Umbrella coverage a no brainer?

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Post Reply
Topic Author
sergio
Posts: 405
Joined: Sat Jun 20, 2015 6:52 pm

Umbrella coverage a no brainer?

Post by sergio » Tue Sep 10, 2019 8:12 pm

Spoke with my insurance agent yesterday. I've always had a $250k/$500k/$100k person/accident/property auto liability policy and a $500k liability on homeowners policy. I inquired about adding umbrella. I was shocked at the price - $8/month ($100/year) for $1 million or $14/month ($168/year) for $2 million. This is through one of the major insurers not some rinky dink shady basement operation. I also have home and life insurance thru them.

According to the agent, the average wrongful death payout is over $800k in our state. That leaves a gap of $550k under the $250k per person liability policy. He said he once saw a settlement of several million where a young physician was hit head on, needed months of hospital time and rehabilitation, and couldn't work any longer (and had massive student loans on top of that)...

Is there anything that I'm missing? I signed up for $1 million umbrella and honestly am shocked more people don't do this. Seems like cheap protection against a truly catastrophic (albeit rare) situation.

RubyTuesday
Posts: 102
Joined: Fri Oct 19, 2012 11:24 am

Re: Umbrella coverage a no brainer?

Post by RubyTuesday » Tue Sep 10, 2019 8:29 pm

Many good threads on this subject, do a search for some good reading.

I do think it’s a no-brainer... my only question would be how much.

Many people base their umbrella coverage on the net worth of non-protected assets. Others base it on the idea of being large enough to handle typical settlement. Still others say so long as you have at least 1-2 million, you will have the insurance company’s attorneys working for you and that’s enough...

FWIW I just increased from $1M to $5M.

RT

retiredflyboy
Posts: 170
Joined: Sun Dec 02, 2018 10:02 pm

Re: Umbrella coverage a no brainer?

Post by retiredflyboy » Tue Sep 10, 2019 9:02 pm

I carry 3 million and find it comforting and very affordable. I think not having adequate liability insurance is a risk that could undue an otherwise solid retirement plan.
Facts are stubborn things. Everything works until it doesn’t.

User avatar
fortfun
Posts: 2227
Joined: Tue Apr 19, 2016 7:31 pm

Re: Umbrella coverage a no brainer?

Post by fortfun » Tue Sep 10, 2019 9:28 pm

sergio wrote:
Tue Sep 10, 2019 8:12 pm
Spoke with my insurance agent yesterday. I've always had a $250k/$500k/$100k person/accident/property auto liability policy and a $500k liability on homeowners policy. I inquired about adding umbrella. I was shocked at the price - $8/month ($100/year) for $1 million or $14/month ($168/year) for $2 million. This is through one of the major insurers not some rinky dink shady basement operation. I also have home and life insurance thru them.

According to the agent, the average wrongful death payout is over $800k in our state. That leaves a gap of $550k under the $250k per person liability policy. He said he once saw a settlement of several million where a young physician was hit head on, needed months of hospital time and rehabilitation, and couldn't work any longer (and had massive student loans on top of that)...

Is there anything that I'm missing? I signed up for $1 million umbrella and honestly am shocked more people don't do this. Seems like cheap protection against a truly catastrophic (albeit rare) situation.
Who is it through? I've never seen it that cheap. My 1M costs something like $240 a year through Allstate.

Mako
Posts: 154
Joined: Wed Feb 28, 2007 9:34 am

Re: Umbrella coverage a no brainer?

Post by Mako » Tue Sep 10, 2019 9:43 pm

fortfun wrote:
Tue Sep 10, 2019 9:28 pm
Who is it through? I've never seen it that cheap. My 1M costs something like $240 a year through Allstate.
Mine is $128 with Erie. I don’t know where you are, they are not everywhere but are well regarded in the mid Atlantic.

rage_phish
Posts: 71
Joined: Thu Jan 31, 2019 4:27 pm

Re: Umbrella coverage a no brainer?

Post by rage_phish » Tue Sep 10, 2019 9:44 pm

Just got quoted $1million for $340. Doesn’t seem as good now after seeing your $100

Topic Author
sergio
Posts: 405
Joined: Sat Jun 20, 2015 6:52 pm

Re: Umbrella coverage a no brainer?

Post by sergio » Tue Sep 10, 2019 10:30 pm

fortfun wrote:
Tue Sep 10, 2019 9:28 pm
sergio wrote:
Tue Sep 10, 2019 8:12 pm
Spoke with my insurance agent yesterday. I've always had a $250k/$500k/$100k person/accident/property auto liability policy and a $500k liability on homeowners policy. I inquired about adding umbrella. I was shocked at the price - $8/month ($100/year) for $1 million or $14/month ($168/year) for $2 million. This is through one of the major insurers not some rinky dink shady basement operation. I also have home and life insurance thru them.

According to the agent, the average wrongful death payout is over $800k in our state. That leaves a gap of $550k under the $250k per person liability policy. He said he once saw a settlement of several million where a young physician was hit head on, needed months of hospital time and rehabilitation, and couldn't work any longer (and had massive student loans on top of that)...

