Umbrella Insurance - Worst Case

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Topic Author
TrollToll
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Umbrella Insurance - Worst Case

Post by TrollToll »

I've just started thinking about umbrella insurance and I'm wondering if I should get it.

About me:
Married, 27 & 25
$550,000 Net Worth (almost all in stock index funds, otherwise bank)
No debt
$160,000 Income
$120,000 Spouse Income
$90,000 Annual Spending (conservative guess based on past spending and recent move to HCOL city)
Renting home in HCOL city with no intention to buy
No car
No kids
Anticipating FI in 5-10 years. Spouse isn't interested in RE at this point, but I'd be interested in trying something different.

I've reviewed a number of umbrella insurance threads. They all seem to emphasize risk factors individuals have, but don't apply to me.

Examples:
-Car owner could be sued in accident.
-Teen driver has higher likelihood of accidents.
-Easy to tack on umbrella to car/home policy.

I feel like my situation is a bit different. The risk factors for being sued are mitigated by my situation. I can't injure someone in a car I don't own/drive. My apartment is tiny, so any guests would be rare. And any guest we do have would be close family/friends. We have no kids to worry about. I don't have a habit of slandering or libeling people. I also don't have a car/homeowner policy to add umbrella to (does renters insurance count?).

On the other hand, we do have a decent chunk of assets and umbrella insurance is cheap. And I've never heard a Boglehead recommend not getting umbrella insurance.

Should I get umbrella insurance?
JD2775
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Re: Umbrella Insurance - Worst Case

Post by JD2775 »

Yes, you should IMO. Your assets alone make it worth it.

FWIW, I am older than you, approx same net worth, renter in HCOL, no kids etc. I got an umbrella policy last year for peace of mind.

Edit- I do have a car though (I missed that the first go round in your post) , that does make it a little different. Let's see what others say
Luckywon
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Re: Umbrella Insurance - Worst Case

Post by Luckywon »

I would get umbrella insurance even in your situation. The fact your risk factors are low will be reflected in lower premiums and the rationale for purchasing umbrella therefore still applies, in my opinion.

Wow, with this post I become a 1-comma Boglehead (1000 posts)!
vtjon02
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Re: Umbrella Insurance - Worst Case

Post by vtjon02 »

Yes should definitely have renters insurance to cover belongings and enough liability coverage to be able to buy an umbrella. And then buy a $1-$2M umbrella policy above it. It is cheap coverage and could come in handy.

Let's say you have a close friend or relative over and something disastrous happens and they are severely injured. Yes the insurance is protecting you, but it also is protecting your friend/relative. Your friend/family may not want to sue you, but they may have to. And in a way you should want them to so that their loss is covered. It is a no brainer coverage given the cheap cost.
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cowdogman
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Re: Umbrella Insurance - Worst Case

Post by cowdogman »

First, you should have renters' insurance if only for the liability cover. E.g., you leave a pan on a lit burner and start a fire. There, possibly, goes your net worth.

Second, have you priced umbrella coverage yet? I'm guessing under $300/year for $1M coverage. See above example about the fire.

Third, I don't know if this is a real thing, but my State Farm agent told my son to buy renters' insurance so that my son had an "insurance history"--like a credit history, but for insurance.

Just do it. You can afford it.
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gr7070
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Re: Umbrella Insurance - Worst Case

Post by gr7070 »

There are threads on here where many of us recommend against umbrella insurance *without* an actual greater risk!

You do not appear to have greater risk than the typical person; therefore I wouldn't bother with an umbrella policy.

Boglehead's can be insanely conservative financially. There are threads on here stating 4 year emergency fund is too small and $40,000 cars are too expensive for millionaires making $200k annually. Just understand that some folks have a different perspective than others.

Umbrella insurance is inexpensive, but just because I can afford to throw dollar bills out the window as I drive doesn't mean I should. It's inexpensive as it is rarely needed; even less needed by those with ordinary risk.

Just make certain your renters policy is appropriate, you have adequate car insurance (when owned/know your coverage from other insurance if renting car?), and long-term disability insurance (these are important!).
Last edited by gr7070 on Mon Aug 24, 2020 11:50 am, edited 1 time in total.
oldfort
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Re: Umbrella Insurance - Worst Case

Post by oldfort »

80-90% of individual umbrella claims are for motor vehicle accidents. There is a subset of bogleheads, which is incredibly risk averse. For a non-driver, an excess verdict above the $300k on your homeowner's policy might be near lightning strike territory.
Last edited by oldfort on Mon Aug 24, 2020 12:30 pm, edited 4 times in total.
Swimmer
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Re: Umbrella Insurance - Worst Case

Post by Swimmer »

