Who has needed to use their umbrella insurance?

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NMJack
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Re: Who has needed to use their umbrella insurance?

Post by NMJack »

jwhitaker wrote: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.
Thank you. That is great information.

Since you're an "insider," I have a question for you. If a person has $2M in umbrella coverage, but only $1M in awardable assets (i.e. assets that a judge could award in a lawsuit), is the insurance company at risk of a $2M payout or only a $1M payout?
NMJack
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Re: Who has needed to use their umbrella insurance?

Post by NMJack »

JonnyDVM wrote: 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.
Isn't a person's "likelihood of dying" 100%? :confused (I'm guessing you're referring to term insurance that you don't intend to carry indefinitely)
Last edited by NMJack on Fri Jun 17, 2016 3:01 pm, edited 1 time in total.
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JDCarpenter
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Re: Who has needed to use their umbrella insurance?

Post by JDCarpenter »

NMJack wrote:... If a person has $2M in umbrella coverage, but only $1M in awardable assets (i.e. assets that a judge could award in a lawsuit), is the insurance company at risk of a $2M payout or only a $1M payout?
You didn't address this to me, but the company would be at risk for 2 million. (And the insured, if not retired, would be at risk for 2 million as well--wages can be garnished for a very long time. When a judge/jury enters a verdict for damages in a negligence case, he/they do not know how much wealth the Defendant has.)
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mervinj7
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Re: Who has needed to use their umbrella insurance?

Post by mervinj7 »

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.
Very sorry to hear about your wife's accident. Thanks again for sharing. It's a invaluable lesson for the forum.
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Re: Who has needed to use their umbrella insurance?

Post by Tamahome »

I have not used mine.

I have clients who have used theirs (that I did not represent, as I told them the insurance company would provide a "free" lawyer... not really free... they already paid for it.) I have had clients who could have used it, but did not have it (some of which I did represent). Of course, I am an attorney, so people come to me for help. Also, I am in the Metro-Atlanta area, an area where the population would make it statistically more likely that I would see this, as there are a lot of people here.
I'm not a financial professional. Post is info only & not legal advice. No attorney-client relationship exists with reader. Scrutinize my ideas as if you spoke with a guy at a bar. I may be wrong.
boglerdude
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Re: Who has needed to use their umbrella insurance?

Post by boglerdude »

"When a judge/jury enters a verdict for damages in a negligence case, he/they do not know how much wealth the Defendant has"

Every $2MM+ judgement Ive heard about has been levied against a defendant who has substantial assets, like a corporation.

In other words I havent seen a multi-million dollar judgement against someone middle class who will never be able to pay it.

Not sure what this means, if the size of the awards are supposed to be "asset blind"
Iridium
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Re: Who has needed to use their umbrella insurance?

Post by Iridium »

BSA44 wrote: 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.
I have shark attack, coconut, and New Yorker insurance.

If I need to go to the doctor from any of the three, I have comprehensive health insurance. It will pay regardless of cause (they reserve the right to sue to New Yorker on my behalf to recover their costs, but my bills get paid regardless).
If I can't work, I have disability insurance. It will pay regardless of cause (there might be some exception if the disability was due to something I intentionally did to myself).
If I die, I have life insurance. It will pay regardless of cause (might be an exception for suicide).

So, yes, whether it is a shark attack, coconut fall, or New Yorker bite, most of my economic losses (less deductibles, coinsurance, etc.) will be covered through my comprehensive insurance.

Similarly, an umbrella is relatively comprehensive lawsuit insurance.

If I hit a clown car, I am covered by umbrella.
If a restaurant sues me for my Yelp review, I am covered by umbrella.
If a member of my Toastmaster's club breaks their neck because the lectern was in the wrong place, I am covered by umbrella.
If I do an AirB&B in Italy and accidentally burn it down, I am covered by umbrella.

Between my health, disability, life, home, auto, and umbrella, most of my major economic risks are covered. Niche insurance overlaps with my comprehensive insurance, and since I had already accepted the deductibles in my comprehensive insurance as being affordable, niche insurance doesn't really provide any downside protection, so I do without. This is different from doing without umbrella, which would leave me exposed to a very unlikely, but potentially significant downside risk.
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snackdog
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Re: Who has needed to use their umbrella insurance?

