Umbrella liability - is it necessary?

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stocknoob4111
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Umbrella liability - is it necessary?

Post by stocknoob4111 »

I have a NW around $1.2M, unfortunately $800K of it is in my taxable brokerage which does not have any protections against lawsuits etc. Should I be considering getting an umbrella liability policy? I have not really thought about this up until now.

What are the major coverage gaps in these policies? How many of you have bought such a policy and is it really essentially for anyone of a certain net worth?
Soon2BXProgrammer
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Re: Umbrella liability - is it necessary?

Post by Soon2BXProgrammer »

Yes, you should consider having a umbrella policy.

I have one.
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exodusNH
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Re: Umbrella liability - is it necessary?

Post by exodusNH »

stocknoob4111 wrote: Thu Nov 04, 2021 8:01 am I have a NW around $1.2M, unfortunately $800K of it is in my taxable brokerage which does not have any protections against lawsuits etc. Should I be considering getting an umbrella liability policy? I have not really thought about this up until now.

What are the major coverage gaps in these policies? How many of you have bought such a policy and is it really essentially for anyone of a certain net worth?
If you drive a car, allow people to drink alcohol at your home, have driving-aged children, or are relatively young and earn a good salary, you should have an umbrella policy. You don't need them very often, which is why they're cheap; when you do, you really, really do.
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Re: Umbrella liability - is it necessary?

Post by Sandtrap »

stocknoob4111 wrote: Thu Nov 04, 2021 8:01 am I have a NW around $1.2M, unfortunately $800K of it is in my taxable brokerage which does not have any protections against lawsuits etc. Should I be considering getting an umbrella liability policy? I have not really thought about this up until now.

What are the major coverage gaps in these policies? How many of you have bought such a policy and is it really essentially for anyone of a certain net worth?
This is one of those things that you hope you will never need in a lifetime. But, if you ever need liability coverage and don't have it, you might very dearly regret it.

Suggest getting various insurance quotes. See how much it will cost you. Then decide.
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Running Bum
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Re: Umbrella liability - is it necessary?

Post by Running Bum »

Another advantage is that you get the insurance company's lawyers working with you if you do get sued. Peace of mind.
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stocknoob4111
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Re: Umbrella liability - is it necessary?

Post by stocknoob4111 »

Question - I have a friend who has a bit higher net worth to me without any coverage, the difference is that 95% of his net worth is split between his home and his 401K. In this situation is an umbrella liability policy still recommended? The reason I ask is that I remember recalling that a primary residence and a 401K are protected from any lawsuits and judgements.
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Re: Umbrella liability - is it necessary?

Post by MikeG62 »

exodusNH wrote: Thu Nov 04, 2021 8:10 am
stocknoob4111 wrote: Thu Nov 04, 2021 8:01 am I have a NW around $1.2M, unfortunately $800K of it is in my taxable brokerage which does not have any protections against lawsuits etc. Should I be considering getting an umbrella liability policy? I have not really thought about this up until now.

What are the major coverage gaps in these policies? How many of you have bought such a policy and is it really essentially for anyone of a certain net worth?
If you drive a car, allow people to drink alcohol at your home, have driving-aged children, or are relatively young and earn a good salary, you should have an umbrella policy. You don't need them very often, which is why they're cheap; when you do, you really, really do.
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Watty
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Re: Umbrella liability - is it necessary?

Post by Watty »

stocknoob4111 wrote: Thu Nov 04, 2021 8:01 am What are the major coverage gaps in these policies?
One big gap that these cover are things like if you are in a car accident and there is a judgement for more than your car insurance limits.

It is important to also keep in mind that it will also pay for a lawyer to defend you and that can be expensive.

There will be a list of things that the umbrella policy will not cover and you need to read since this will vary with the company that but as I recall they are things you would expect like criminal activity, like if you intentionally shoot someone.
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Re: Umbrella liability - is it necessary?

Post by Gill »

The peace of mind is well worth it. You’re probably only looking at a few hundred dollars premium.
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Re: Umbrella liability - is it necessary?