I’d suggest you call a few agents and explain your situation. Maybe they can come up with a good reason you should have it. I sure can’t unless you make changes to your lifestyle (like buy/drive a vehicle).
runner540
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Re: Umbrella Insurance - Worst Case

Post by runner540 »

I wonder if there is an insurance company that would write an umbrella policy without a homeowners or auto policy elsewhere to take the first loss. Please report back.
randomguy
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Re: Umbrella Insurance - Worst Case

Post by randomguy »

Swimmer wrote: Mon Aug 24, 2020 11:41 am I’d suggest you call a few agents and explain your situation. Maybe they can come up with a good reason you should have it. I sure can’t unless you make changes to your lifestyle (like buy/drive a vehicle).
Well maybe they own a bit pull or have a pet tiger? You have your friend over and serve them a couple beers. They have an accident on the way home and kill a couple people. You then get sued for getting your guest drunk. Your on vacation and try out a jet ski and run someone over. Your a/c unit falls out a window and squishs a dog. I am sure a good agent has a list of horror stories:). I have gone looking for causes of Umbrella insurance payouts and the distribution of sizes but never could find it.

In theory the price of insurance should factor in your risk. For a person who doesn't own a car, you would think the cost of the policy would be a fraction of what car owners pay. I don't know if that is true or not. I would get a quote and see what it is for like 1 million in coverage. If it was 100 bucks, you might not lose sleep over if it is wasteful or not.
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Watty
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Re: Umbrella Insurance - Worst Case

Post by Watty »

Unless I missed it you did not say what it would cost you and that could be deciding factor.

When considering it one thing to keep in mind is that in addition to covering your liability the umbrella policy will also pay the lawyers fees to defend you if you are sued. That can also be worth a lot.

It would be good to get an actual quote and then decide.
oldfort
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Re: Umbrella Insurance - Worst Case

Post by oldfort »

randomguy wrote: Mon Aug 24, 2020 12:39 pm
Swimmer wrote: Mon Aug 24, 2020 11:41 am I’d suggest you call a few agents and explain your situation. Maybe they can come up with a good reason you should have it. I sure can’t unless you make changes to your lifestyle (like buy/drive a vehicle).
Well maybe they own a bit pull or have a pet tiger? You have your friend over and serve them a couple beers. They have an accident on the way home and kill a couple people. You then get sued for getting your guest drunk. Your on vacation and try out a jet ski and run someone over. Your a/c unit falls out a window and squishs a dog. I am sure a good agent has a list of horror stories:). I have gone looking for causes of Umbrella insurance payouts and the distribution of sizes but never could find it.

In theory the price of insurance should factor in your risk. For a person who doesn't own a car, you would think the cost of the policy would be a fraction of what car owners pay. I don't know if that is true or not. I would get a quote and see what it is for like 1 million in coverage. If it was 100 bucks, you might not lose sleep over if it is wasteful or not.
I’m betting most companies will require the OP to buy a non-owner auto policy to get an umbrella policy.
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cowdogman
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Re: Umbrella Insurance - Worst Case

Post by cowdogman »

gr7070 wrote: Mon Aug 24, 2020 11:12 am Boglehead's can be insanely conservative financially.
That's not my perception in general, but I'm sure there are some outliers.

And it could be argued that it is "insanely conservative financially" to not spend a few hundred dollars each year on liability insurance when such amount is a tiny fraction of the OP's annual income/net worth.

Separately, in response to various posts, the base for the umbrella would be the renters' policy. I just paid the renewal on my son's renters' policy for his college apartment--the annual premium was was $133.00
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neurosphere
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Re: Umbrella Insurance - Worst Case

Post by neurosphere »

Do you ever borrow a car? Rent?
runner540 wrote: Mon Aug 24, 2020 11:54 am I wonder if there is an insurance company that would write an umbrella policy without a homeowners or auto policy elsewhere to take the first loss. Please report back.
I was not able to find umbrella without first getting a "non-owners" auto liability policy but didn't try that hard. My liability-only policy costs me and my wife about $250/year, and the umbrella ($2M) is also about $250. I rent a car for about 20 days per year, so I make back a lot of that fee by declining the rental company's liability policy.
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TrollToll
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Re: Umbrella Insurance - Worst Case

Post by TrollToll »

Thanks everyone. I'll look for quotes and if they aren't ridiculous, I'll probably buy it. If they require non-owner car insurance, are expensive, or otherwise inconvenient, I may not. If I don't buy, I'll definitely keep it in mind in the future, as NW increases and lifestyle changes.