Post by snackdog »

The weird thing about umbrella is that you can only get it on top of other insurance, which the insurer normally wants to also hold and to ensure you have set the limits to their satisfaction. For example, my insurer would want me to have auto and home insurance with them with fairly high coverage levels before they would add on an umbrella above that.

My problem is, I don't have a car in the US and thus minimum auto insurance. I have home insurance (on two homes, but with renters) through two different insurers (because USAA won't cover short-term rentals) and neither will offer an umbrella on those policies. USAA is particularly difficult on this. Geico offered it but only if I would pick up a big auto insurance policy I don't need.

Has anyone picked up some form of umbrella from a third party or say from Lloyd's of London?

Thanks
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metalworking
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Re: Who has needed to use their umbrella insurance?

Post by metalworking »

After following this thread I decided to look into umbrella insurance. USAA quoted me $400/year for a million in coverage. Only risk factor I have is owning a non aggressive dog bread. Seems higher than what you all are paying.
Da5id
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Re: Who has needed to use their umbrella insurance?

Post by Da5id »

metalworking wrote:After following this thread I decided to look into umbrella insurance. USAA quoted me $400/year for a million in coverage. Only risk factor I have is owning a non aggressive dog bread. Seems higher than what you all are paying.
My premium last year (Amica) was $291 for 1M coverage, but I got a $58 dividend on the policy (they are a mutual insurance co and paid dividends), so effectively $233. No risk factors. Going up quite a bit this year due to new driver (big risk factor), not sure exactly what it will be. Not sure why yours is $400, maybe based on location? USAA is generally a good company.
camden
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Re: Who has needed to use their umbrella insurance?

Post by camden »

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.
Caught my attention. Do you actually get a $5 million umbrella policy for $400 a year? If so, who is your insurance carrier? I'm paying a lot more than that.
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JDCarpenter
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Re: Who has needed to use their umbrella insurance?

Post by JDCarpenter »

boglerdude wrote:"When a judge/jury enters a verdict for damages in a negligence case, he/they do not know how much wealth the Defendant has"

Every $2MM+ judgement Ive heard about has been levied against a defendant who has substantial assets, like a corporation.

In other words I havent seen a multi-million dollar judgement against someone middle class who will never be able to pay it.

Not sure what this means, if the size of the awards are supposed to be "asset blind"
1. Publicity biases; who cares if a large amount is awarded against a judgment proof scumbag (as opposed to GM, Boeing, etc.)? Large, uncollectible awards do happen. Here is an older article on one that was knowingly obtained, seemingly to provide comfort to the surviving family: http://www.theledger.com/article/200807 ... /807020422 Also, here, where an 80,000,000 judgment was obtained against a particularly unsympathetic defendant and his family: https://en.wikipedia.org/wiki/Tri-State ... Litigation
2. Competent plaintiff's attorneys will have a good idea as to collectibility before the lawsuit is filed--and definitely before trial. Why put the client through the litigation process if can't collect? Usually not a desired outcome--and if on contingency fee, not a good course to stay in law business.
3. A judge/jury may not "know," and they will typically be instructed to not consider the irrelevant financial status of the parties, but there are often indicators--rule of thumb, if the defendant or plaintiff is a Neurosurgeon, she likely will have more money than a janitor. Sometimes the instruction might not be followed. (We haven't really seen this though--most juries do try to follow the rules in civil litigation.)
4. If punitive damages are at issue, assets/incomes are relevant--in many (most?) US jurisdictions in a second stage of the proceedings.
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miles monroe
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Re: Who has needed to use their umbrella insurance?

Post by miles monroe »

clast wrote: 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.
at 1:26 eastern 6/18 this thread has 4793 views.

2 people have used it.

if each view was a policy, then at at average $150 per $1 million policy, the insurance company has taken in $718,950 in premiums.

and paid out $2,000,000 (plus attorney's fees).

this is the cheapest insurance you're ever gonna find.
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Doom&Gloom
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Re: Who has needed to use their umbrella insurance?

Post by Doom&Gloom »

miles monroe wrote:
clast wrote: 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.
at 1:26 eastern 6/18 this thread has 4793 views.

2 people have used it.

if each view was a policy, then at at average $150 per $1 million policy, the insurance company has taken in $718,950 in premiums.

and paid out $2,000,000 (plus attorney's fees).

this is the cheapest insurance you're ever gonna find.
There is so much wrong with those assumptions that the math results and conclusions are totally meaningless.
user5027
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Re: Who has needed to use their umbrella insurance?

