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Umbrella insurance questions and help

Posted: Sun Jan 22, 2017 11:19 am
by jkushne1
I'm looking into umbrella insurance for the first time. Currently I'm a medical resident and have low assets now but the potential for significant salary and net worth accumulations in the next 10-20 years. Already have life/disability setup.

1) How much to get? I've seen people suggested your current net worth but my understanding is that they can go after future earnings as well and physician's often have a "target" on their back. Have heard anywhere in the neighborhood of 1-5 million since it is relatively inexpensive.
2) Which company to get it from? For life insurance I went to "terms4sale" to evaluate but wasn't sure if there was something like that for umbrella insurance. Are there specific companies to choose from that are considered better?
3) Has anyone experienced discounts with umbrella insurance if you carry multiple policies with the same insurer? If I carry life/disability/rental/automobile with one company, are there discounts if I get my umbrella policy with the same company?
4) Do you typically "lock in" a lower rate by getting it younger? For instance, with disability insurance it is much cheaper to buy younger when healthy and continue to pay the premiums without having to take another physical. Is it similar with umbrella insurance? Is it locked in once I buy it at that rate even if 5 years down the road I choose to start drag racing or some other risky activity?

Re: Umbrella insurance questions and help

Posted: Sun Jan 22, 2017 11:41 am
by ebrasmus21
1) Get what you need to cover your assets. Changing your umbrella policy later on should be very easy.
2) I think you'll find that most of the personal lines insurance companies offer umbrella. There are a lot (Travelers, Safeco, Hartford....)
3) Not sure, but there could be something to that. When you finish up your residency and start making the big bucks there will be lots of options for High Net Worth insurance. Speaking to a reputable independent insurance agency in your area will be well worth your time to make sure your assets are protected at a fair price.
4) No. The terms of your Umbrella policy are subject to change on a yearly basis (in most cases). What I think will happen in your case is that you'll find a nice personal lines company and end up writing your home, auto and umbrella all through one company. You will also probably renew those policies around the same time as well. The auto policy might be effective on 6 month terms but the home and umbrella will probably be 12 month terms. So, you'll be renewing those annually.

Re: Umbrella insurance questions and help

Posted: Sun Jan 22, 2017 11:42 am
by CppCoder
I just purchased an umbrella policy from my regular insurance agent (one of the big, national underwriters). I believe I did get a small discount on something for having auto, personal articles, and home insurance already with the company. I got a $2 million policy, and I think the premium was $259/yr. Maybe I could have done better, but I'm not wasting hours of research and phone calls to save $50.

My understanding is that no, you do not lock in a better rate based purely on your age. Instead, the rate is set by your risk profile, which changes by events rather than by age. Often, umbrella insurance is used when liability exceeds your other policies, so, for example, umbrella insurance often goes up significantly when your children become teenage drivers. Your risk profile also changes if you have a pool or a boat. Also, keep in mind that one way to lower your umbrella is to raise the liability on auto and home. You have to run the numbers to see which combination is cheaper, but the umbrella may require auto and home minimum liability coverage.

How much is the right amount? I honestly don't know. I was debating something between $1 million and $3 million, so I just split the difference. The agent's advice (I think he initially recommended $1 million, actually) was to make sure that you have a policy amount large enough for the insurance company to have some skin in the game so that they hire good lawyers. He said in his experience with claims, the majority of the umbrella coverage ends up paying legal fees. Honestly, I don't know if that's true or not. Maybe someone in the business will respond.

Re: Umbrella insurance questions and help

Posted: Sun Jan 22, 2017 11:46 am
by BigJohn
There are many forum discussion on umbrella insurance that you can find with a search that could give you more information. Here are a few comments based on my experience.

While not required, it's usually easiest to get umbrella coverage from the company that provides car/home insurance as well. The umbrella policy will have liability requirements for those other policies as they do interact. Umbrella takes over after they are exhausted so you have to have required level of coverage elsewhere. I have gotten multiple policy discounts for all being at one place as well. You might want to start there and then shop around for prices at others after you get their quote. Umbrella insurance is like more like car/home, the price you pay is updated each year based on your current factors (size of house, how many cars, age of drivers, etc). It is not like some disability/life insurance products where you lock-in a rate.

Re: Umbrella insurance questions and help

Posted: Sun Jan 22, 2017 12:11 pm
by crefwatch
I would certainly check on whether the policy excludes actions related to employment, and actions performed or attributed to people under the control of the applicant, even if they are employed by others. I'm not a doctor; The reason I bring this up is that in taking care of my declining mother's Renter's Insurance, it was pointed out to me that if her Home Health Aide burns out the apartment (I mean, just as a point of discussion ... ), the policy will not cover it, only actions of my mother are covered.

