratio for umbrella insurance. I take that mean my likelihood of tragically dying far exceeds my likelihood of getting sued for millions. Yet somehow on this board we're always preoccupied with the latter.


Just because the probability of an event is low does not mean it won't happen.
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein

User avatar
LittleGreenSoldiers
Posts: 21
Joined: Fri Nov 14, 2014 6:59 pm

Re: Who has needed to use their umbrella insurance?

Post by LittleGreenSoldiers » Thu Jun 16, 2016 6:41 am

JonnyDVM wrote:There is usually the same list of a couple obscure cases someone posts. One is a nanny having a diabetic crisis while driving resulting in the injury of a child in the vehicle and other references a 15 year old allowed to drive a boat which results in the severe injury to another child in the boat.

I doubt you'll find anyone on the board that's actually had to use their policy. There's a reason a few hundred buys a few million in coverage. As another poster has already replied, however, I haven't had to use my life insurance policy yet, think it's unlikely that I will, and yet i still carry it.

Food for thought- the cost to coverage ratio for the life insurance is greater than the ratio for umbrella insurance. I take that mean my likelihood of tragically dying far exceeds my likelihood of getting sued for millions. Yet somehow on this board we're always preoccupied with the latter.



To clarify. I am not referring to using your umbrella to augment auto liability but rather to help in an uninsured/underinsured situation. I speak from experience where my family found out the hard way that we should've had an umbrella policy to augment our UM when someone underinsured hit us.
You can't pick who hits you, but you can insure yourself against it. Please make sure you have adequate UM coverage and consider an umbrella that augments.

qwertyjazz
Posts: 1026
Joined: Tue Feb 23, 2016 4:24 am

Re: Who has needed to use their umbrella insurance?

Post by qwertyjazz » Thu Jun 16, 2016 6:50 am

ThankYouJack wrote:
clast wrote:Great question. Since the cost is about $400/year for up to $5 million liability, that works out to a pretty low statistic of folks having to use it. Actuaries correct me if I'm wrong, but I think this thread will probably have to get on the order of 10,000 views before someone reads it who has had to "use" their umbrella insurance.


Would be neat to have any actuaries respond. Are you guessing that 1 out of 10,000 people use it? If so, the insurance company is making a killing on it.

Total views is up to ~500, but I'm guessing even more people have viewed the title too and didn't bother to click on the link.


Add in my cousin brother's son's roommate from college knew this guy stories which have not been mentioned

jbmitt
Posts: 237
Joined: Mon Jul 14, 2008 1:00 am

Re: Who has needed to use their umbrella insurance?

Post by jbmitt » Thu Jun 16, 2016 7:44 am

Umbrella policies often allow the underlying/primary insurance to defend/challenge the merits of a claim. For example, if you have a $300k policy and a claim is submitted for policy limits and could be worth anywhere from $100k to $500k. The insurer could benefit from a $100k settlement, but an excess verdict could force them to pay more than the limits and open them up to bad faith for not settling for the $300k limits. Often times from a risk/reward standpoint, it is better for them to settle out and/or tender the policy limits.

With an excess/umbrella policy in place they can defend a claim, and presuming that there is not a risk of a verdict in excess of the underlying/primary and excess/umbrella policies and attempt to obtain a more favorable outcome for their policyholder.

In some ways, an umbrella policy is a good deterrent.

miles monroe
Posts: 1129
Joined: Mon Jan 20, 2014 12:14 pm

Re: Who has needed to use their umbrella insurance?

Post by miles monroe » Thu Jun 16, 2016 7:55 am

i had to use my umbrella.

after settlement it was cancelled for a period of 3 years. in the interim i increased the liability on both my autos and home to $1 million.

you can be sure that i renewed it as soon as i was able.

edit to add: to answer a question above at renewal the rate was basically the same as it had been prior to cancellation.
Last edited by miles monroe on Thu Jun 16, 2016 8:26 am, edited 1 time in total.

BSA44
Posts: 105
Joined: Wed Jul 31, 2013 6:43 pm

Re: Who has needed to use their umbrella insurance?

Post by BSA44 » Thu Jun 16, 2016 7:57 am

Call_Me_Op wrote:
JonnyDVM wrote:Food for thought- the cost to coverage ratio for the life insurance is greater than the ratio for umbrella insurance. I take that mean my likelihood of tragically dying far exceeds my likelihood of getting sued for millions. Yet somehow on this board we're always preoccupied with the latter.