Post by user5027 »

I've only skimmed the replies. I think it would also be enlightening to hear from anyone that did not have an umbrella but had an experience where they wish they did. :shock:
randomguy
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Re: Who has needed to use their umbrella insurance?

Post by randomguy »

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.
Thats debatable. If you have 500k of coverage and 500k of assets (say taxable to make it easy) and you get sued for 1 million, you go broke. Or maybe you are a high earner and they can garnish your wages for the next 20 years.

The alternate way is to have enough insurance to cover expected cases. This is hard because there are some outliers. A 5 million dollar policy covers like 99% of cases. But there is always the .1% cases (i.e. you lose control of your car, hit 12 kids and leave them paralyized for life) where you get like a 15 million dollar liability. At some point you have to draw the line.


The question with a lot of insurance is always do you need it and if there is a better way of getting it. Maybe you need cancer insurance (i.e. you would need the lump sum to cover lack of working, copays,....). Are you better off buying it, getting a disability policy, a critical illness policy , or self insuring. Going specific either requires you to buy a lot of insurance (i.e. do you want to protect yourself against cancer but leave yourself exposed to heart disease?).
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Earl Lemongrab
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Re: Who has needed to use their umbrella insurance?

Post by Earl Lemongrab »

JDCarpenter wrote:You didn't address this to me, but the company would be at risk for 2 million. (And the insured, if not retired, would be at risk for 2 million as well--wages can be garnished for a very long time. When a judge/jury enters a verdict for damages in a negligence case, he/they do not know how much wealth the Defendant has.)
My understanding is that most typical judgments can be discharged through bankruptcy, although not ones from DUI or intentional acts. So the "run into the bus full of surgeons" case probably wouldn't follow the person for life. They'd declare bankruptcy and the applicable assets and insurance divided up.

Earl
NMJack
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Re: Who has needed to use their umbrella insurance?

Post by NMJack »

Earl Lemongrab wrote:
JDCarpenter wrote:You didn't address this to me, but the company would be at risk for 2 million. (And the insured, if not retired, would be at risk for 2 million as well--wages can be garnished for a very long time. When a judge/jury enters a verdict for damages in a negligence case, he/they do not know how much wealth the Defendant has.)
My understanding is that most typical judgments can be discharged through bankruptcy, although not ones from DUI or intentional acts. So the "run into the bus full of surgeons" case probably wouldn't follow the person for life. They'd declare bankruptcy and the applicable assets and insurance divided up.

Earl
Maybe that is what I was thinking about. I believe that in some cases (may vary by state), a bankruptcy judge will consider the fact that you've bought umbrella insurance to protect your assets and allow you to keep most/all of your assets up to the value of the umbrella coverage. Hopefully others can fill in the gaps here.
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Re: Who has needed to use their umbrella insurance?

Post by clast »

camden wrote: Caught my attention. Do you actually get a $5 million umbrella policy for $400 a year? If so, who is your insurance carrier? I'm paying a lot more than that.
It's State Farm. In order to add umbrella, I first had to increase my auto (with State Farm) to the maximum, which I believe is $500k liability. So the umbrella kicks in after the normal auto. I also have renter's insurance, but I think that has 50k liability (I could be wrong on this number). My price may be lower due to a multi-line discount for having all my insurance through them.
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JDCarpenter
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Re: Who has needed to use their umbrella insurance?

Post by JDCarpenter »

Earl Lemongrab wrote:
JDCarpenter wrote:You didn't address this to me, but the company would be at risk for 2 million. (And the insured, if not retired, would be at risk for 2 million as well--wages can be garnished for a very long time. When a judge/jury enters a verdict for damages in a negligence case, he/they do not know how much wealth the Defendant has.)
My understanding is that most typical judgments can be discharged through bankruptcy, although not ones from DUI or intentional acts. So the "run into the bus full of surgeons" case probably wouldn't follow the person for life. They'd declare bankruptcy and the applicable assets and insurance divided up.

Earl
Yes; your understanding is correct.
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carolinaman
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Re: Who has needed to use their umbrella insurance?

Post by carolinaman »

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.
+1. If you have an incident that requires a large payout, it can ruin you financially. Therefore, even though it is a low probability, it is something that is needed to avoid such a catastrophe. Catastrophes like this are why we need insurance.