Here's what got me there:
-FYI I do have renters insurance. A very small portion of our net worth is "stuff" in our apartment - a total loss would probably be $10,000 - but we've been required to have this insurance for years by our landlords.
-I generally avoid insurance. Average premiums > average claims, so it's a bad deal on average. But umbrella is catastrophic protection, which may make more sense due to the low cost and potentially severe need.
-I'm glad to get a few responses where people weren't 100% for buying the insurance. I'm not crazy!
-I appreciate the response referring to if friends/family were injured in my apartment. I would want them to sue me so my policy can pay off and so I could help them.
oldfort
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Re: Umbrella Insurance - Worst Case

Post by oldfort »

cowdogman wrote: Mon Aug 24, 2020 12:57 pm
gr7070 wrote: Mon Aug 24, 2020 11:12 am Boglehead's can be insanely conservative financially.
That's not my perception in general, but I'm sure there are some outliers.

And it could be argued that it is "insanely conservative financially" to not spend a few hundred dollars each year on liability insurance when such amount is a tiny fraction of the OP's annual income/net worth.

Separately, in response to various posts, the base for the umbrella would be the renters' policy. I just paid the renewal on my son's renters' policy for his college apartment--the annual premium was was $133.00
More exact terminology would be risk averse. I would argue you are incredibly risk averse if you buy insurance to cover an event with a 0.0001% probability of occurrence, although the $300/year might be a small fraction of the OP's income and net worth.
Katietsu
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Re: Umbrella Insurance - Worst Case

Post by Katietsu »

I would be most concerned about a mistake that causes damage to your apartment or your neighbors‘ apartments. I am surprised that this has not been mentioned more than once. Am I correct to assume that if I live in an apartment and my error leads to fire or water damage in my apartment and/or my neighbors’ apartments, that my umbrella policy would kick in after my renter’s insurance was exhausted?
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BolderBoy
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Re: Umbrella Insurance - Worst Case

Post by BolderBoy »

Someone gave a reason in another thread, which I thought was profound:

You purchase a liability umbrella policy for a once-per-year premium amount of say $200 in order to have the ongoing services of a $500/hr lawyer should you need one.
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cowdogman
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Re: Umbrella Insurance - Worst Case

Post by cowdogman »

Katietsu wrote: Mon Aug 24, 2020 1:34 pm I would be most concerned about a mistake that causes damage to your apartment or your neighbors‘ apartments. I am surprised that this has not been mentioned more than once. Am I correct to assume that if I live in an apartment and my error leads to fire or water damage in my apartment and/or my neighbors’ apartments, that my umbrella policy would kick in after my renter’s insurance was exhausted?
Exactly. The primary benefit of renters' insurance and an umbrella policy on top is for accidental damage to the apartment building (leaving the bath water on, which then floods the apartment and the apartment below) and accidental injury to neighbors and guests (causing a fire). Plus the insurance company will deal with the claim and if necessary defend the insured in court.

If someone has zero net worth and a minimum wage job, then insurance is not financially necessary. For the OP, it's a must.
wwtraveler
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Re: Umbrella Insurance - Worst Case

Post by wwtraveler »

IMO: Right now based on scenario presented, you probably don't need it urgently right now, but the cost could be so low ($150-300/yr for a $1-2m policy) that it's so cheap that it's worth getting. The fact you are asking this question to me means you are interested in protecting for the unforeseen. If there's something you can buy that isn't very expensive to make you feel better that you've addressed the concern prudently that can be worth quite a bit more than the cost of the policy.

You mentioned renting so I'll assume you have a renter's policy already but that's not to say there won't be some dispute that may come about that's above and beyond the limits of that policy. (Think leave the bathtub running and it overflows due to a clogged overflow valve while you are on a 2 week vacation and a multi-unit building has damage to multiple units -- there's a conflict of opinion there that can become more complicated than you can imagine once attorneys get involved! BTW - generally speaking physical replacement of stuff is cheap, it's when someone gets injured that the numbers, time, complexity, disputable allegations, etc goes through the roof)

One thing that I'd consider doing in OP's position would be to find an insurance broker type that you like working with that can look at lots of different companies for you (vs. shopping on your own or just picking one co). The reason for that is that given your relative ages your insurance needs will change with time and having a central person for "everything" will make your life a lot easier. It is super useful to be able to also talk to a professional that's not actually the insurance co itself. The advice I've gotten over time has been very good. It will also help so that policies are compatible with one another.

What's that? I know OP doesn't have a car but here's an example with auto insurance. There's a liability area on car insurance that defaults to various minimums by state law with all sorts of in betweens for what to set it to for your situation, however, that particular liability line can be set to be incompatible with an umbrella policy. The umbrella will actually specify you'll need x (usually 300K or 500k) on this line for your car insurance. The idea is why would they provide insurance for something where the primary insurance is not at its maximum -- again the point is above & beyond. If you just willy-nilly sign up for various types of insurance without having some sophistication around these gotchas then you may end up with an insurance blanket that's full of holes which is exactly what you bought insurance for to avoid to begin with.