Is there anything that I'm missing? I signed up for $1 million umbrella and honestly am shocked more people don't do this. Seems like cheap protection against a truly catastrophic (albeit rare) situation.
Who is it through? I've never seen it that cheap. My 1M costs something like $240 a year through Allstate.
State Farm. I also have Auto, Home, and Life with them. Live in a middle class somewhat blue collar suburb in the midwest in a townhouse, one car, spotless record.

I've found State Farm to be so-so on pricing for each individual plan but for whatever reason came in super competitive this year esp after I bundled.

NewMoneyMustBeSmart
Posts: 44
Joined: Sat Jun 01, 2019 10:28 pm

Re: Umbrella coverage a no brainer?

Post by NewMoneyMustBeSmart » Wed Sep 11, 2019 7:45 am

sergio wrote:
Tue Sep 10, 2019 8:12 pm
Is there anything that I'm missing? I signed up for $1 million umbrella and honestly am shocked more people don't do this. Seems like cheap protection against a truly catastrophic (albeit rare) situation.
I think it's a no-brainer for anyone with >1M net worth or likely to have within 5 years.

The coverage is what it is - it only takes effect after your primary homeowners/auto. Statistically, few lawsuits exceed $500k/$1M - so the likelihood they have to pay out is low.

Also remember that in addition to indemnifying/insuring you - they also pay to defend you (and their payment). That is valuable.

Some people say having a high umbrella insurance makes you a target for lawsuits, as plaintiffs see a juicy cash payout. Others say it disincentives plaintiffs as you'll have good legal defense. 3-Armed Economists say that it encourages small settlements.

megabad
Posts: 2382
Joined: Fri Jun 01, 2018 4:00 pm

Re: Umbrella coverage a no brainer?

Post by megabad » Wed Sep 11, 2019 10:52 am

sergio wrote:
Tue Sep 10, 2019 10:30 pm
fortfun wrote:
Tue Sep 10, 2019 9:28 pm
sergio wrote:
Tue Sep 10, 2019 8:12 pm
Spoke with my insurance agent yesterday. I've always had a $250k/$500k/$100k person/accident/property auto liability policy and a $500k liability on homeowners policy. I inquired about adding umbrella. I was shocked at the price - $8/month ($100/year) for $1 million or $14/month ($168/year) for $2 million. This is through one of the major insurers not some rinky dink shady basement operation. I also have home and life insurance thru them.

According to the agent, the average wrongful death payout is over $800k in our state. That leaves a gap of $550k under the $250k per person liability policy. He said he once saw a settlement of several million where a young physician was hit head on, needed months of hospital time and rehabilitation, and couldn't work any longer (and had massive student loans on top of that)...

Is there anything that I'm missing? I signed up for $1 million umbrella and honestly am shocked more people don't do this. Seems like cheap protection against a truly catastrophic (albeit rare) situation.
Who is it through? I've never seen it that cheap. My 1M costs something like $240 a year through Allstate.
State Farm. I also have Auto, Home, and Life with them. Live in a middle class somewhat blue collar suburb in the midwest in a townhouse, one car, spotless record.

I've found State Farm to be so-so on pricing for each individual plan but for whatever reason came in super competitive this year esp after I bundled.
Yes this. You can't look at just the umbrella "price". You need to look at the whole bundle. Some insurers will take your discounts off umbrella and skew the cost down, others take it off another policy. Insurance companies are just generally a pain to shop for.

Topic Author
sergio
Posts: 405
Joined: Sat Jun 20, 2015 6:52 pm

Re: Umbrella coverage a no brainer?

Post by sergio » Wed Sep 11, 2019 10:58 am

megabad wrote:
Wed Sep 11, 2019 10:52 am
sergio wrote:
Tue Sep 10, 2019 10:30 pm
fortfun wrote:
Tue Sep 10, 2019 9:28 pm
sergio wrote:
Tue Sep 10, 2019 8:12 pm
Spoke with my insurance agent yesterday. I've always had a $250k/$500k/$100k person/accident/property auto liability policy and a $500k liability on homeowners policy. I inquired about adding umbrella. I was shocked at the price - $8/month ($100/year) for $1 million or $14/month ($168/year) for $2 million. This is through one of the major insurers not some rinky dink shady basement operation. I also have home and life insurance thru them.

According to the agent, the average wrongful death payout is over $800k in our state. That leaves a gap of $550k under the $250k per person liability policy. He said he once saw a settlement of several million where a young physician was hit head on, needed months of hospital time and rehabilitation, and couldn't work any longer (and had massive student loans on top of that)...

Is there anything that I'm missing? I signed up for $1 million umbrella and honestly am shocked more people don't do this. Seems like cheap protection against a truly catastrophic (albeit rare) situation.
Who is it through? I've never seen it that cheap. My 1M costs something like $240 a year through Allstate.
State Farm. I also have Auto, Home, and Life with them. Live in a middle class somewhat blue collar suburb in the midwest in a townhouse, one car, spotless record.