I pay a little more than $300 per year for $3M umbrella. That is ratio of 10,000 to 1 in one year, 1,000 to 1 over 10 years and 500 to 1 over 20 years. Over time it will becomes more probable although still very low.
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Wildebeest
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Re: Who has needed to use their umbrella insurance?

Post by Wildebeest »

Iridium wrote: Sat Jun 18, 2016 2:58 am
BSA44 wrote: 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.
I have shark attack, coconut, and New Yorker insurance.

If I need to go to the doctor from any of the three, I have comprehensive health insurance. It will pay regardless of cause (they reserve the right to sue to New Yorker on my behalf to recover their costs, but my bills get paid regardless).
If I can't work, I have disability insurance. It will pay regardless of cause (there might be some exception if the disability was due to something I intentionally did to myself).
If I die, I have life insurance. It will pay regardless of cause (might be an exception for suicide).

So, yes, whether it is a shark attack, coconut fall, or New Yorker bite, most of my economic losses (less deductibles, coinsurance, etc.) will be covered through my comprehensive insurance.

Similarly, an umbrella is relatively comprehensive lawsuit insurance.

If I hit a clown car, I am covered by umbrella.
If a restaurant sues me for my Yelp review, I am covered by umbrella.
If a member of my Toastmaster's club breaks their neck because the lectern was in the wrong place, I am covered by umbrella.
If I do an AirB&B in Italy and accidentally burn it down, I am covered by umbrella.

Between my health, disability, life, home, auto, and umbrella, most of my major economic risks are covered. Niche insurance overlaps with my comprehensive insurance, and since I had already accepted the deductibles in my comprehensive insurance as being affordable, niche insurance doesn't really provide any downside protection, so I do without. This is different from doing without umbrella, which would leave me exposed to a very unlikely, but potentially significant downside risk.


We have umbrella insurance. It does not give me peace of mind. I consider it taking a piece of my economic well being ( the chance that I hit a clown car and get sued for millions is infinitesimal, the chance that the clown hits me, most likely not with his umbrella but with his clown truck and causes me grievous bodily harm is).

If we ever need to use umbrella insurance it will be one bad day, week and most likely a horrible year. I do not believe it to be be a comprehensive law suit insurance. I expect the insurance company to be adversarial and not be be out for my best interests and I probably hire my own lawyer.

Why pay the money for an umbrella insurance for events that are unlikely to happen while I can invest in Index funds or if I am worried about clown cars get a safer, bigger car or meditate to quiet my worrying mind?

The short answer is that it is the consensus on Bogleheads that umbrella insurance is desirable and sometimes I just pay my $ 300 a year and overcome my aversion to making insurance companies even more profitable than they already are.
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Slacker
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Re: Who has needed to use their umbrella insurance?

Post by Slacker »

LittleGreenSoldiers wrote: 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.
Very interesting. I have had to make claims on Under-insured / uninsured motorists coverage 3 times while living in King County WA over 6 years. Never had umbrella insurance at the time and luckily I was never in the car in a serious accident, but in my limited experiences you will encounter people without insurance coverage (and they are the ones who seem to be the worst drivers) more often than you'd expect. (UIM covers physical damage to the vehicle in addition to bodily injury in WA luckily - in AZ it only covers bodily injury).
texas lawdog
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Re: Who has needed to use their umbrella insurance?

Post by texas lawdog »

Remember that umbrella insurance is really additional liability insurance that extends the underlying coverage amount.
As an example, I have $1.5M of total auto liability coverage ($500K auto liability + $1M umbrella).

Umbrella insurance also helps to fill in some of the liability gaps that are not covered under auto & homeowner policies. It is a relatively inexpensive prepaid legal defense. You can bet that your insurance company is going to provide a top notch lawyer team if they are on the hook for the first $1.5M in liability.
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Re: Who has needed to use their umbrella insurance?

Post by Iridium »

Wildebeest wrote: Sun Sep 10, 2017 9:20 am <snip>
If we ever need to use umbrella insurance it will be one bad day, week and most likely a horrible year. I do not believe it to be be a comprehensive law suit insurance. I expect the insurance company to be adversarial and not be be out for my best interests and I probably hire my own lawyer.
<snip>
Yes, it will mostly likely be a horrible year or more, as I would be living with the guilt that, through my error, I had made someone's life substantially worse (or killed them). However, at least they or their families could get more monetary compensation than I could ever afford to help make their lives a bit easier.