Don't be surprised if you find some of your other insurance policy (like rental insurance) is set too low for an umbrella or that the broker recommends higher levels. I know this feels like an up-sell and it kind of is but it's also part of that making sure the policies actually cover you entirely without holes. A good broker will make that discussion a dialog and it won't feel like a "you must do x" situation. I've often found that once I found out what xyz protection will take that it really turns out I don't need xyz protection or instead I really needed abc protection.

Lastly, I know this sounds like age discrimination but if you find a insurance broker you like that's about 10 years older than you are that brings a certain advantage which is that many of the things you will experience in the next decade, they will have direct experience with on their own. I know that sounds crazy but that's what I found anyway. That's not to say you can't get excellent service from someone older or younger but just a thought. I haven't had this issue with insurance but I have had an attorney die that I was using who was very old, loved the guy, even became friends with him but ultimately easily outlived him (45+ year age diff) and then it was a huge scramble!
Lee_WSP
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Re: Umbrella Insurance - Worst Case

Post by Lee_WSP »

OP cannot buy umbrella insurance without auto insurance.

OP could buy personal liability insurance, but that is not umbrella insurance and is going to much more expensive since there is no primary auto insurance.

OP should, however, buy a 1 million renter's or homeowner's policy.
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Re: Umbrella Insurance - Worst Case

Post by Broken Man 1999 »

I considered an umbrella policy a few years ago, but instead I ended up jacking up our homeowner's and auto insurance liability limits to $500,000.

Still, the way Mr Market is steaming ahead, perhaps I'll check into such a policy again.

As others have pointed out, you probably don't need it, but if buying it helps you SWAN, buy it.

And, there is no reason to be ashamed about being risk averse. I became much more risk averse when my lawyer was able to peel away money from others and give it to me. Having been on one side of such an effort, I prefer to never be on the other side. :shock:

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sandan
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Re: Umbrella Insurance - Worst Case

Post by sandan »

I rather minimize the hassle of finding a lawyer and scrutinizing their legal fees during a potentially stressful time. Coverage is just icing for me.
Katietsu
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Re: Umbrella Insurance - Worst Case

Post by Katietsu »

Lee_WSP wrote: Mon Aug 24, 2020 2:33 pm OP cannot buy umbrella insurance without auto insurance.

OP could buy personal liability insurance, but that is not umbrella insurance and is going to much more expensive since there is no primary auto insurance.

OP should, however, buy a 1 million renter's or homeowner's policy.
This is a good option if the OP truly never drives. If they do occasionally rent or borrow a car, a non owner policy is probably well worth it. The liability coverage by a rental company is usually state minimum. This might not even be enough to cover the cost of a totaled Toyota Camry. Using a credit card benefit never includes liability. Increased liability only through the rental company was $15 a day last time I needed it. Who knows what it is today.
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ResearchMed
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Re: Umbrella Insurance - Worst Case

Post by ResearchMed »

Watty wrote: Mon Aug 24, 2020 12:46 pm Unless I missed it you did not say what it would cost you and that could be deciding factor.

When considering it one thing to keep in mind is that in addition to covering your liability the umbrella policy will also pay the lawyers fees to defend you if you are sued. That can also be worth a lot.

It would be good to get an actual quote and then decide.
And.... one can be sued even if one did NOT do anything wrong, and knows she/he wasn't even nearby, etc.

But if someone "thinks it was you..." or is just being malicious... then one still needs to defend, and there go the legal fees.
Not likely, but most insured events aren't likely.
The less likely, the lower the cost (for a given amount).

Wouldn't umbrella coverage be added to a renter's policy? That would also cover the first <$1m??> in liability, depending upon the terms.
Would the renter's insurance be enough early in life?

RM
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BogleFan510
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Re: Umbrella Insurance - Worst Case

Post by BogleFan510 »

We are very happy long term customers of umbrella insurance. I also think the insurance companies look favorably on you with regards to auto and home policy renewals, if you wrap it with an umbrella. Locally some folks have had home policies dropped, due to risk factors or claims volume. It never hurts to be high on their list of long time customers who purchase multiple products, IMHO.
utvolfan
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Re: Umbrella Insurance - Worst Case

Post by utvolfan »

If a person is retired and most of the assets are in IRAs and other protected accounts, is an umbrella policy necessary to protect an income stream such as a pension?
oldfort
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Re: Umbrella Insurance - Worst Case

Post by oldfort »

ResearchMed wrote: Mon Aug 24, 2020 4:05 pm
Watty wrote: Mon Aug 24, 2020 12:46 pm Unless I missed it you did not say what it would cost you and that could be deciding factor.