Re: Umbrella insurance questions and help

Posted: Sun Jan 22, 2017 12:35 pm
by Daryl
The idea that one should purchase insurance based on their net worth is misguided. Instead, one should ask, "Supposed I'm at fault in a major auto accident tomorrow, causing significant medical expenses for another family for an extended duration. How are they going to pay those medical bills?"

Personally, I don't have a lot of cash available to help that family out. Most of my assets are in accounts with varying degrees of creditor / bankruptcy protection (think 401k accounts). When someone files a claim against me, my sincere desire is that my insurance company would take the following two steps:
1) Thoroughly investigate, ask questions, determine the probability of waste/fraud/abuse. If the claim is fraudulent, they should aggressively prosecute.
2) If the claim is legitimate, quickly issue a preliminary payout, and then follow-up with the claimant to ensure they are made whole. I really don't want my insurance company spending a lot of money on legal defense costs. This money would be better spent helping the claimant heal.

I should follow-up with my insurance agent, but I'm assuming that my combined auto/umbrella limits cover at least 3 standard deviations of claims/loss experience types of losses. A black swan event could be potentially devastating, both for myself and the claimant. As a result, I try to be a careful driver.

Re: Umbrella insurance questions and help

Posted: Sun Jan 22, 2017 1:12 pm
by kenner
Daryl wrote:The idea that one should purchase insurance based on their net worth is misguided.
Having spent a few decades litigating cases involving injury and death, I agree with Daryl's statement.

If and when your liability coverage is exhausted, your net worth is always at risk (largely dependent on state and federal law). So, the simple answer to "how much liability insurance should I buy" is this: Buy at least as much as the dollar amount that a jury and court may award in the event of a case against you. Of course, that is impossible to determine ahead of time.

What you can control is the amount of insurance you buy and proper planning pursuant to state and federal law.

Re: Umbrella insurance questions and help

Posted: Sun Jan 22, 2017 3:33 pm
by LadyGeek
This thread is now in the Personal Finance (Not Investing) forum (insurance).

Re: Umbrella insurance questions and help

Posted: Sun Jan 22, 2017 3:49 pm
by denovo
Your primary concern should be liability in regards to your professional activities. Umbrella policies exclude liability from actions taken at work, i.e. performing heart surgery. Medical malpractice insurance is what you should be worried about it, although I guess your hospital covers you while you are a resident.

Re: Umbrella insurance questions and help

Posted: Sun Jan 22, 2017 4:44 pm
by afan
kenner wrote: If and when your liability coverage is exhausted, your net worth is always at risk (largely dependent on state and federal law). So, the simple answer to "how much liability insurance should I buy" is this: Buy at least as much as the dollar amount that a jury and court may award in the event of a case against you. Of course, that is impossible to determine ahead of time.
Well, a court could award $50 million. That guideline is not particularly helpful.

The most important part of the coverage is the first million. That covers you for a large share of the potential judgements, provides you with expert legal representation and pays the lawyers. Without liability coverage you would have to find a good lawyer and pay the legal bills.

Carrying a lot of umbrella coverage means the judgement has to be even higher before it threatens your networth. But as Kenner indicates, your exposure need not match your networth. If you have a swimming pool you have more liability than someone with the same networth who does not.

Re: Umbrella insurance questions and help

Posted: Sun Jan 22, 2017 4:50 pm
by Daryl
kenner wrote:
Daryl wrote:The idea that one should purchase insurance based on their net worth is misguided.
Having spent a few decades litigating cases involving injury and death, I agree with Daryl's statement.
Clearly auto bodily injury claims are skewed towards the low end, with most damage awards within the policy limits of typical auto policies. Additionally, excess liability policies typically require higher than average liability limits on the underlying policy. Given that, are there resources available for a consumer to estimate the probability that he/she will incur a loss in excess of the limits afforded by a combined auto/umbrella insurance policy? For discussion purposes, lets assume an auto policy with a $0.5M bodily injury limit and a fairly modest excess policy that provides $1M in coverage.

Re: Umbrella insurance questions and help

Posted: Sun Jan 22, 2017 9:52 pm
by boglerdude
kenner wrote:Having spent a few decades litigating cases involving injury and death
It's been said a few times that lawyers don't go after assets beyond the insurance amount. Why is it that? thx

Re: Umbrella insurance questions and help

Posted: Sun Jan 22, 2017 10:04 pm
by kenner
boglerdude wrote:
kenner wrote:Having spent a few decades litigating cases involving injury and death
It's been said a few times that lawyers don't go after assets beyond the insurance amount. Why is it that? thx
Generally, that is likely because dollar amounts beyond the insurance coverage limits may be deemed to be legally uncollectible.