The insurance company does not have your best interest at heart. However, I would encourage you to read your umbrella insurance contract. Unlike most insurance, it is an easy read and leaves no wiggle room for the insurance company. They are covering all suits against us for property damage, bodily injury, and personal injury. There are about 3-5 pages of objective and precise exceptions. In the vast, vast majority of cases it will be plainly obvious whether the situation is covered or not and the amount of your loss will always be trivial to calculate: the amount you lost in the lawsuit. Even better, the insurance company needs your help in the lawsuit (they even pay up to $250/day to replace your salary on days you have to miss work). The absolute last thing they want is for you to be a hostile witness. So why piss you off, when 99.99% of the time they'll get slapped by the courts/regulators and then be on the hook in a lawsuit where the defendant wants to lose to get back at the insurance company?

This stands in great contrast with health insurance, where the 'summary' is 200 pages and when I asked for the complete policy was told by HR that I don't want it (it is not clear to me that such a document even exists). It stands in contrast of home insurance where the loss cannot be known exactly so is up for negotiation and debate with the adjuster. It stands in contrast of home insurance again that when a hurricane blows through, the damage has to be portioned out between wind damage (which is covered) and 'rising water' damage (which is not). I have read tons of insurance horror stories, but in every story/complaint I recall reading about liability insurance, it was the plaintiff getting screwed over, not the insured.

Okay, so yeah, there is no such thing a truly comprehensive lawsuit insurance. No insurance company is ever going to insure you when you get in a fistfight with someone or intentionally set fire someone's house (although my umbrella would cover my hypothetical grade schooler doing it). No insurance company is going to insure you when you drive on a suspended license. No insurance company is going to defend you against the RIAA when you share the latest music album. However, I do feel good confidence that it is something that I can rely to protect me and help make my victim closer to whole for the vast, vast majority of honest mistakes.
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Re: Who has needed to use their umbrella insurance?

Post by denovo »

clast wrote: 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.
But that does not mean they want to post about it! Let's be honest, if you used the umbrella it means you were somehow liable/responsible for a great deal of property damage or bodily injury to others. Not something people are willing to discuss.


I have an acquaintance whose wife was walking on the street and was hit by a vehicle that lost control. It was a commercial vehicle. The injured pedestrian needed extensive physical therapy and became permanently disabled. The business had auto liability and commercial umbrella insurance that paid out. I don't know any further details and didn't want to probe too deeply since I don't know him too well.
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ddurrett896
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Re: Who has needed to use their umbrella insurance?

Post by ddurrett896 »

JonnyDVM wrote: Thu Jun 16, 2016 8:40 am Also, what's to stop someone from suing you for 6 million when you have one million of coverage?
Nothing. However if you can get a guaranteed $1mm without litigation or risk it by going to course, the guarantee might seem attractive.
Boglegrappler
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Re: Who has needed to use their umbrella insurance?

Post by Boglegrappler »

Here's an example of someone who benefited from Umbrella policies.


http://www.washingtonpost.com/wp-srv/po ... 040498.htm
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ResearchMed
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Re: Who has needed to use their umbrella insurance?

Post by ResearchMed »

ddurrett896 wrote: Sat Sep 16, 2017 6:39 am
JonnyDVM wrote: Thu Jun 16, 2016 8:40 am Also, what's to stop someone from suing you for 6 million when you have one million of coverage?
Nothing. However if you can get a guaranteed $1mm without litigation or risk it by going to course, the guarantee might seem attractive.
There's nothing stopping someone from suing you for $100,000,000. Same (small) filing fee.

More seriously, if you've got that lower Umbrella Policy, then you've got the insurance company, and their attorneys, going to bat for you.
These are likely attorneys that you wouldn't want to pay for, even if you "wanted" to pay for any attorney at all.

If you have more that might be at risk, or you've got a target on your back, then upping the umbrella might make sense.
But I think that first Umbrella Policy, for $1-2 million is the most valuable for the above reason.

RM
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Re: Who has needed to use their umbrella insurance?