Just because the probability of an event is low does not mean it won't happen.


Just because something could happen doesn't mean it's worth insuring for. No one on this board seems to have:

-Terrorism insurance
-Alien abduction insurance
-Political risk insurance
-Kidnap and ransom insurance
-Pollution insurance
-War risk insurance

https://en.wikipedia.org/wiki/Category:Types_of_insurance

Although some of those examples are likely impossible (alien abduction), some seem like their likelihood of occurrence could plausibly not be too far off from needing umbrella insurance (i.e., having to pay more in a lawsuit than the $250k+ that is required from normal auto/home insurance to get the umbrella insurance). Given the lack of statistics (actual justification) for umbrella versus other types of insurance, it seems like we might have fallen prey to clever marketing and/or the availability heuristic (https://en.wikipedia.org/wiki/Availability_heuristic).

User avatar
JDCarpenter
Posts: 1330
Joined: Tue Sep 09, 2014 2:42 pm

Re: Who has needed to use their umbrella insurance?

Post by JDCarpenter » Thu Jun 16, 2016 8:14 am

I have not. Several defendants in our cases have though. At least one recent case too where the defendant didn't have excess and wished that he had after resolving the case.

These cases, however, are lightning strikes. As shown by the premiums, excess policies are rarely drawn upon.
Edit Signature

seanmerron
Posts: 137
Joined: Tue May 31, 2016 5:08 pm

Re: Who has needed to use their umbrella insurance?

Post by seanmerron » Thu Jun 16, 2016 8:14 am

miles monroe wrote:i had to use my umbrella.

after settlement it was cancelled for a period of 3 years. in the interim i increased the liability on both my autos and home to $1 million.

you can be sure that i renewed it as soon as i was able.



Is it a true statement that Retirement accounts are protected anyways so really only need it to protect taxable account monies? I hear lawyers know how much coverage you have and will go for all of it.

User avatar
Toons
Posts: 11910
Joined: Fri Nov 21, 2008 10:20 am
Location: Hills of Tennessee

Re: Who has needed to use their umbrella insurance?

Post by Toons » Thu Jun 16, 2016 8:19 am

I had umbrella insurance for about 10 years.
I never used it.
a couple of years ago for whatever reason I cancelled the policy.
I may re buy but not at the moment. :happy
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

miles monroe
Posts: 1129
Joined: Mon Jan 20, 2014 12:14 pm

Re: Who has needed to use their umbrella insurance?

Post by miles monroe » Thu Jun 16, 2016 8:20 am

well, OF COURSE, not many people end up using it. if you do the math, at $150 per year (my current premium) for a $1 million policy, the insurance company needs 6,666 policies to reach $1 million in total premiums. and that doesn't include admin costs, profit, and what they pay to lawyers in defend the cases.

if writing a $1 million check won't affect your lifestyle, future retirement plans, or your legacy, then save the $150. there might be a handful of people here that fit that description. everyone else needs the insurance. really.

JW-Retired
Posts: 6372
Joined: Sun Dec 16, 2007 12:25 pm

Re: Who has needed to use their umbrella insurance?

Post by JW-Retired » Thu Jun 16, 2016 8:23 am

seanmerron wrote:
Is it a true statement that Retirement accounts are protected anyways so really only need it to protect taxable account monies? I hear lawyers know how much coverage you have and will go for all of it.

Not true. Protection varies with your state's law. A long time poster here had his IRA drained as a result of a business lawsuit judgement.
JW
Retired at Last

Da5id
Posts: 1401
Joined: Fri Feb 26, 2016 8:20 am

Re: Who has needed to use their umbrella insurance?

Post by Da5id » Thu Jun 16, 2016 8:26 am

BSA44 wrote:Just because something could happen doesn't mean it's worth insuring for. No one on this board seems to have:

-Terrorism insurance
-Alien abduction insurance
-Political risk insurance
-Kidnap and ransom insurance
-Pollution insurance
-War risk insurance

https://en.wikipedia.org/wiki/Category:Types_of_insurance

Although some of those examples are likely impossible (alien abduction), some seem like their likelihood of occurrence could plausibly not be too far off from needing umbrella insurance (i.e., having to pay more in a lawsuit than the $250k+ that is required from normal auto/home insurance to get the umbrella insurance). Given the lack of statistics (actual justification) for umbrella versus other types of insurance, it seems like we might have fallen prey to clever marketing and/or the availability heuristic (https://en.wikipedia.org/wiki/Availability_heuristic).