Re: Umbrella insurance questions and help

Posted: Sun Jan 22, 2017 10:19 pm
by grabiner
kenner wrote:
boglerdude wrote:
kenner wrote:Having spent a few decades litigating cases involving injury and death
It's been said a few times that lawyers don't go after assets beyond the insurance amount. Why is it that? thx
Generally, that is likely because dollar amounts beyond the insurance coverage limits may be uncollectible.
And even if they are collectible, they may not be worth collecting. Suppose that you have $2M in insurance, and $1M in assets. You offer to settle a case for $2M. The plaintiff can get $2M now, or take a chance at getting $3M from a court in several years; most plaintiffs would prefer to settle.

Re: Umbrella insurance questions and help

Posted: Sun Jan 22, 2017 10:36 pm
by kenner
grabiner wrote:
kenner wrote:
boglerdude wrote:
kenner wrote:Having spent a few decades litigating cases involving injury and death
It's been said a few times that lawyers don't go after assets beyond the insurance amount. Why is it that? thx
Generally, that is likely because dollar amounts beyond the insurance coverage limits may be uncollectible.
And even if they are collectible, they may not be worth collecting. Suppose that you have $2M in insurance, and $1M in assets. You offer to settle a case for $2M. The plaintiff can get $2M now, or take a chance at getting $3M from a court in several years; most plaintiffs would prefer to settle.
True. That is a strong incentive to carry the highest liability limits you can afford. And also the main reason to understand your state's laws regarding asset protection. In Florida, you can own a $500 million home that is totally exempt from tort claims, as long as that home can be claimed as your primary residence.

Re: Umbrella insurance questions and help

Posted: Mon Jan 23, 2017 12:29 am
by spammagnet
kenner wrote:
grabiner wrote:... Suppose that you have $2M in insurance, and $1M in assets. You offer to settle a case for $2M. The plaintiff can get $2M now, or take a chance at getting $3M from a court in several years; most plaintiffs would prefer to settle.
True. That is a strong incentive to carry the highest liability limits you can afford. And also the main reason to understand your state's laws regarding asset protection. In Florida, you can own a $500 million home that is totally exempt from tort claims, as long as that home can be claimed as your primary residence.
I don't see the logic in kenner's response. If I can afford higher liability limits than I buy, but plaintiffs are likely to settle for the insurance amount rather than risk trial to get my personal assets, why pay for more insurance than they'd likely find acceptable? If my assets significantly exceeded my insurance that seems like it would be bait but it seems like I wouldn't have to insure every dime of it.

I'm nowhere near the level that I have to consider that. I'm about to buy a policy with the minimum $1MM coverage. That will cover my net worth, much of which is not accessible to a plaintiff, anyway. But I'd hate to have to give up any of what I have as a retiree, with no chance of future work to regain any of it.

Re: Umbrella insurance questions and help

Posted: Mon Jan 23, 2017 12:31 am
by spammagnet
Daryl wrote:2) If the claim is legitimate, quickly issue a preliminary payout, and then follow-up with the claimant to ensure they are made whole. I really don't want my insurance company spending a lot of money on legal defense costs. This money would be better spent helping the claimant heal.
My views are similar but I doubt they'd have any influence on what the insurance company chooses to do.

Re: Umbrella insurance questions and help

Posted: Mon Jan 23, 2017 12:45 am
by Watty
If you have not checked out the White Coat investor web site you should see what the other doctors suggest over there.

http://whitecoatinvestor.com/

It is run by a regular poster here.

Re: Umbrella insurance questions and help

Posted: Mon Jan 23, 2017 9:17 am
by MikeG62
I bought my first personal liability insurance policy >20 years ago at $1 million. Increased it to $2 million maybe 5-8 years later as my net worth increased. I increased it again to $5 million maybe 5 years ago. It does not cover my net worth, but it was the largest amount I could get that I felt was reasonably priced. I pay ~$1,100 for the $5 million. The next step up was $10 milllion and the insurance agent said she had never seen anyone get approved for that. Then she ran the quote and called me back and the underwriter approved it with a premium of $3,000. I declined and kept it at the $5 milllion level. Is it enough, I most certainly hope so. Tend to think the insurance company will fight pretty damn hard to not pay $5 million. I suppose one could make the same argument with $2 million, but the extra $3 million feels like cheap insurance (incremental cost was around $600).

Re: Umbrella insurance questions and help

Posted: Mon Jan 23, 2017 9:52 am
by bluebolt
Another reason to have higher liability limits - insurance companies have more skin in the game with higher limits and are likely to defend against those claims more vigorously.