Post by Soon2BXProgrammer »

stocknoob4111 wrote: Thu Nov 04, 2021 8:14 am Question - I have a friend who has a bit higher net worth to me without any coverage, the difference is that 95% of his net worth is split between his home and his 401K. In this situation is an umbrella liability policy still recommended? The reason I ask is that I remember recalling that a primary residence and a 401K are protected from any lawsuits and judgements.
If your friend wants to protect his future wages, then yes. Primary residence protection varies slightly by state. IRA protection varies by state (and is different then 401k).

(simple example: consider a doctor with a negative networth due to student loans but makes 300k+ a year, and has a teenage driver, should consider an umbrella policy)
Last edited by Soon2BXProgrammer on Thu Nov 04, 2021 8:20 am, edited 1 time in total.
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Re: Umbrella liability - is it necessary?

Post by hoofaman »

The probability of being sued starts at zero when you are born, and increases as your assets and income potential increase
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Re: Umbrella liability - is it necessary?

Post by tibbitts »

I'm relatively frugal (well, not compared to Bogleheads, but compared to normal people) and even I pay for an umbrella policy.
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JoMoney
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Re: Umbrella liability - is it necessary?

Post by JoMoney »

Whether or not It's "necessary" is a personal thing about how much risk you're willing to assume. There's no regulations demanding you have it.
There is a dollar figure I've seen thrown around that once you have $1mil in assets you're starting to become a target for such things, and have a big enough chunk of change that you should protect it. I have no idea what the rationale is used to come up with that number. But I have observed that seems to be the point where you start getting labeled with "Private Client" and "High Net Worth" status with various financial institutions and probably shared amongst their marketing partners as such.
I've also observed that umbrella policies tend to start at $1mil dollars of coverage, and the amount of coverage I've seen suggested starts at whatever amount of money you have to protect. i.e. you don't buy $50,000 of replacement coverage on a $10,000 car.... then again, when it comes to liability coverage I have seen people go several multiples above whatever they have to lose *shrug*
I would think having a high value insurance policy would likely also paint a target around someone. :?
I don't personally have liability coverage outside of my auto and renters policy... but most of my assets are inside retirement accounts.
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Re: Umbrella liability - is it necessary?

Post by exodusNH »

Watty wrote: Thu Nov 04, 2021 8:16 am
stocknoob4111 wrote: Thu Nov 04, 2021 8:01 am What are the major coverage gaps in these policies?
One big gap that these cover are things like if you are in a car accident and there is a judgement for more than your car insurance limits.

It is important to also keep in mind that it will also pay for a lawyer to defend you and that can be expensive.

There will be a list of things that the umbrella policy will not cover and you need to read since this will vary with the company that but as I recall they are things you would expect like criminal activity, like if you intentionally shoot someone.
I think that people who haven't had to deal with the US medical system greatly underestimate how expensive it is.

In 2005, I had my appendix out. I was 31, in great shape, had 0 complications. I was in the hospital for about 18 hours. (Arrived around 11 PM on Friday, was home by 7 PM on Saturday.)

Total bill: $17,000. In 2005 dollars. The time I spent in the emergency room was $75/minute.

If you're found at-fault with bodily injury, the required treatments could easily be $100,000s. And if that person was 25 years old, sustained a brain injury that requires care for the rest of their life...
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Re: Umbrella liability - is it necessary?

Post by PVW »

There are many prior threads on Bogleheads about umbrella liability insurance.
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Re: Umbrella liability - is it necessary?

Post by FOGU »

The umbrella, the protection and the peace of mind it provides, is worth the relative pittance it will cost you in premium.

My umbrella of $1M has an annual premium of $156. Some things I don't have can jack the premium, like teen drivers or a swimming pool or a trampoline in your yard. And if you have any of those things you need the umbrella even more, so the premium is still a good deal.
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Re: Umbrella liability - is it necessary?

Post by lostdog »

Yes, it's worth it.

Having that much money unprotected while living in America's litigious society is a huge risk. There are a lot of parasites who will gladly take your money.
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Re: Umbrella liability - is it necessary?