For US residents, the risks above seem much smaller than the risk you will be at fault in an auto accident and get sued. I'd bet most of us who has been driving a long time have either had an accident where we were at fault, or at least been in a driving situation where things easily could have gone badly wrong but didn't. I've not had an accident, but certainly have been in situations where I was fortunate not to. For me, paying a reasonable amount to insure against losing large chunks of money (some is protected) that would put my retirement in jeopardy seems worth it. The billboards for the ambulance chasers along the highways reinforces that.

I guess I'm just assuming that in the competitive umbrella policy market I'm not getting totally fleeced. Mine is from Amica, a mutual insurance company in any case, so I'm hoping that the premium is justified.

ThankYouJack
Posts: 1788
Joined: Wed Oct 08, 2014 7:27 pm

Re: Who has needed to use their umbrella insurance?

Post by ThankYouJack » Thu Jun 16, 2016 8:35 am

seanmerron wrote:
miles monroe wrote:i had to use my umbrella.

after settlement it was cancelled for a period of 3 years. in the interim i increased the liability on both my autos and home to $1 million.

you can be sure that i renewed it as soon as i was able.



Is it a true statement that Retirement accounts are protected anyways so really only need it to protect taxable account monies? I hear lawyers know how much coverage you have and will go for all of it.


Miles - can explain more how the legal process went? Did the other lawyers try to get more, the same or less than your amount of insurance? How much did they know about your personal finances?

Seanmerron, I've heard similar from a personal injury lawyer about going for the amount of coverage. She deals with corporations, but said the goal is often to settle up to the insurance limit -- it's a win-win for both sides and saves years of litigating. Maybe some attorneys will weigh in about the legal process.

User avatar
JonnyDVM
Posts: 1579
Joined: Wed Feb 12, 2014 6:51 pm
Location: Atlanta, GA

Re: Who has needed to use their umbrella insurance?

Post by JonnyDVM » Thu Jun 16, 2016 8:40 am

miles monroe wrote:well, OF COURSE, not many people end up using it. if you do the math, at $150 per year (my current premium) for a $1 million policy, the insurance company needs 6,666 policies to reach $1 million in total premiums. and that doesn't include admin costs, profit, and what they pay to lawyers in defend the cases.

if writing a $1 million check won't affect your lifestyle, future retirement plans, or your legacy, then save the $150. there might be a handful of people here that fit that description. everyone else needs the insurance. really.


Well I don't think anyone would argue that $1 million won't affect your lifestyle. It's that the $200 you're paying X 30 years just isn't worth the infinitesimal chance of having to use it. Also, what's to stop someone from suing you for 6 million when you have one million of coverage? Nothing that's what. But as I've posted many times, though I think umbrella is probably the dumbest of the standard Boglehead recommended non health insurance types (life, disability, umbrella, auto, home) I do carry it much like everyone else on this board. Lets hope we all never have to use it. That certainly won't be a "brag" post.
Sometimes the questions are complicated and the answers are simple. -Dr. Seuss

BSA44
Posts: 105
Joined: Wed Jul 31, 2013 6:43 pm

Re: Who has needed to use their umbrella insurance?

Post by BSA44 » Thu Jun 16, 2016 8:40 am

Da5id wrote:For US residents, the risks above seem much smaller than the risk you will be at fault in an auto accident and get sued.


That's very plausible, however, is just conjecture without any actual statistics, and is likely falling prey to the large number of biases which make humans very bad at estimating probabilities of infrequent events (e.g., https://en.wikipedia.org/wiki/Availability_heuristic).

Although many of us have (or could have been in car accidents) the likelihood of all of:

1) being in an at-fault accident
2) being sued for it
3) not having the case settle for below $250k (the minimum umbrella policies often require of pre-existing auto insurance)
4)having a jury verdict of over $250k

happening is something entirely different.

Again, it is possible that this is a tail risk that we should protect against, but making the decision based on no real information (anecdotes and feelings at best, so far) is very problematic. With the proper information, it may turn out that not only is umbrella insurance very sensible, but we are missing other key types of insurance just because their risks aren't as salient. But, saying we should get X insurance, but not Y insurance seems very arbitrary in this case, and is likely driven more by marketing and salience of risk rather than the actual rates of the risk.

