Umbrella Insurance

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tman9940
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Umbrella Insurance

Post by tman9940 »

I have a net worth of a little over 700k..at 38 years old. Do you think I need umbrella insurance? Single-no kids- no house.

I’m not entirely sure how it works..I just know it’s like “extra” insurance in the event I get sued. If someone could help explain it I would love that. Thanks for any advice!
Gradient Descent
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Re: Umbrella Insurance

Post by Gradient Descent »

Umbrella policies sit on top of your existing homeowners/renters and auto liability policies. You usually buy umbrella through the same company that provides your auto insurance.

At $700k NW, you could get a $1 mil umbrella policy (they are sold in $1m increments) to cover you. You would need to coordinate your auto and homeowners/renters liability limits.

However, the key question is: what are you trying to protect?
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TexasPE
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Re: Umbrella Insurance

Post by TexasPE »

Gradient Descent wrote: Mon Jun 10, 2024 9:26 pm the key question is: what are you trying to protect?
In my case, I feel an obligation to help someone I might injure for life in a traffic accident (medical, lost income, etc.). Not hard dollars and cents, YMMV.
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Topic Author
tman9940
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Re: Umbrella Insurance

Post by tman9940 »

Gradient Descent wrote: Mon Jun 10, 2024 9:26 pm Umbrella policies sit on top of your existing homeowners/renters and auto liability policies. You usually buy umbrella through the same company that provides your auto insurance.

At $700k NW, you could get a $1 mil umbrella policy (they are sold in $1m increments) to cover you. You would need to coordinate your auto and homeowners/renters liability limits.

However, the key question is: what are you trying to protect?
If I cause an accident and someone gets injured..I’m not only trying to help whoever is injured, but protect my assets if I get sued.
Dpmbball
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Re: Umbrella Insurance

Post by Dpmbball »

tman9940 wrote: Mon Jun 10, 2024 10:09 pm
Gradient Descent wrote: Mon Jun 10, 2024 9:26 pm Umbrella policies sit on top of your existing homeowners/renters and auto liability policies. You usually buy umbrella through the same company that provides your auto insurance.

At $700k NW, you could get a $1 mil umbrella policy (they are sold in $1m increments) to cover you. You would need to coordinate your auto and homeowners/renters liability limits.

However, the key question is: what are you trying to protect?
If I cause an accident and someone gets injured..I’m not only trying to help whoever is injured, but protect my assets if I get sued.
I think you said you don’t own a home so you would get renters insurance also you have auto insurance that alone is enough unless you run your own business you need insurance on that…If get into a auto accident the insurers talk to each other and any lawyers…if somone gets hurt at your rental you have policy limits just make sure your first line of defense insurance is enough
rossington
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Re: Umbrella Insurance

Post by rossington »

tman9940 wrote: Mon Jun 10, 2024 9:18 pm I have a net worth of a little over 700k..at 38 years old. Do you think I need umbrella insurance? Single-no kids- no house.

I’m not entirely sure how it works..I just know it’s like “extra” insurance in the event I get sued. If someone could help explain it I would love that. Thanks for any advice!
Hello OP,
If the majority of your NW is in retirement accounts then these are most likely protected from lawsuits. So you don't need umbrella insurance at this time.
"Success is going from failure to failure without loss of enthusiasm." Winston Churchill.
dcabler
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Re: Umbrella Insurance

Post by dcabler »

tman9940 wrote: Mon Jun 10, 2024 9:18 pm I have a net worth of a little over 700k..at 38 years old. Do you think I need umbrella insurance? Single-no kids- no house.

I’m not entirely sure how it works..I just know it’s like “extra” insurance in the event I get sued. If someone could help explain it I would love that. Thanks for any advice!
There are some types of accounts that are federally protected from lawsuits, such as 401Ks. Depending on your state, other accounts may also have such protections (such as IRAs). Your homestead may likewise be.

Calculate your net worth, then subtract those items that are exempt from judgment. Then subtract the minimum liability for one person that you have via your auto or homeowners insurance, whichever one is lowest, since that will pay first. Whatever is left is what would have to come out of your pocket in the event of a judgment. Umbrella insurance is generally sold in multiples of $1M, so $1M is the minimum coverage you can purchase.