Post by IowaFarmBoy »

I posted this a year ago. Not me personally but this happened in our area. Here are a couple of excerpts from my original post. The link has all the details.
Here's the story- In 2012, the driver of an ATV made a left turn onto a roadway from a four-way stop sign. He was hit from behind by a motorcycle. The driver of the motorcycle was issued a citation for disregarding a stop sign. Both motorcycle and ATV carried a driver and a passenger. The driver of the ATV was uninjured, the passenger was injured. The driver of the motorcycle was seriously injured and is now a quadriplegic. The passenger on the motorcycle was also injured.
And that is why I have a liability umbrella. People chase the deep pockets- both drivers have been sued and they (most likely their insurance) has paid. This one accident has resulted in three lawsuits, one of which has resulted in a multi-million dollar settlement, another settled for an undisclosed amount and the third is unresolved. I suspect the legal bills incurred over the 4 years since the accident have been large. My $170/year premium looks pretty cheap in light of this. These situations are rare but they do happen and the consequences could be catastrophic to a financial plan.
viewtopic.php?f=2&t=199545
nimo956
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Re: Who has needed to use their umbrella insurance?

Post by nimo956 »

Let's say that you are single and make $100k, but don't have much in the way of assets outside of your 401k, IRA, and home equity (i.e. not much in taxable).

Let's say you don't have umbrella insurance and are in an auto accident where you are at fault and the other party either dies or is permanently disabled. Let's say you are sued for above your auto policy limits for $1m and lose.

The only way I can see for the other party to collect is through wage garnishment. Can this be discharged in bankruptcy (or how easy is it to be discharged in bankruptcy)? I'm trying to determine if I'm "judgement-proof" per se, and therefore don't need to purchase umbrella insurance.

I actually do know of a school teacher who hit a motorcycle and the cyclist died. She was sued for $1m by the family. I'm not sure how the case was settled, but always wondered since there's no way she'd able to pay $1m on a $50k salary.
50% VTI / 50% VXUS
michaeljc70
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Re: Who has needed to use their umbrella insurance?

Post by michaeljc70 »

I don't have an umbrella policy, but it has been on my to do list for a while. There are a lot of expensive cars on the road where I live and most likely need for an umbrella would be being at fault for an auto accident with one or more expensive cars and/or one or more people being injured that have large incomes.
david99
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Re: Who has needed to use their umbrella insurance?

Post by david99 »

Umbrella liability only costs me $300 for 2 mill. But health insurance costs 10k ---my company pays half of that. If I had to pay the full amount I think that I would skip health insurance but I would keep the umbrella liability.
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dm200
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Re: Who has needed to use their umbrella insurance?

Post by dm200 »

nimo956 wrote: Sat Sep 16, 2017 8:57 am Let's say that you are single and make $100k, but don't have much in the way of assets outside of your 401k, IRA, and home equity (i.e. not much in taxable).
Let's say you don't have umbrella insurance and are in an auto accident where you are at fault and the other party either dies or is permanently disabled. Let's say you are sued for above your auto policy limits for $1m and lose.
The only way I can see for the other party to collect is through wage garnishment. Can this be discharged in bankruptcy (or how easy is it to be discharged in bankruptcy)? I'm trying to determine if I'm "judgement-proof" per se, and therefore don't need to purchase umbrella insurance.
I actually do know of a school teacher who hit a motorcycle and the cyclist died. She was sued for $1m by the family. I'm not sure how the case was settled, but always wondered since there's no way she'd able to pay $1m on a $50k salary.
Depending on state law, your IRA may be subject to civil judgment. Contrary to what several attorneys told me, I lost well over $300,000 taken from an IRA. The rules may be different for civil judgments and bankruptcy.
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ResearchMed
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Re: Who has needed to use their umbrella insurance?

Post by ResearchMed »

dm200 wrote: Sat Sep 16, 2017 10:13 am
nimo956 wrote: Sat Sep 16, 2017 8:57 am Let's say that you are single and make $100k, but don't have much in the way of assets outside of your 401k, IRA, and home equity (i.e. not much in taxable).
Let's say you don't have umbrella insurance and are in an auto accident where you are at fault and the other party either dies or is permanently disabled. Let's say you are sued for above your auto policy limits for $1m and lose.
The only way I can see for the other party to collect is through wage garnishment. Can this be discharged in bankruptcy (or how easy is it to be discharged in bankruptcy)? I'm trying to determine if I'm "judgement-proof" per se, and therefore don't need to purchase umbrella insurance.
I actually do know of a school teacher who hit a motorcycle and the cyclist died. She was sued for $1m by the family. I'm not sure how the case was settled, but always wondered since there's no way she'd able to pay $1m on a $50k salary.
Depending on state law, your IRA may be subject to civil judgment. Contrary to what several attorneys told me, I lost well over $300,000 taken from an IRA. The rules may be different for civil judgments and bankruptcy.
There is - or used to be (and perhaps only in some states) - a difference in "protections" for regular IRA's and "rollover IRA's" (meaning specifically IRA money that came from an ERISA 401k/403b account and was NOT commingled with other IRA monies).
"Plain" IRA money might not be fully protected, but this type of rollover (note: NOT "just' a rollover from any IRA to another) *was* protected - at least up to different limits.