Post by El Greco »

If there is any "deal" to be had in insurance, Umbrella Liability insurance is it. It typically only costs a few hundred dollars per year to protect you from catastrophic financial ruin. If you have substantial assets, own a home and car you will be the first to be targeted for a lawsuit in an accident, irregardless of whether you are at fault or not. Why? To paraphrase Willie Sutton: Because YOU are where the money is.

Example: A few years ago, a friend of mine was tangentially involved in a fatal car accident. A car in the left lane swerved across three lanes because a car in front of them stopped short. My friend who was stopped in the right lane had the corner of his front bumper lightly brushed by the swerving car which continued onto the shoulder and then struck an abutment, killing the driver and injuring a couple of the passengers.

The police and several witnesses immediately ruled that he was not at fault in any way, however, since none of the other people involved in the accident had sufficient insurance or assets my friend was targeted to be sued. Fortunately, he had an Umbrella policy which supplied a battery of lawyers to defend him through the many hours of depositions and court appearances he had to make. In the end, the insurance company settled for $100K just to make the whole thing go away. My friend payed nothing. If he hadn't been insured, the legal costs alone would have cost him tens of thousands of dollars.
He is very happy he had an Umbrella Policy and continues to have one
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Re: Umbrella liability - is it necessary?

Post by Candor »

My premium is approx $10 per month for 1m. It was a no-brainer for me and most of my assets are relatively protected compared to yours. The odds are low for needing it but this is a very litigious society and it seemed to be a bargain all things considered. Come to think of it I should probably bump up the coverage a bit.
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Re: Umbrella liability - is it necessary?

Post by diy60 »

Gill wrote: Thu Nov 04, 2021 8:16 am The peace of mind is well worth it. You’re probably only looking at a few hundred dollars premium.
Gill
For completeness one should mention nearly all umbrella policies requires increased limits (usually 300/300) for their auto and home, so the true cost should include comparison of total premiums. But still, umbrella is a great deal since the cost is very low compared to the coverage. OP should definitely get an umbrella policy.
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Re: Umbrella liability - is it necessary?

Post by ebeb »

$2MM umbrella peace of mind worth $200/yr premium geico :o
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Re: Umbrella liability - is it necessary?

Post by LittleMaggieMae »

If you drive a car, allow people to drink alcohol at your home, have driving-aged children, or are relatively young and earn a good salary, you should have an umbrella policy. You don't need them very often, which is why they're cheap; when you do, you really, really do.
Just to add to the list - if you have a pool in your yard, if you have a dog (or dogs) or some sort of pet that might hurt someone, if you have a "recreational vehicle" - like a boat, jet skis, snow mobile, one of those quad/ATV things, dirt bike, motorcycle... you get the idea. If you own a rental property(s).

Having one or more of these things doesn't automatically mean - you NEED an umbrella policy - it means you need to learn about umbrella policies and your own assets to determine if an umbrella policy is right for you.
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Re: Umbrella liability - is it necessary?

Post by ResearchMed »

LittleMaggieMae wrote: Thu Nov 04, 2021 10:29 am
If you drive a car, allow people to drink alcohol at your home, have driving-aged children, or are relatively young and earn a good salary, you should have an umbrella policy. You don't need them very often, which is why they're cheap; when you do, you really, really do.
Just to add to the list - if you have a pool in your yard, if you have a dog (or dogs) or some sort of pet that might hurt someone, if you have a "recreational vehicle" - like a boat, jet skis, snow mobile, one of those quad/ATV things, dirt bike, motorcycle... you get the idea. If you own a rental property(s).

Having one or more of these things doesn't automatically mean - you NEED an umbrella policy - it means you need to learn about umbrella policies and your own assets to determine if an umbrella policy is right for you.
Or if you have any carpets or throw rugs, or stairs, or perhaps ice on your sidewalk...

And don't forget, at least in the USA, "almost anyone can sue almost anyone else for almost anything".
Defending against a lawsuit when you are "completely innocent" [and that can become a legal finding, not just "your own perception"] - and even ending up "winning" - can cost a lot. And an insurer will have much better attorneys than you are likely to want to pay for, as it's their dime($) on the line.