User avatar
dodecahedron
Posts: 3195
Joined: Tue Nov 12, 2013 12:28 pm

Re: Who has needed to use their umbrella insurance?

Post by dodecahedron » Thu Jun 16, 2016 8:45 am

JonnyDVM wrote:
miles monroe wrote:well, OF COURSE, not many people end up using it. if you do the math, at $150 per year (my current premium) for a $1 million policy, the insurance company needs 6,666 policies to reach $1 million in total premiums. and that doesn't include admin costs, profit, and what they pay to lawyers in defend the cases.

if writing a $1 million check won't affect your lifestyle, future retirement plans, or your legacy, then save the $150. there might be a handful of people here that fit that description. everyone else needs the insurance. really.


Well I don't think anyone would argue that $1 million won't affect your lifestyle. It's that the $200 you're paying X 30 years just isn't worth the infinitesimal chance of having to use it. Also, what's to stop someone from suing you for 6 million when you have one million of coverage? Nothing that's what.


Anyone can sue for anything, but that doesn't mean that they can or will prevail. One thing you overlook is that part of the umbrella insurance package you are buying is a vigorous legal defense team paid for by the insurer and highly incentivized to defend you, since the first million of any judgment comes out of the insurance company's pocket.

User avatar
JonnyDVM
Posts: 1579
Joined: Wed Feb 12, 2014 6:51 pm
Location: Atlanta, GA

Re: Who has needed to use their umbrella insurance?

Post by JonnyDVM » Thu Jun 16, 2016 8:55 am

dodecahedron wrote:
JonnyDVM wrote:
miles monroe wrote:well, OF COURSE, not many people end up using it. if you do the math, at $150 per year (my current premium) for a $1 million policy, the insurance company needs 6,666 policies to reach $1 million in total premiums. and that doesn't include admin costs, profit, and what they pay to lawyers in defend the cases.

if writing a $1 million check won't affect your lifestyle, future retirement plans, or your legacy, then save the $150. there might be a handful of people here that fit that description. everyone else needs the insurance. really.


Well I don't think anyone would argue that $1 million won't affect your lifestyle. It's that the $200 you're paying X 30 years just isn't worth the infinitesimal chance of having to use it. Also, what's to stop someone from suing you for 6 million when you have one million of coverage? Nothing that's what.


Anyone can sue for anything, but that doesn't mean that they can or will prevail. One thing you overlook is that part of the umbrella insurance package you are buying is a vigorous legal defense team paid for by the insurer and highly incentivized to defend you, since the first million of any judgment comes out of the insurance company's pocket.


Yah, but wait til those lawyers hear what I did to get into this predicament in the first place :twisted:
Sometimes the questions are complicated and the answers are simple. -Dr. Seuss

quantAndHold
Posts: 910
Joined: Thu Sep 17, 2015 10:39 pm

Re: Who has needed to use their umbrella insurance?

Post by quantAndHold » Thu Jun 16, 2016 9:06 am

I haven't used myself it but I had two friends. One needed it and had it, the other needed it and didn't have it. Both were for surprisingly minor traffic accidents, and both accidents were arguably not even my friends' fault. People can sue for anything.

Da5id
Posts: 1401
Joined: Fri Feb 26, 2016 8:20 am

Re: Who has needed to use their umbrella insurance?

Post by Da5id » Thu Jun 16, 2016 9:07 am

BSA44 wrote:
That's very plausible, however, is just conjecture without any actual statistics, and is likely falling prey to the large number of biases which make humans very bad at estimating probabilities of infrequent events (e.g., https://en.wikipedia.org/wiki/Availability_heuristic).


All insurance is a "bad deal" for the purchaser in that there is generally a profit for the company (or if a mutual insurance co, costs to running administering the insurance). Are you just raising issues, or do you actually know for a fact that umbrella is an unusually bad deal for the insured party?

Even if the real cost of the insurance was $50 and I was paying $200, I'd still do it for peace of mind.

LarryAllen
Posts: 692
Joined: Fri Apr 22, 2016 9:41 am
Location: State of Confusion

Re: Who has needed to use their umbrella insurance?