This may be outdated, and may not apply in all states if still current.

RM
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Bfwolf
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Re: Who has needed to use their umbrella insurance?

Post by Bfwolf »

Bfwolf wrote: 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.
Update: it went to court and judge ruled against the lady suing, so umbrella didn't come into play.
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steadyeddy
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Re: Who has needed to use their umbrella insurance?

Post by steadyeddy »

Most of the responses assume any large lawsuit will be unjustified or frivolous. Imagine you are responsible for killing a young parent and paralyzing their child in an auto accident, but you wanted to save $200/yr and dropped your umbrella insurance. I wouldn't be able to live with myself.
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Nate79
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Re: Who has needed to use their umbrella insurance?

Post by Nate79 »

Bfwolf wrote: Sat Sep 16, 2017 10:36 am
Bfwolf wrote: 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.
Update: it went to court and judge ruled against the lady suing, so umbrella didn't come into play.
Did the umbrella policy pay for your lawyer?
Iridium
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Re: Who has needed to use their umbrella insurance?

Post by Iridium »

nimo956 wrote: Sat Sep 16, 2017 8:57 am Let's say that you are single and make $100k, but don't have much in the way of assets outside of your 401k, IRA, and home equity (i.e. not much in taxable).

Let's say you don't have umbrella insurance and are in an auto accident where you are at fault and the other party either dies or is permanently disabled. Let's say you are sued for above your auto policy limits for $1m and lose.

The only way I can see for the other party to collect is through wage garnishment. Can this be discharged in bankruptcy (or how easy is it to be discharged in bankruptcy)? I'm trying to determine if I'm "judgement-proof" per se, and therefore don't need to purchase umbrella insurance.

I actually do know of a school teacher who hit a motorcycle and the cyclist died. She was sued for $1m by the family. I'm not sure how the case was settled, but always wondered since there's no way she'd able to pay $1m on a $50k salary.
Unless it was the result of an intentional act or DUI, the judgement should be dischargeable in bankruptcy. However, I have always wondered how one would actually file. Can anyone shine a light on how it would work because, to me, it looks like every type of filing would fail:

Chapter 7: With your income, I would think you would fail the means test and be ineligible to file.
Chapter 13: In the hypothetical case where you get sued for $1MM+, you your debt would exceed the ~$400K limit to be eligible for chapter 13.
Chapter 11: Though rare, individuals can file this and it has the advantage of not having any eligibility criteria. However, in chapter 11, you have to get your creditors to vote for the plan, and I do not see any incentive for them to do so.
mptfan
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Re: Who has needed to use their umbrella insurance?

Post by mptfan »

dm200 wrote: 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.
It doesn't.
Raggs
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Re: Who has needed to use their umbrella insurance?

Post by Raggs »

I have a number of clients who have Umbrella policies. Over the past several decades only one was paid out on and personally I feel the insurance company capitulated on it(the litigant had been to a bar an hour before and had an open container at the time of accident, due to the severity of his injuries no blood alcohol was done). The rates depends on where you live, how many vehicles you own, how many drivers, and how many properties. The settlement can be based on which court gets jurisdiction. Years ago I had a discussion with a prominent area trial attorney. He told me if he was to sue me he would attempt to get it into a court that he feels he could win. He used the example that the county I am in is a conservative political area and the jury would reflect that. He stated he would do everything he could to get a change of venue to another county court that is more liberal. Those were his words. I asked how does he determine how much to sue for and to settle for in a case. His answer was it is dependent on the case details, the policy limits involved, and the assets of the defendant.