This is one of the best examples of insurance: many people pooling resources, each paying *very* little, in case of that very rare but potentially devastating financial loss.

As for rental property, make sure you know whether your regular umbrella policy covers that, or is a commercial/business umbrella policy needed? These are also inexpensive.

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Re: Umbrella liability - is it necessary?

Post by wolf359 »

Umbrella liability is insurance for a low probability but high risk event. It is not necessary unless you need it -- and then it's too late to get it.

Chances are that the highest probability risk for liability exposure is around your car or your home. Your car and home insurances should cover most of those events. The umbrella liability requires you to have a certain amount of coverage for both, and covers amounts in excess of those amounts.

It isn't strictly necessary if you're willing to accept the risk. It's very unlikely that things will go wrong to a point that you will need this coverage. On the other hand, because the probability is low, the cost is cheap.

It is well worth it to buy this coverage. If you have factors that increase the probability that you are exposed to liability, your cost will increase (because you're more likely to claim.) These include things like owning a pool, owning a business, having teenage drivers in the house, etc. In those cases, you really should want to buy this coverage.
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Re: Umbrella liability - is it necessary?

Post by JDave »

$800k in a personal account is a HUGE target for lawsuits. You NEED an umbrella policy.
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Re: Umbrella liability - is it necessary?

Post by sport »

It is often lower cost to have all your casualty insurance with one company. There may be multi-policy discounts on all the policies. This implies one should shop them as a package when considering new insurance.
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Re: Umbrella liability - is it necessary?

Post by Nicolas »

exodusNH wrote: Thu Nov 04, 2021 8:10 am
stocknoob4111 wrote: Thu Nov 04, 2021 8:01 am I have a NW around $1.2M, unfortunately $800K of it is in my taxable brokerage which does not have any protections against lawsuits etc. Should I be considering getting an umbrella liability policy? I have not really thought about this up until now.

What are the major coverage gaps in these policies? How many of you have bought such a policy and is it really essentially for anyone of a certain net worth?
If you drive a car, allow people to drink alcohol at your home, have driving-aged children, or are relatively young and earn a good salary, you should have an umbrella policy. You don't need them very often, which is why they're cheap; when you do, you really, really do.
Also if you post on social media an umbrella policy may protect you from libel, defamation, or slander lawsuits. https://www.allstate.com/tr/personal-um ... ility.aspx
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Re: Umbrella liability - is it necessary?

Post by Cali4en »

We hold virtually all of our assets in accounts that are shielded from creditor/bankruptcy exposure, but we carry a $2M umbrella policy anyway.

First, it's cheap for what it is and it's nice to know that our carrier has a rather large incentive to defend us against frivolous lawsuits.

Second, we think it's the responsible thing to do in relation to other people. Accidents do happen and while our assets would be largely immune from any sort of judgment or seizure, we feel like it's wrong to neglect our own reasonable liability in case something bad does happen. So in a certain sense we carry our umbrella for the benefit of other people, rather than ourselves. We don't want someone to suffer simply because our asset structures afford us a good amount of liability shield by default.
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Re: Umbrella liability - is it necessary?

Post by ebeb »

Cali4en wrote: Thu Nov 04, 2021 2:05 pm We hold virtually all of our assets in accounts that are shielded from creditor/bankruptcy exposure, but we carry a $2M umbrella policy anyway.
What type of accounts are being used to shield is it some type of trust.
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Re: Umbrella liability - is it necessary?

Post by Blue456 »

stocknoob4111 wrote: Thu Nov 04, 2021 8:14 am Question - I have a friend who has a bit higher net worth to me without any coverage, the difference is that 95% of his net worth is split between his home and his 401K. In this situation is an umbrella liability policy still recommended? The reason I ask is that I remember recalling that a primary residence and a 401K are protected from any lawsuits and judgements.
The primary residence protection can be a joke in some states so make sure to research your state well prior to assuming that your house is covered.
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Re: Umbrella liability - is it necessary?