Post by LarryAllen » Thu Jun 16, 2016 9:20 am

JW-Retired wrote:
seanmerron wrote:
Is it a true statement that Retirement accounts are protected anyways so really only need it to protect taxable account monies? I hear lawyers know how much coverage you have and will go for all of it.

Not true. Protection varies with your state's law. A long time poster here had his IRA drained as a result of a business lawsuit judgement.
JW


I could be wrong but I believe ERISA (federal governed) plans like 401ks do have creditor protection and non-ERISA (state governed) plans like IRAs depend on state law. Also, it depends on if it's your 401k/IRA or an inherited one (i.e. it was your parent's IRA which may have been protected by state law but it became your inherited IRA it may have lost that protection). I am not an asset protection expert so just repeating what I have heard over the years.

Also, as to the question of having an umbrella it's all about sleeping at night if you ever are sued for a lot of money.

User avatar
JonnyDVM
Posts: 1579
Joined: Wed Feb 12, 2014 6:51 pm
Location: Atlanta, GA

Re: Who has needed to use their umbrella insurance?

Post by JonnyDVM » Thu Jun 16, 2016 9:22 am

Da5id wrote:
BSA44 wrote:
That's very plausible, however, is just conjecture without any actual statistics, and is likely falling prey to the large number of biases which make humans very bad at estimating probabilities of infrequent events (e.g., https://en.wikipedia.org/wiki/Availability_heuristic).


Even if the real cost of the insurance was $50 and I was paying $200, I'd still do it for peace of mind.


What if it was $500? $1000? Where do you draw the line? Interesting hypothetical.
Sometimes the questions are complicated and the answers are simple. -Dr. Seuss

Da5id
Posts: 1401
Joined: Fri Feb 26, 2016 8:20 am

Re: Who has needed to use their umbrella insurance?

Post by Da5id » Thu Jun 16, 2016 9:26 am

JonnyDVM wrote:What if it was $500? $1000? Where do you draw the line? Interesting hypothetical.


Not sure about $1000, $500 I'd do. You can't insure against everything, and do need to pick your battles. Umbrella seems widely recommended by people financial planners who don't sell it directly to you, guess I just buy into that advice.

User avatar
dm200
Posts: 13183
Joined: Mon Feb 26, 2007 2:21 pm
Location: Washington DC area

Re: Who has needed to use their umbrella insurance?

Post by dm200 » Thu Jun 16, 2016 10:00 am

To clarify. I am not referring to using your umbrella to augment auto liability but rather to help in an uninsured/underinsured situation. I speak from experience where my family found out the hard way that we should've had an umbrella policy to augment our UM when someone underinsured hit us.
You can't pick who hits you, but you can insure yourself against it. Please make sure you have adequate UM coverage and consider an umbrella that augments.


I do not understand how an umbrella policy applies for UM. An umbrella policy protects you from being "liable" for something you "did" or were sued for doing (or perhaps not doing)>

User avatar
dm200
Posts: 13183
Joined: Mon Feb 26, 2007 2:21 pm
Location: Washington DC area

Re: Who has needed to use their umbrella insurance?

Post by dm200 » Thu Jun 16, 2016 10:02 am

As I learned, an umbrella policy does not protect you from business related lawsuits.

BSA44
Posts: 105
Joined: Wed Jul 31, 2013 6:43 pm

Re: Who has needed to use their umbrella insurance?

Post by BSA44 » Thu Jun 16, 2016 10:03 am

Da5id wrote:
BSA44 wrote:
That's very plausible, however, is just conjecture without any actual statistics, and is likely falling prey to the large number of biases which make humans very bad at estimating probabilities of infrequent events (e.g., https://en.wikipedia.org/wiki/Availability_heuristic).


All insurance is a "bad deal" for the purchaser in that there is generally a profit for the company (or if a mutual insurance co, costs to running administering the insurance). Are you just raising issues, or do you actually know for a fact that umbrella is an unusually bad deal for the insured party?

Even if the real cost of the insurance was $50 and I was paying $200, I'd still do it for peace of mind.


I agree that all insurance is always a bad deal for the purchaser. I'm raising issues because if your logic was followed (i.e., "I'll pay for a long tail risk for peace of mind") we should all each have hundreds of kinds of insurance to protect against any kind of risk (e.g., war, political risk, terrorism, etc.). The decision to only get umbrella seems fairly arbitrary at the moment due to lack of facts (the issue I am raising).