When considering it one thing to keep in mind is that in addition to covering your liability the umbrella policy will also pay the lawyers fees to defend you if you are sued. That can also be worth a lot.

It would be good to get an actual quote and then decide.
And.... one can be sued even if one did NOT do anything wrong, and knows she/he wasn't even nearby, etc.

But if someone "thinks it was you..." or is just being malicious... then one still needs to defend, and there go the legal fees.
Not likely, but most insured events aren't likely.
The less likely, the lower the cost (for a given amount).

Wouldn't umbrella coverage be added to a renter's policy? That would also cover the first <$1m??> in liability, depending upon the terms.
Would the renter's insurance be enough early in life?

RM
Most companies want you to have renters/homeowners and auto before they issue a policy.
Lee_WSP
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Re: Umbrella Insurance - Worst Case

Post by Lee_WSP »

Katietsu wrote: Mon Aug 24, 2020 3:56 pm
Lee_WSP wrote: Mon Aug 24, 2020 2:33 pm OP cannot buy umbrella insurance without auto insurance.

OP could buy personal liability insurance, but that is not umbrella insurance and is going to much more expensive since there is no primary auto insurance.

OP should, however, buy a 1 million renter's or homeowner's policy.
This is a good option if the OP truly never drives. If they do occasionally rent or borrow a car, a non owner policy is probably well worth it. The liability coverage by a rental company is usually state minimum. This might not even be enough to cover the cost of a totaled Toyota Camry. Using a credit card benefit never includes liability. Increased liability only through the rental company was $15 a day last time I needed it. Who knows what it is today.
I wouldn't worry about property damage. No attorney is going to take on that case for a commission. I'd worry about the family of four in the minivan who now has to have extensive PT.
MichDad
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Re: Umbrella Insurance - Worst Case

Post by MichDad »

After we retired, I looked into selling our car, which we rarely drive. I spoke at length with our State Farm agent and was informed that if we no longer owned a car, I couldn't continue our umbrella insurance policy. I checked with several other companies and agents and was told the same thing. For that reason only, I've kept the car. No agent advised us that if we purchased a non-owner's auto policy we could qualify for an umbrella policy.

MichDad
boglerdude
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Re: Umbrella Insurance - Worst Case

Post by boglerdude »

Legal defense is included with any liability policy.

Just raise your renter's policy and your non-owner auto policy (if you get one) to 1M.
chw
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Re: Umbrella Insurance - Worst Case

Post by chw »

Buy 2M policy. Not so much to cover your net worth, but your income. Cheap insurance...
afan
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Re: Umbrella Insurance - Worst Case

Post by afan »

You would have to check what is covered under renters and non owned auto if you plan to rely in that alone. Some umbrella policies cover a broader range of liability than the other policies.

You could just raise your auto liability limits. When we first got umbrella, it allowed us to lower the liability on our auto policy. The savings on that paid for the umbrella.
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wannalearn
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Re: Umbrella Insurance - Worst Case

Post by wannalearn »

oldfort wrote: Mon Aug 24, 2020 11:34 am 80-90% of individual umbrella claims are for motor vehicle accidents. There is a subset of bogleheads, which is incredibly risk averse. For a non-driver, an excess verdict above the $300k on your homeowner's policy might be near lightning strike territory.
I also read somewhere that "most" of these claims against the umbrella policy occur because of the existence of that umbrella policy.
They go onto say, in the event that umbrella policy needs to be exercised, it will be unlikely it will even be enough.

"You kill or severely injure a young person in a car accident" Fortunately you have a 1-2MM umbrella policy? Wrong... probably won't even cover the hospital expenses....

Someone in my marina crushed a little girls legs with their boat, they had a 1MM umbrella policy, the insurance company got involved, literally wrote the check, put up minimal legal representation because, what's the point spending more legal fee's if the outcome seems obvious?
Lee_WSP
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Re: Umbrella Insurance - Worst Case

Post by Lee_WSP »

boglerdude wrote: Tue Aug 25, 2020 5:21 am Legal defense is included with any liability policy.