Post by exodusNH »

Blue456 wrote: Thu Nov 04, 2021 4:44 pm
stocknoob4111 wrote: Thu Nov 04, 2021 8:14 am Question - I have a friend who has a bit higher net worth to me without any coverage, the difference is that 95% of his net worth is split between his home and his 401K. In this situation is an umbrella liability policy still recommended? The reason I ask is that I remember recalling that a primary residence and a 401K are protected from any lawsuits and judgements.
The primary residence protection can be a joke in some states so make sure to research your state well prior to assuming that your house is covered.
E.g., for bankruptcy, New Hampshire only allows for $120,000. I'm not sure how that would apply to a liability case.
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Re: Umbrella liability - is it necessary?

Post by Luckywon »

stocknoob4111 wrote: Thu Nov 04, 2021 8:01 am What are the major coverage gaps in these policies? How many of you have bought such a policy and is it really essentially for anyone of a certain net worth?
If a domestic worker such as housekeeper or nanny is injured in your home and sues you, I'm not sure whether an umbrella would cover you.

This is what my umbrella states:

EXCLUSIONS:
19. Bodily injury to any person eligible to receive any benefits required to be provided or voluntarily provided by any insured person under:
a. any workers' compensation law, nonoccupational disability law or occupational diesase law

Since the threshold for classifying a household worker as an employee is quite low, many or most housekeepers/nannies should by law be paid as employees and therefore would meet the criteria of "benefits required to be provided....under.....workers' compensation law". It seems to me that therefore the exclusion would apply to most domestic workers injured in your home, whether or not you are paying them as an employee.

If there is anyone with insight into this, would love to hear it.
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Re: Umbrella liability - is it necessary?

Post by Broken Man 1999 »

OJ Simpson is living well on his NFL pension in Florida.

He spends his time looking for Nicole's killer on various golf courses, though thus far he has been unsuccessful.

Florida has good protection, but still an umbrella policy is better.

My liability limits are $500K on homeowners and vehicle, but with the run-up of our portfolio I probably should add an umbrella policy.

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Re: Umbrella liability - is it necessary?

Post by fyre4ce »

stocknoob4111 wrote: Thu Nov 04, 2021 8:14 am Question - I have a friend who has a bit higher net worth to me without any coverage, the difference is that 95% of his net worth is split between his home and his 401K. In this situation is an umbrella liability policy still recommended? The reason I ask is that I remember recalling that a primary residence and a 401K are protected from any lawsuits and judgements.
ERISA retirement plans get great asset protection. Not all 401k's are ERISA, for example, Solo 401k's. It's worth checking with your plan provider to see if it's ERISA.

Home equity is not protected from creditors in all states. Many states have some level of asset protection, but much of the time the amount is pitifully small, like $20,000. Only a few states, such as Florida, have unlimited home asset protection from creditors. In those states it does make sense to pay down a mortgage if you're worried about asset protection.

In non-recourse states like California, where a lender cannot come after you for more than the value of the property, paying down the mortgage can actually increase your exposure. In a big housing market crash, you are exposing more money to collection from your lender if you default on the mortgage, a risk it wouldn't have in a taxable account.

Even if most of my assets were creditor-protected that wouldn't stop me from getting an umbrella policy. You can still receive a judgment against future earnings.
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Re: Umbrella liability - is it necessary?

Post by sherwink »

If you have substantial assets open to legal risk, then umbrella insurance is worth its price. QED.
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ResearchMed
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Re: Umbrella liability - is it necessary?

Post by ResearchMed »

I'v always wondered... If someone has, say, all of their money in a nice, safe, 403b ERISA account, that's great.
But what happens when they need to remove money so they can spend it on living expenses?
Is the money vulnerable while being parked temporarily in a checking account or such?

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Re: Umbrella liability - is it necessary?