As for what the trial attorney goes after can be based the circumstances and details of what occurred, on your policy limits, and probably/possibly your assets especially if he can get into your retirement. Another discussion I had was with a private investigator. Almost all of his clients were attorneys. He finds out what the other party's net worth is for the attorney. He told me he finds out most of information by gray or illegal means. All the attorney has to do is simply state "I have in my hand this list of the assets" and once the defendant confirms in deposition that list is correct it can be on the chopping block. There are trial attorneys who will go after everything and not care if they put you on the street.
michaeljc70
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Re: Who has needed to use their umbrella insurance?

Post by michaeljc70 »

Raggs wrote: Sat Sep 16, 2017 1:16 pm There are trial attorneys who will go after everything and not care if they put you on the street.
True. But a lot are pragmatic and know court can be unpredictable and trying a case very expensive and time consuming. I've also heard of many people "winning" judgements and never being able to collect a dime.
mnnice
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Re: Who has needed to use their umbrella insurance?

Post by mnnice »

miles monroe wrote: 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.
Does it live on your CLUE report for 5 years?
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LadyGeek
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Re: Who has needed to use their umbrella insurance?

Post by LadyGeek »

^^^ The wiki has some background info: CLUE database
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fh2000
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Re: Who has needed to use their umbrella insurance?

Post by fh2000 »

I have auto, home, and umbrella all covered by the same insurance company. I have not used my umbrella, and hope I don't have to use it.

I have 2 young drivers on my policies. One of my adult children is now away from home without a car. I am thinking of dropping the child from family group auto insurance plan. Later on, the child will purchase a car and carry auto insurance on his own.

So, is there a benefit of keeping the child in my umbrella insurance? Would you drop your children once they move away and live on their own?
Bfwolf
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Re: Who has needed to use their umbrella insurance?

Post by Bfwolf »

Nate79 wrote: Sat Sep 16, 2017 11:14 am
Bfwolf wrote: Sat Sep 16, 2017 10:36 am
Bfwolf wrote: 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.
Update: it went to court and judge ruled against the lady suing, so umbrella didn't come into play.
Did the umbrella policy pay for your lawyer?
The insurance companies paid for the lawyer since they did not want to pay the homeowner's policy amount in case of a settlement. Don't think umbrella made any difference, and honestly not even sure if my brother (the one who ended up being sued) had umbrella.
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StevieG72
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Re: Who has needed to use their umbrella insurance?

Post by StevieG72 »

I am still trying to figure out why people are insuring their umbrellas.
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Da5id
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Re: Who has needed to use their umbrella insurance?

Post by Da5id »

StevieG72 wrote: Sun Sep 17, 2017 8:17 am I am still trying to figure out why people are insuring their umbrellas.
Haven't you seen the hurricanes? They can really do a number on your umbrella.
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StevieG72
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Re: Who has needed to use their umbrella insurance?

Post by StevieG72 »

Interesting recap of some actual claims....

http://www.galleninsurance.com/wp-conte ... Policy.pdf

I am in the process of getting an umbrella policy. Geico insures my auto & boat so I will likely get my umbrella policy with them. Spoke with an agent today and he said that legal services do not tap in to policy coverage amounts. Apparently this is not the case with all companies.
So if you have a $1 million policy with Geico and legal is drawn out for a few years, there will still be $1 million to pay any claim / settlement.

For those that are interested a $1m policy came it at $140, $3m policy $336, $5M policy $560. Obviously premiums will vary greatly depending on the specifics of your household.
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changingtimes
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Re: Who has needed to use their umbrella insurance?

Post by changingtimes »

ResearchMed wrote: Sat Sep 16, 2017 10:19 am
dm200 wrote: Sat Sep 16, 2017 10:13 am
Depending on state law, your IRA may be subject to civil judgment. Contrary to what several attorneys told me, I lost well over $300,000 taken from an IRA. The rules may be different for civil judgments and bankruptcy.
There is - or used to be (and perhaps only in some states) - a difference in "protections" for regular IRA's and "rollover IRA's" (meaning specifically IRA money that came from an ERISA 401k/403b account and was NOT commingled with other IRA monies).
"Plain" IRA money might not be fully protected, but this type of rollover (note: NOT "just' a rollover from any IRA to another) *was* protected - at least up to different limits.

This may be outdated, and may not apply in all states if still current.
Having recently inherited an IRA that is in the high six figures, I just upped my umbrella to $2 million, precisely because of this, though admittedly I could have actually done the research first to determine whether my state protects inherited IRAs the same as "regular" retirement accounts.
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