Just raise your renter's policy and your non-owner auto policy (if you get one) to 1M.
Only for covered incidents.
wwtraveler
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Re: Umbrella Insurance - Worst Case

Post by wwtraveler »

wannalearn wrote: Tue Aug 25, 2020 11:07 am
oldfort wrote: Mon Aug 24, 2020 11:34 am 80-90% of individual umbrella claims are for motor vehicle accidents. There is a subset of bogleheads, which is incredibly risk averse. For a non-driver, an excess verdict above the $300k on your homeowner's policy might be near lightning strike territory.
I also read somewhere that "most" of these claims against the umbrella policy occur because of the existence of that umbrella policy.
They go onto say, in the event that umbrella policy needs to be exercised, it will be unlikely it will even be enough.
Note all the below is my opinion only:

Claims will exist if there are assets that can be reasonably claimed. No assets = generally no civil claim. So if there's assets but no umbrella, there still is a claim, don't kid yourself. The umbrella acts as a buffer to all that. The attorneys making the claim know if they bankrupt the person by their judgment they will never actually collect regardless of the judgment and they will be fighting tooth and nail. At some point when the insurance co gets involved the attorneys often settle for %'s of the policy.

There could very well be claims below the limit. After all, actual costs are the real driver behind most claims. Typically the high figure stuff is related to medical and long term / life long medical care. The lower cost stuff tends to be "stuff" (damage to boat, house, car, whatever).

Some insurance processes do default to "policy maximums" -- I believe some California auto stuff actually requires the two insurance companies to "auto resolve at policy maximums". Just because there may be an auto resolution doesn't mean the claim is fully done though.

First rule of insurance is not to disclose the presence of insurance & especially any limits. For instance in a car accident the only relevant item is the car insurance co and their contact info. There's at least one auto insurance co that started putting limits on their car insurance glovebox wallet card thing which cost them dearly.

For umbrellas you should never disclose the existence of an umbrella. The attorneys will handle that.

One last anecdote, the longer legal proceedings go on for the more medical claims that are outrageous or even fraudulent go away on their own. A claim of life time medical treatment for a foot injury for instance gets dismissed once the insurance co finds that the claimant is out playing soccer 4 days a week for the past 6 months for a legal proceeding that's gone on for 2 years. Yes they will go to lengths to investigate things like that. This is another benefit of the umbrella, the process has a runway whereas you may have to liquidate personal assets to create such a long legal runway on your own vs. settling immediately and trying to minimize your asset losses.
TallBoy29er
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Re: Umbrella Insurance - Worst Case

Post by TallBoy29er »

Haven't read the whole thread. But having more at stake may make your insurer fight a little harder for you.
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Re: Umbrella Insurance - Worst Case

Post by oldfort »

wwtraveler wrote: Tue Aug 25, 2020 12:27 pm
wannalearn wrote: Tue Aug 25, 2020 11:07 am
oldfort wrote: Mon Aug 24, 2020 11:34 am 80-90% of individual umbrella claims are for motor vehicle accidents. There is a subset of bogleheads, which is incredibly risk averse. For a non-driver, an excess verdict above the $300k on your homeowner's policy might be near lightning strike territory.
I also read somewhere that "most" of these claims against the umbrella policy occur because of the existence of that umbrella policy.
They go onto say, in the event that umbrella policy needs to be exercised, it will be unlikely it will even be enough.
Note all the below is my opinion only:

Claims will exist if there are assets that can be reasonably claimed. No assets = generally no civil claim. So if there's assets but no umbrella, there still is a claim, don't kid yourself. The umbrella acts as a buffer to all that. The attorneys making the claim know if they bankrupt the person by their judgment they will never actually collect regardless of the judgment and they will be fighting tooth and nail. At some point when the insurance co gets involved the attorneys often settle for %'s of the policy.
What's going to give rise to a claim though? No one in his family drives, and motor vehicle accidents account for 80-90% of all personal umbrella claims. The OP didn't mention owning a boat, ATV, aircraft, pit bull, being on a non-profit board, owning rental properties, or anything else which would elevate their risk. The OP sounds like something of a homebody and not the type to throw Bryce Hall ragers.
Lee_WSP
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Re: Umbrella Insurance - Worst Case

Post by Lee_WSP »

oldfort wrote: Tue Aug 25, 2020 1:21 pm
wwtraveler wrote: Tue Aug 25, 2020 12:27 pm
wannalearn wrote: Tue Aug 25, 2020 11:07 am
oldfort wrote: Mon Aug 24, 2020 11:34 am 80-90% of individual umbrella claims are for motor vehicle accidents. There is a subset of bogleheads, which is incredibly risk averse. For a non-driver, an excess verdict above the $300k on your homeowner's policy might be near lightning strike territory.
I also read somewhere that "most" of these claims against the umbrella policy occur because of the existence of that umbrella policy.
They go onto say, in the event that umbrella policy needs to be exercised, it will be unlikely it will even be enough.
Note all the below is my opinion only:

Claims will exist if there are assets that can be reasonably claimed. No assets = generally no civil claim. So if there's assets but no umbrella, there still is a claim, don't kid yourself. The umbrella acts as a buffer to all that. The attorneys making the claim know if they bankrupt the person by their judgment they will never actually collect regardless of the judgment and they will be fighting tooth and nail. At some point when the insurance co gets involved the attorneys often settle for %'s of the policy.
What's going to give rise to a claim though? No one in his family drives, and motor vehicle accidents account for 80-90% of all personal umbrella claims. The OP didn't mention owning a boat, ATV, aircraft, pit bull, being on a non-profit board, owning rental properties, or anything else which would elevate their risk. The OP sounds like something of a homebody and not the type to throw Bryce Hall ragers.
You can't even buy umbrella insurance without both auto and renters/homeowner.
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willthrill81
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Re: Umbrella Insurance - Worst Case

Post by willthrill81 »

I would be very interested to know what type of account(s) the OP has his/her investments in. Certain tax-advantaged accounts are protected from judgments by federal and/or state law. In our case, 100% of our tax-advantaged accounts of all type are protected from judgments.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
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ResearchMed
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Re: Umbrella Insurance - Worst Case

Post by ResearchMed »

willthrill81 wrote: Tue Aug 25, 2020 2:17 pm I would be very interested to know what type of account(s) the OP has his/her investments in. Certain tax-advantaged accounts are protected from judgments by federal and/or state law. In our case, 100% of our tax-advantaged accounts of all type are protected from judgments.
"Yes but..."

I'm still trying to figure out if there is any protection for that money as it is removed from the "protected" account such that one can actually use the money, or even just due to RMDs?

Presumably, given that money is fungible, if that money lands in, say, a checking account... it's "available" per terms of any judgment?
And what about any "income in process"? Can that be garnished like income in something like an enforced child support case?
And finally, if one passes (okay, well *when* one passes...), is any of the money subject to the judgment or would it go directly to beneficiaries? And if so, but instead the money goes "to one's estate", would it then be subject to the judgment before any other disbursements?

What I mean, of course, is "is that money only protected as long as it remains untouched IN the protected accounts", but after that, it immediately becomes fair game...?

This is just curiosity, and I hope it stays that way (we do have umbrella coverage).
Almost all of our money is in protected accounts, but I'd like to better undestand this possible quirk.

RM
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AAA
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Re: Umbrella Insurance - Worst Case

Post by AAA »

Question: if one has an umbrella policy added to one's home and auto policy, does it typically just cover liability associated with those two things or liability in general?
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Re: Umbrella Insurance - Worst Case

Post by Lee_WSP »

AAA wrote: Tue Aug 25, 2020 3:35 pm Question: if one has an umbrella policy added to one's home and auto policy, does it typically just cover liability associated with those two things or liability in general?
It is basically supplemental coverage for what those policies cover. Individual policies are written differently, but they generally follow a set format and only extend extra coverage as secondary insurance.

Personal liability insurance is a different policy and would cover all sorts of things and have less exclusions (most notably damages not due to bodily injury or physical property damage.)
oldfort
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Re: Umbrella Insurance - Worst Case

Post by oldfort »

AAA wrote: Tue Aug 25, 2020 3:35 pm Question: if one has an umbrella policy added to one's home and auto policy, does it typically just cover liability associated with those two things or liability in general?
Theoretically, an umbrella policy may have broader coverage, with some rare edge cases covered under your umbrella, but not under your auto and homeowners. Practically speaking, umbrella policies are relatively cheap because they almost never drop down to provide first dollar coverage with real claims.
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willthrill81
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Re: Umbrella Insurance - Worst Case

Post by willthrill81 »

ResearchMed wrote: Tue Aug 25, 2020 3:26 pm
willthrill81 wrote: Tue Aug 25, 2020 2:17 pm I would be very interested to know what type of account(s) the OP has his/her investments in. Certain tax-advantaged accounts are protected from judgments by federal and/or state law. In our case, 100% of our tax-advantaged accounts of all type are protected from judgments.
"Yes but..."

I'm still trying to figure out if there is any protection for that money as it is removed from the "protected" account such that one can actually use the money, or even just due to RMDs?

Presumably, given that money is fungible, if that money lands in, say, a checking account... it's "available" per terms of any judgment?
And what about any "income in process"? Can that be garnished like income in something like an enforced child support case?
And finally, if one passes (okay, well *when* one passes...), is any of the money subject to the judgment or would it go directly to beneficiaries? And if so, but instead the money goes "to one's estate", would it then be subject to the judgment before any other disbursements?

What I mean, of course, is "is that money only protected as long as it remains untouched IN the protected accounts", but after that, it immediately becomes fair game...?

This is just curiosity, and I hope it stays that way (we do have umbrella coverage).
Almost all of our money is in protected accounts, but I'd like to better undestand this possible quirk.