Post by Blue456 »

exodusNH wrote: Thu Nov 04, 2021 4:53 pm
Blue456 wrote: Thu Nov 04, 2021 4:44 pm
stocknoob4111 wrote: Thu Nov 04, 2021 8:14 am Question - I have a friend who has a bit higher net worth to me without any coverage, the difference is that 95% of his net worth is split between his home and his 401K. In this situation is an umbrella liability policy still recommended? The reason I ask is that I remember recalling that a primary residence and a 401K are protected from any lawsuits and judgements.
The primary residence protection can be a joke in some states so make sure to research your state well prior to assuming that your house is covered.
E.g., for bankruptcy, New Hampshire only allows for $120,000. I'm not sure how that would apply to a liability case.
That’s actually not bad. NY is 50,000 I think. Which is nothing short of a joke especially that houses near NYC can be minimum $800,000.
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Re: Umbrella liability - is it necessary?

Post by cflannagan »

Yes, we have umbrella policy. Umbrella policy is very cheap compared to homeowner & auto policies.

You most likely want to protect your net worth. It is easily worth the money you pay for it, in the rare event you somehow get sued for your net worth (or more).
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Re: Umbrella liability - is it necessary?

Post by Cali4en »

ebeb wrote: Thu Nov 04, 2021 4:17 pm What type of accounts are being used to shield is it some type of trust.
IRAs, HSA, and primary home equity. We live in Texas, so pretty much the only thing we have that is vulnerable is whatever happens to be in our checking account at any given moment. Even that we could minimize if we wanted to to with tighter cashflow management on a weekly or biweekly basis between our portfolio and our checking account.
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Re: Umbrella liability - is it necessary?

Post by Candor »

Luckywon wrote: Thu Nov 04, 2021 5:04 pm
stocknoob4111 wrote: Thu Nov 04, 2021 8:01 am What are the major coverage gaps in these policies? How many of you have bought such a policy and is it really essentially for anyone of a certain net worth?
If a domestic worker such as housekeeper or nanny is injured in your home and sues you, I'm not sure whether an umbrella would cover you.

This is what my umbrella states:

EXCLUSIONS:
19. Bodily injury to any person eligible to receive any benefits required to be provided or voluntarily provided by any insured person under:
a. any workers' compensation law, nonoccupational disability law or occupational diesase law

Since the threshold for classifying a household worker as an employee is quite low, many or most housekeepers/nannies should by law be paid as employees and therefore would meet the criteria of "benefits required to be provided....under.....workers' compensation law". It seems to me that therefore the exclusion would apply to most domestic workers injured in your home, whether or not you are paying them as an employee.

If there is anyone with insight into this, would love to hear it.
Wouldn't the "benefits required to be provided or voluntarily provided by any insured person" nullify the exclusion? The insured is not providing these benefits for a housekeeper. Not sure about a nanny.
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Luckywon
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Re: Umbrella liability - is it necessary?

Post by Luckywon »

Candor wrote: Thu Nov 04, 2021 5:57 pm
Luckywon wrote: Thu Nov 04, 2021 5:04 pm
stocknoob4111 wrote: Thu Nov 04, 2021 8:01 am What are the major coverage gaps in these policies? How many of you have bought such a policy and is it really essentially for anyone of a certain net worth?
If a domestic worker such as housekeeper or nanny is injured in your home and sues you, I'm not sure whether an umbrella would cover you.

This is what my umbrella states:

EXCLUSIONS:
19. Bodily injury to any person eligible to receive any benefits required to be provided or voluntarily provided by any insured person under:
a. any workers' compensation law, nonoccupational disability law or occupational diesase law

Since the threshold for classifying a household worker as an employee is quite low, many or most housekeepers/nannies should by law be paid as employees and therefore would meet the criteria of "benefits required to be provided....under.....workers' compensation law". It seems to me that therefore the exclusion would apply to most domestic workers injured in your home, whether or not you are paying them as an employee.

If there is anyone with insight into this, would love to hear it.
Wouldn't the "benefits required to be provided or voluntarily provided by any insured person" nullify the exclusion? The insured is not providing these benefits.
This is my concern: A domestic worker who meets criteria for being an employee (which probably includes most regular housekeepers) is required to be paid as an employee which includes Workers' Compensation Insurance. At least, this is true in California.