I've found State Farm to be so-so on pricing for each individual plan but for whatever reason came in super competitive this year esp after I bundled.
Yes this. You can't look at just the umbrella "price". You need to look at the whole bundle. Some insurers will take your discounts off umbrella and skew the cost down, others take it off another policy. Insurance companies are just generally a pain to shop for.
They specifically mentioned a 50% umbrella surcharge if home and/or auto is with another carrier. On top of that there's the 20% bundle discount. So if I only used State Farm for umbrella they'd be around $180/year for $1mil coverage.

Maybe I can save 5-10% of the total annual cost I pay for insurance if I went with the lowest bidder for each component but having everything at one company, one online account, one agent etc. makes life a lot simpler and my understanding is you generally get somewhat better treatment being "all in" on one company. I now have a one page executive summary of all my policies that I'll send use to shop around once a year to see if anyone can offer a better total package.

Pete3
Posts: 90
Joined: Thu Jul 01, 2010 12:10 pm

Re: Umbrella coverage a no brainer?

Post by Pete3 » Wed Sep 11, 2019 4:24 pm

RubyTuesday wrote:
Tue Sep 10, 2019 8:29 pm
Many people base their umbrella coverage on the net worth of non-protected assets. Others base it on the idea of being large enough to handle typical settlement. Still others say so long as you have at least 1-2 million, you will have the insurance company’s attorneys working for you and that’s enough...
I say this for almost every umbrella thread I run across (which seems to be a lot on this forum) - I would like to see any logical argument for basing umbrella coverage amount on your net worth (total or non-protected). It is a completely irrational reasoning.

The only thing I've seen that comes close is that if you are worth $5m and are sued they may ask for $5m because that is what you have (assuming they can find out your net worth through discovery).

Of course that doesn't make a lot of sense, any lawsuit amount should be based on on the specifics of the case, not your net-worth. Like the example Sergio provided, if you kill someone who is young and has a lot of earning potential you would expect they would sue for a lot, regardless of what you are worth.

If you have $2m NW and the young physican's future earnings are determined to be $5m you can be they are going to sue you for $5m and not $2m. It seems unlikely they would settle for your $2m umbrella policy limit when they know you have another $2m in assets they can go after.

You can't shield your NW by buying an equal amount of umbrella coverage - that is how a homeowners policy works, it doesn't work for umbrella coverage.

User avatar
Hector
Posts: 1085
Joined: Fri Dec 24, 2010 2:21 pm
Contact:

Re: Umbrella coverage a no brainer?

Post by Hector » Wed Sep 11, 2019 5:38 pm

Yes. Most people should have umbrella coverage.

megabad
Posts: 2382
Joined: Fri Jun 01, 2018 4:00 pm

Re: Umbrella coverage a no brainer?

Post by megabad » Wed Sep 11, 2019 5:49 pm

Pete3 wrote:
Wed Sep 11, 2019 4:24 pm

You can't shield your NW by buying an equal amount of umbrella coverage
I mostly agree with your points. NW is just an easy proxy. The real variable (other than actual future loss which is unknown) is “flashiness” in most cases but that is hard to quantify. Basically it is just assumed that if your NW is high, you have a flashy lifestyle that will attract litigation.

Topic Author
sergio
Posts: 405
Joined: Sat Jun 20, 2015 6:52 pm

Re: Umbrella coverage a no brainer?

Post by sergio » Thu Sep 12, 2019 12:08 pm

Pete3 wrote:
Wed Sep 11, 2019 4:24 pm
RubyTuesday wrote:
Tue Sep 10, 2019 8:29 pm
Many people base their umbrella coverage on the net worth of non-protected assets. Others base it on the idea of being large enough to handle typical settlement. Still others say so long as you have at least 1-2 million, you will have the insurance company’s attorneys working for you and that’s enough...
I say this for almost every umbrella thread I run across (which seems to be a lot on this forum) - I would like to see any logical argument for basing umbrella coverage amount on your net worth (total or non-protected). It is a completely irrational reasoning.

The only thing I've seen that comes close is that if you are worth $5m and are sued they may ask for $5m because that is what you have (assuming they can find out your net worth through discovery).

Of course that doesn't make a lot of sense, any lawsuit amount should be based on on the specifics of the case, not your net-worth. Like the example Sergio provided, if you kill someone who is young and has a lot of earning potential you would expect they would sue for a lot, regardless of what you are worth.

If you have $2m NW and the young physican's future earnings are determined to be $5m you can be they are going to sue you for $5m and not $2m. It seems unlikely they would settle for your $2m umbrella policy limit when they know you have another $2m in assets they can go after.

You can't shield your NW by buying an equal amount of umbrella coverage - that is how a homeowners policy works, it doesn't work for umbrella coverage.
According to my agent, umbrella in a case like you mentioned is largely to get the other side to settle and avoid a lawsuit. Even if the other side considers a "fair" amount to be $2.4m, getting that may require years (and $$$) of litigation, and it's absolutely not guaranteed a jury would agree to that amount anyways. It may be much "better" to settle for $1.25m and get the process over with in a few weeks.

Post Reply