RM
My thought would be that the money does become 'fair game', as you put it, once it's withdrawn from the protected accounts. The key then becomes to only withdraw what will be pretty quickly spent.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
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Re: Umbrella Insurance - Worst Case

Post by smitcat »

willthrill81 wrote: Tue Aug 25, 2020 4:39 pm
ResearchMed wrote: Tue Aug 25, 2020 3:26 pm
willthrill81 wrote: Tue Aug 25, 2020 2:17 pm I would be very interested to know what type of account(s) the OP has his/her investments in. Certain tax-advantaged accounts are protected from judgments by federal and/or state law. In our case, 100% of our tax-advantaged accounts of all type are protected from judgments.
"Yes but..."

I'm still trying to figure out if there is any protection for that money as it is removed from the "protected" account such that one can actually use the money, or even just due to RMDs?

Presumably, given that money is fungible, if that money lands in, say, a checking account... it's "available" per terms of any judgment?
And what about any "income in process"? Can that be garnished like income in something like an enforced child support case?
And finally, if one passes (okay, well *when* one passes...), is any of the money subject to the judgment or would it go directly to beneficiaries? And if so, but instead the money goes "to one's estate", would it then be subject to the judgment before any other disbursements?

What I mean, of course, is "is that money only protected as long as it remains untouched IN the protected accounts", but after that, it immediately becomes fair game...?

This is just curiosity, and I hope it stays that way (we do have umbrella coverage).
Almost all of our money is in protected accounts, but I'd like to better undestand this possible quirk.

RM
My thought would be that the money does become 'fair game', as you put it, once it's withdrawn from the protected accounts. The key then becomes to only withdraw what will be pretty quickly spent.
Your future earnings can be subject to claims as well.
000
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Re: Umbrella Insurance - Worst Case

Post by 000 »

My understanding is that most umbrellas only increase coverage for the underlying policies, they do not cover other events outside of those policies.

So it's not clear what would be gained by an umbrella for a non-driver renter that would be different from just increasing the renter's insurance limits.

I don't think an umbrella would cover torts such as defamation, copyright infringement, criminal acts, etc. Can anyone correct me on this?
oldfort
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Re: Umbrella Insurance - Worst Case

Post by oldfort »

000 wrote: Tue Aug 25, 2020 4:51 pm My understanding is that most umbrellas only increase coverage for the underlying policies, they do not cover other events outside of those policies.

So it's not clear what would be gained by an umbrella for a non-driver renter that would be different from just increasing the renter's insurance limits.

I don't think an umbrella would cover torts such as defamation, copyright infringement, criminal acts, etc. Can anyone correct me on this?
No insurance will cover intentional criminal acts. My homeowner's will cover defamation. If you want an answer, read your homeowner's policy and your umbrella policy side by side. Note any differences in the language.
Last edited by oldfort on Tue Aug 25, 2020 5:20 pm, edited 2 times in total.
000
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Re: Umbrella Insurance - Worst Case

Post by 000 »

oldfort wrote: Tue Aug 25, 2020 5:08 pm
000 wrote: Tue Aug 25, 2020 4:51 pm My understanding is that most umbrellas only increase coverage for the underlying policies, they do not cover other events outside of those policies.

So it's not clear what would be gained by an umbrella for a non-driver renter that would be different from just increasing the renter's insurance limits.

I don't think an umbrella would cover torts such as defamation, copyright infringement, criminal acts, etc. Can anyone correct me on this?
No insurance will cover criminal acts. My homeowner's will cover defamation. If you want an answer, read your homeowner's policy and your umbrella policy side by side.
I'm not sure about your first claim. And I wasn't asking for myself, just trying to understand why an umbrella would be any different from upping the limits on the renter's insurance.
oldfort
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Re: Umbrella Insurance - Worst Case

Post by oldfort »

000 wrote: Tue Aug 25, 2020 5:09 pm
oldfort wrote: Tue Aug 25, 2020 5:08 pm
000 wrote: Tue Aug 25, 2020 4:51 pm My understanding is that most umbrellas only increase coverage for the underlying policies, they do not cover other events outside of those policies.

So it's not clear what would be gained by an umbrella for a non-driver renter that would be different from just increasing the renter's insurance limits.

I don't think an umbrella would cover torts such as defamation, copyright infringement, criminal acts, etc. Can anyone correct me on this?
No insurance will cover criminal acts. My homeowner's will cover defamation. If you want an answer, read your homeowner's policy and your umbrella policy side by side.
I'm not sure about your first claim. And I wasn't asking for myself, just trying to understand why an umbrella would be any different from upping the limits on the renter's insurance.
I'm 100% confident you can't insure intentional criminal acts.
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