Therefore any employee is eligible to receive benefits under workers' compensation law and therefore the exclusion would apply to bodily injury to employees.

Many homeowners do not pay domestic workers as employees, even if they should. However, the umbrella exclusion states it applies if the benefits are required to be provided. The fact you did not provide them would not seem to be a defense against the exclusion.
Last edited by Luckywon on Thu Nov 04, 2021 6:17 pm, edited 1 time in total.
tonyclifton
Posts: 347
Joined: Sat Feb 08, 2020 5:25 pm

Re: Umbrella liability - is it necessary?

Post by tonyclifton »

The annual cost is trivial compared to your net worth. Just today your net worth probable rose 5x the annual costs of a policy due to the marketing going up by about a 1/2%. Open up that wallet tomorrow.
Candor
Posts: 697
Joined: Sat May 28, 2011 4:25 pm

Re: Umbrella liability - is it necessary?

Post by Candor »

Luckywon wrote: Thu Nov 04, 2021 6:08 pm
Candor wrote: Thu Nov 04, 2021 5:57 pm
Luckywon wrote: Thu Nov 04, 2021 5:04 pm
stocknoob4111 wrote: Thu Nov 04, 2021 8:01 am What are the major coverage gaps in these policies? How many of you have bought such a policy and is it really essentially for anyone of a certain net worth?
If a domestic worker such as housekeeper or nanny is injured in your home and sues you, I'm not sure whether an umbrella would cover you.

This is what my umbrella states:

EXCLUSIONS:
19. Bodily injury to any person eligible to receive any benefits required to be provided or voluntarily provided by any insured person under:
a. any workers' compensation law, nonoccupational disability law or occupational diesase law

Since the threshold for classifying a household worker as an employee is quite low, many or most housekeepers/nannies should by law be paid as employees and therefore would meet the criteria of "benefits required to be provided....under.....workers' compensation law". It seems to me that therefore the exclusion would apply to most domestic workers injured in your home, whether or not you are paying them as an employee.

If there is anyone with insight into this, would love to hear it.
Wouldn't the "benefits required to be provided or voluntarily provided by any insured person" nullify the exclusion? The insured is not providing these benefits.
This is my concern: A domestic worker who meets criteria for being an employee (which probably includes most regular housekeepers) is required to be paid as an employee which includes Workers' Compensation Insurance. At least, this is true in California.

Therefore any employee is eligible to receive benefits under workers' compensation law and therefore the exclusion would apply to bodily injury to employees.
Like many things it looks like it varies by state. In Virginia, where I live, domestic employees are excluded but it can be provided voluntarily. I just assumed the housekeepers employer would provide it but it looks like it is required to be provided by the homeowner in Ca from what I can tell.
The fool, with all his other faults, has this also - he is always getting ready to live. - Epicurus
Trader Joe
Posts: 2697
Joined: Fri Apr 25, 2014 6:38 pm

Re: Umbrella liability - is it necessary?

Post by Trader Joe »

"Umbrella liability - is it necessary?"

No, not at all.
KineticSync
Posts: 76
Joined: Tue Jan 15, 2019 11:22 am

Re: Umbrella liability - is it necessary?

Post by KineticSync »

It's legal insurance for suits targeting our assets. Rather than us footing the bill and dealing with (most of the) hassles of nuisance or justified suits, the insurance company is highly motivated to do so. My wife is a court reporter and sees cases quite often where someone peripherally involved in a situation has the misfortune to be the one perceived to have deep pockets and is specifically targeted by the plaintiff's sharks. Fortunately, the insurance companies have their own sharks which, for the low, low price of a few hundred dollars a year, will help protect our interests. Indemnification for any amounts awarded is almost a bonus.

Most of us here are going to appear to plaintiff's counsel as folks with attractively deep pockets.
Swimmer
Posts: 601
Joined: Tue Dec 29, 2015 4:24 pm

Re: Umbrella liability - is it necessary?

Post by Swimmer »

We have a 1M umbrella (Allstate), but it’s far from cheap. Our last premium was just short of $600. We have one vehicle, one golf cart, one home; no pet, pool, motorcycle, trampoline, etc.