Basically, there are three logics for which long tail risk insurance to buy:

1) Have statistics and buy insurance based on a certain probability cutoff (e.g,, it's worth buying something to cover a .01% risk but not a .0000001% risk) and a policy cost to risk ratio.
2) Buy every single type of long tail insurance available as long as it is cheap because it gives us peace of mind (you'd spend all of your money on insurance).
3) Arbitrarily pick certain types of long tail risk insurance based on what "feels" more common.

It feels like the rationale for this board is #3.

Some examples of why this logic problematic.
-People are significantly very concerned about shark attacks (this is a very salient risk), and would probably pay a few dollars to never have to worry about them. However, people are 15x more likely to die via a falling coconut rather than a shark attack. Who would pay for coconut insurance?
-In New York alone people are seriously bitten (hospitalized) annually at a rate 10x higher than all of the shark bites in the entire world. Yet, while we spend significant amount of time worrying about sharks, New Yorkers are the true hidden danger.

User avatar
JonnyDVM
Posts: 1579
Joined: Wed Feb 12, 2014 6:51 pm
Location: Atlanta, GA

Re: Who has needed to use their umbrella insurance?

Post by JonnyDVM » Thu Jun 16, 2016 10:09 am

BSA44 wrote:-In New York alone people are seriously bitten (hospitalized) annually at a rate 10x higher than all of the shark bites in the entire world. Yet, while we spend significant amount of time worrying about sharks, New Yorkers are the true hidden danger.


Yet another reason to avoid NYC
Sometimes the questions are complicated and the answers are simple. -Dr. Seuss

Da5id
Posts: 1401
Joined: Fri Feb 26, 2016 8:20 am

Re: Who has needed to use their umbrella insurance?

Post by Da5id » Thu Jun 16, 2016 10:24 am

BSA44 wrote:I agree that all insurance is always a bad deal for the purchaser. I'm raising issues because if your logic was followed (i.e., "I'll pay for a long tail risk for peace of mind") we should all each have hundreds of kinds of insurance to protect against any kind of risk (e.g., war, political risk, terrorism, etc.). The decision to only get umbrella seems fairly arbitrary at the moment due to lack of facts (the issue I am raising).


I understand all you are saying. And clearly we all need to pick and choose what we are insuring against based in part on risks (real or perceived), and part on what we can afford, and additionally based on what insurance products are available. In the meantime, I'll keep paying my umbrella premiums anyway...

Rupert
Posts: 2519
Joined: Fri Aug 17, 2012 12:01 pm

Re: Who has needed to use their umbrella insurance?

Post by Rupert » Thu Jun 16, 2016 12:23 pm

dm200 wrote:
To clarify. I am not referring to using your umbrella to augment auto liability but rather to help in an uninsured/underinsured situation. I speak from experience where my family found out the hard way that we should've had an umbrella policy to augment our UM when someone underinsured hit us.
You can't pick who hits you, but you can insure yourself against it. Please make sure you have adequate UM coverage and consider an umbrella that augments.


I do not understand how an umbrella policy applies for UM. An umbrella policy protects you from being "liable" for something you "did" or were sued for doing (or perhaps not doing)>


Some insurance companies offer additional UM/UIM coverage in their umbrella policies. There are numerous previous threads on this at Bogleheads. How does it work? Say you are driving a friend somewhere, and your car is hit by an uninsured motorist. You aren't seriously hurt, but your friend is. Your friend is paralyzed, becomes disabled and needs a lifetime of 24-hour care. Your friend sues you and the uninsured motorist because he needs the money for care. That's when the umbrella policy might be helpful.

ThankYouJack
Posts: 1788
Joined: Wed Oct 08, 2014 7:27 pm

Re: Who has needed to use their umbrella insurance?

Post by ThankYouJack » Thu Jun 16, 2016 12:34 pm

Rupert wrote:
dm200 wrote:
To clarify. I am not referring to using your umbrella to augment auto liability but rather to help in an uninsured/underinsured situation. I speak from experience where my family found out the hard way that we should've had an umbrella policy to augment our UM when someone underinsured hit us.
You can't pick who hits you, but you can insure yourself against it. Please make sure you have adequate UM coverage and consider an umbrella that augments.