We live in Florida and are old. Would this be the reason or should we start shopping around?
cabfranc
Posts: 157
Joined: Tue Jun 25, 2019 12:46 pm

Re: Umbrella liability - is it necessary?

Post by cabfranc »

The whole point of insurance is to protect you from an unlikely but catastrophic financial ruin. I can't think of a better example than umbrella insurance. Fortunately, it is also very inexpensive.

As others have mentioned, driving a car is enough of reason. Standard liability limits are too low given the potential injuries and cost of healthcare. It's not just about driving. Having a party where alcohol is served or even having your young child's friends over for a playdate can expose you to risk. Go look online for cases where umbrella insurance has been used to see the diversity of circumstances. Again, rare things, but things that could potentially wipe you out.

Don't be cheap.
Hannibal Barca
Posts: 87
Joined: Sun Apr 11, 2021 12:22 pm

Re: Umbrella liability - is it necessary?

Post by Hannibal Barca »

I suspect domestic help won’t be able to successfully claim they’re an employee, so the Umbrella policy should cover it. It comes down the employee vs contractor argument, which was recently highlighted by Uber’s legal challenges in California. Regardless of one’s view on that case, for domestic help it’s feels a lot more clear cut:

1. Who sets the hours? Cleaning people don’t get time cards, don’t get paid hourly in most cases, and generally negotiate a day, time, and cadence with the customer.

2. Who sets the pay? Again, this is a negotiation between you and the help. They can walk away if you don’t come to an agreement on price.

3. Are they restricted from providing services to others outside your relationship, including to competitors? Absolutely not. You’re probably one of 100+ clients.

Some types of domestic help, like long term care givers, may not fit as cleanly. But for most folks on this forum, their cleaning people, lawn guys, etc probably aren’t going to count as employees and thus be excluded from the Umbrella policy.
Luckywon
Posts: 1688
Joined: Tue Mar 28, 2017 10:33 am

Re: Umbrella liability - is it necessary?

Post by Luckywon »

Hannibal Barca wrote: Fri Nov 05, 2021 11:46 am I suspect domestic help won’t be able to successfully claim they’re an employee, so the Umbrella policy should cover it. It comes down the employee vs contractor argument, which was recently highlighted by Uber’s legal challenges in California. Regardless of one’s view on that case, for domestic help it’s feels a lot more clear cut:

1. Who sets the hours? Cleaning people don’t get time cards, don’t get paid hourly in most cases, and generally negotiate a day, time, and cadence with the customer.

2. Who sets the pay? Again, this is a negotiation between you and the help. They can walk away if you don’t come to an agreement on price.

3. Are they restricted from providing services to others outside your relationship, including to competitors? Absolutely not. You’re probably one of 100+ clients.

Some types of domestic help, like long term care givers, may not fit as cleanly. But for most folks on this forum, their cleaning people, lawn guys, etc probably aren’t going to count as employees and thus be excluded from the Umbrella policy.
It appears to me both federal and state law weigh in and in California last year legislation was passed where the presumption is any regular household worker is an employee, and it is up to the employer to prove otherwise, with the established criteria making this quite difficult to do. If you google this for California you will see a lot of legal discussion about this and none of it is in favor of the notion that housekeepers are usually independent contractors.

Whether the homeowner pays the worker as an employee or independent contractor, it seems my umbrella insurance company can potentially disclaim given the provision that I quoted upthread-what matters only is whether the worker should have been entitled to workers's comp. At least if the housekeeper was paid as an employee, worker's compensation would cover medical bills. I wonder if to some degree a worker forfeits their right to sue above what is covered by worker's comp. I once heard something along those lines but that may be just fantasy.
sport
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Joined: Tue Feb 27, 2007 3:26 pm
Location: Cleveland, OH

Re: Umbrella liability - is it necessary?

Post by sport »

I always figure that if an insurance company can find an excuse not to pay, they won't pay. So, I try to err on the side of safety. Insurance companies are not your friend. Same thing with banks.
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