I do not understand how an umbrella policy applies for UM. An umbrella policy protects you from being "liable" for something you "did" or were sued for doing (or perhaps not doing)>


Some insurance companies offer additional UM/UIM coverage in their umbrella policies. There are numerous previous threads on this at Bogleheads. How does it work? Say you are driving a friend somewhere, and your car is hit by an uninsured motorist. You aren't seriously hurt, but your friend is. Your friend is paralyzed, becomes disabled and needs a lifetime of 24-hour care. Your friend sues you and the uninsured motorist because he needs the money for care. That's when the umbrella policy might be helpful.


I took a business law class and we would talk about these doom and gloom scenarios. If your friend is a brain surgeon (or professionally successful prior to the accident), a $1m policy won't be nearly enough.

I do find it interesting that umbrella seems critical by many (most?) on here but something like accidental death and dismemberment is considered junk insurance by many. I think it comes down to a personal decision, personal lifestyle and how much you're willing to pay for peace of mind.

Rupert
Posts: 2519
Joined: Fri Aug 17, 2012 12:01 pm

Re: Who has needed to use their umbrella insurance?

Post by Rupert » Thu Jun 16, 2016 12:40 pm

ThankYouJack wrote:
Rupert wrote:
dm200 wrote:
To clarify. I am not referring to using your umbrella to augment auto liability but rather to help in an uninsured/underinsured situation. I speak from experience where my family found out the hard way that we should've had an umbrella policy to augment our UM when someone underinsured hit us.
You can't pick who hits you, but you can insure yourself against it. Please make sure you have adequate UM coverage and consider an umbrella that augments.


I do not understand how an umbrella policy applies for UM. An umbrella policy protects you from being "liable" for something you "did" or were sued for doing (or perhaps not doing)>


Some insurance companies offer additional UM/UIM coverage in their umbrella policies. There are numerous previous threads on this at Bogleheads. How does it work? Say you are driving a friend somewhere, and your car is hit by an uninsured motorist. You aren't seriously hurt, but your friend is. Your friend is paralyzed, becomes disabled and needs a lifetime of 24-hour care. Your friend sues you and the uninsured motorist because he needs the money for care. That's when the umbrella policy might be helpful.


I took a business law class and we would talk about these doom and gloom scenarios. If your friend is a brain surgeon (or professionally successful prior to the accident), a $1m policy won't be nearly enough.

I do find it interesting that umbrella seems critical by many (most?) on here but something like accidental death and dismemberment is considered junk insurance by many. I think it comes down to a personal decision, personal lifestyle and how much you're willing to pay for peace of mind.


Accidental death and dismemberment insurance doesn't cover anything that isn't already covered by health, auto, disability and life insurance. Bogleheads don't buy it because they already have all that other coverage. The only people who should buy AD&D are people who can't get life or disability insurance because of some medical condition, as it would, perhaps, provide them some benefit in the event of a disabling accident. Btw, how do you feel about termite insurance, i.e., termite bonds? That's my favorite insurance to hate.

Da5id
Posts: 1401
Joined: Fri Feb 26, 2016 8:20 am

Re: Who has needed to use their umbrella insurance?

Post by Da5id » Thu Jun 16, 2016 12:47 pm

ThankYouJack wrote:
I took a business law class and we would talk about these doom and gloom scenarios. If your friend is a brain surgeon (or professionally successful prior to the accident), a $1m policy won't be nearly enough.


My understanding, which could be wrong, was that you should scale your insurance to your assets. e.g. if you have 1 million in accessible assets (some might be immune to judgments by state law, such as retirement accounts) and 2 million in insurance, there may be significant incentive for someone suing you to settle for 2 million or less rather than to risk going to trial. I may have this wrong, feel free to correct it.

ThankYouJack
Posts: 1788
Joined: Wed Oct 08, 2014 7:27 pm

Re: Who has needed to use their umbrella insurance?

Post by ThankYouJack » Thu Jun 16, 2016 1:15 pm

Da5id wrote:
ThankYouJack wrote:
I took a business law class and we would talk about these doom and gloom scenarios. If your friend is a brain surgeon (or professionally successful prior to the accident), a $1m policy won't be nearly enough.


My understanding, which could be wrong, was that you should scale your insurance to your assets. e.g. if you have 1 million in accessible assets (some might be immune to judgments by state law, such as retirement accounts) and 2 million in insurance, there may be significant incentive for someone suing you to settle for 2 million or less rather than to risk going to trial. I may have this wrong, feel free to correct it.


I was wondering the same thing (posted something similar above). I'm not sure how it tends to work out in real life and I'm far from a lawyer, but it probably depends on the situation. In the class we talked about wages getting garnished. I'm guessing that doesn't happen a often, but maybe some attorneys will weigh in.


Rupert wrote:Accidental death and dismemberment insurance doesn't cover anything that isn't already covered by health, auto, disability and life insurance. Bogleheads don't buy it because they already have all that other coverage. The only people who should buy AD&D are people who can't get life or disability insurance because of some medical condition, as it would, perhaps, provide them some benefit in the event of a disabling accident. Btw, how do you feel about termite insurance, i.e., termite bonds? That's my favorite insurance to hate.


For me, AD&D is soooo cheap that it's peace of mind. I enjoy adventures and taking chances more than most. If I loose a limb or die in an accident I'd rather have a huge payout than a meager payout.

I don't have termite insurance - I like to live on the edge :wink:

jwhitaker
Posts: 18
Joined: Thu Jun 16, 2016 12:57 pm

Re: Who has needed to use their umbrella insurance?

Post by jwhitaker » Thu Jun 16, 2016 1:24 pm

I'm an actuary. So you guys are right. The average loss is going to be really large, not necessarily the full limit but call it one million. So if you pay a few hundred and assume the "loss ratio" of the company is 20% to 50%, then the frequency will be on the order of one in ten thousand. It's not a bad deal and you should probably have coverage. Umbrella insurance is not a scam. Pet insurance, consumer product warranty ($20 to insure a $100 microwave) and title insurance, those are the scams. Title insurance has a 1% loss ratio, meaning when you buy your house and pay $1000 for title insurance, there is an expected insurance loss of $10. Now you might say, "oh but they investigate the property, yada yada". Well there's a 90% commission going out the door, so not much leftover to pay MacGyver. That's compared to maybe 15% to 20% to your agent for other types of insurance. The loss ratio on umbrella really is in that 20% to 50% range. So it's higher profit margin than your homeowners or auto (those are more like 60%+) but it's reasonable.

sarahjane
Posts: 189
Joined: Tue Jan 21, 2014 5:18 pm

Re: Who has needed to use their umbrella insurance?

Post by sarahjane » Thu Jun 16, 2016 4:56 pm

OK, I'm the one you're looking for.

My spouse was in a head on vehicle accident where she was determined to be at fault. The passenger in the other vehicle died and the driver had serious injuries. The case settled for the liability limits of the auto policy plus the umbrella. Without the umbrella there's no question personal assets would have been at risk. Incidentally, the umbrella was renewed. Please don't ask for more details. It's cheap coverage for peace of mind.

Bfwolf
Posts: 1618
Joined: Thu Oct 14, 2010 11:19 am

Re: Who has needed to use their umbrella insurance?

Post by Bfwolf » Thu Jun 16, 2016 5:05 pm

My Mom was involved in an incident with my brother's dog that she was walking....long story short the dog knocked over a lady who broke her knee. The litigation is ongoing, but the woman is asking for something like $750,000 so the umbrella insurance may come into play. But I'm guessing it probably will settle for an amount below where the umbrella insurance kicks in.

User avatar
JonnyDVM
Posts: 1579
Joined: Wed Feb 12, 2014 6:51 pm
Location: Atlanta, GA

Re: Who has needed to use their umbrella insurance?

Post by JonnyDVM » Thu Jun 16, 2016 8:02 pm

sarahjane wrote:OK, I'm the one you're looking for.

My spouse was in a head on vehicle accident where she was determined to be at fault. The passenger in the other vehicle died and the driver had serious injuries. The case settled for the liability limits of the auto policy plus the umbrella. Without the umbrella there's no question personal assets would have been at risk. Incidentally, the umbrella was renewed. Please don't ask for more details. It's cheap coverage for peace of mind.


Thank you for sharing. I'm very sorry that happened to you and your spouse.
Sometimes the questions are complicated and the answers are simple. -Dr. Seuss

User avatar
LadyGeek
Site Admin
Posts: 40413
Joined: Sat Dec 20, 2008 5:34 pm
Location: Philadelphia
Contact:

Re: Who has needed to use their umbrella insurance?

Post by LadyGeek » Thu Jun 16, 2016 9:40 pm

This thread is now in the Personal Finance (Not Investing) forum (insurance).
To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.

Post Reply