If after the calculation, the number is fairly small right now, for example $5,000, then I probably wouldn't purchase umbrella coverage. On the other hand, it could still be well below $1M and still be large enough to warrant umbrella coverage if you don't want to ever write such a large check, especially if it can be purchased relatively inexpensively.

I just went through a check on our coverage in the last week and opted to keep the level we currently have. We're a couple of hundred $K over a threshold and rounded up to the next $1M because writing that check would be too painful if we lost a lawsuit. Will continue to check periodically.

Cheers.
jebmke
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Re: Umbrella Insurance

Post by jebmke »

tman9940 wrote: Mon Jun 10, 2024 10:09 pm
Gradient Descent wrote: Mon Jun 10, 2024 9:26 pm Umbrella policies sit on top of your existing homeowners/renters and auto liability policies. You usually buy umbrella through the same company that provides your auto insurance.

At $700k NW, you could get a $1 mil umbrella policy (they are sold in $1m increments) to cover you. You would need to coordinate your auto and homeowners/renters liability limits.

However, the key question is: what are you trying to protect?
If I cause an accident and someone gets injured..I’m not only trying to help whoever is injured, but protect my assets if I get sued.
You may also need to protect future income. The key word in Umbrella Liability is “Liability”

When we got married, our assets were modest but our income was high. I got the maximum I could get without going through underwriting which at the time was $5 million. I still have the policy.
When you discover that you are riding a dead horse, the best strategy is to dismount.
Topic Author
tman9940
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Re: Umbrella Insurance

Post by tman9940 »

rossington wrote: Tue Jun 11, 2024 4:56 am
tman9940 wrote: Mon Jun 10, 2024 9:18 pm I have a net worth of a little over 700k..at 38 years old. Do you think I need umbrella insurance? Single-no kids- no house.

I’m not entirely sure how it works..I just know it’s like “extra” insurance in the event I get sued. If someone could help explain it I would love that. Thanks for any advice!
Hello OP,
If the majority of your NW is in retirement accounts then these are most likely protected from lawsuits. So you don't need umbrella insurance at this time.
Thanks! So the majority of my NW is in a taxable brokerage account. I have about 20% of that in a Roth..and some in cash.
PVW
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Re: Umbrella Insurance

Post by PVW »

dcabler wrote: Tue Jun 11, 2024 5:34 am Calculate your net worth, then subtract those items that are exempt from judgment. Then subtract the minimum liability for one person that you have via your auto or homeowners insurance, whichever one is lowest, since that will pay first. Whatever is left is what would have to come out of your pocket in the event of a judgment. Umbrella insurance is generally sold in multiples of $1M, so $1M is the minimum coverage you can purchase.
Future earnings are not judgment proof. Be sure to add those into this calculation.
bombcar
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Re: Umbrella Insurance

Post by bombcar »

I think for many people the importance of umbrella insurance is it requires you to get reasonable amounts of coverage on car and home first.

Driving with bare legal minimum car insurance might be "ok" when you're penniless and judgement-proof, but very quickly that's not the case anymore and you should up your coverage.

And once you have that, the umbrella is pretty cheap.
Grt2bOutdoors
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Re: Umbrella Insurance

Post by Grt2bOutdoors »

rossington wrote: Tue Jun 11, 2024 4:56 am
tman9940 wrote: Mon Jun 10, 2024 9:18 pm I have a net worth of a little over 700k..at 38 years old. Do you think I need umbrella insurance? Single-no kids- no house.

I’m not entirely sure how it works..I just know it’s like “extra” insurance in the event I get sued. If someone could help explain it I would love that. Thanks for any advice!
Hello OP,
If the majority of your NW is in retirement accounts then these are most likely protected from lawsuits. So you don't need umbrella insurance at this time.
If you are employed and your limits aren’t sufficient, there’s a chance they could go after your income.
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dcabler
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Re: Umbrella Insurance

Post by dcabler »

PVW wrote: Tue Jun 11, 2024 6:16 am
dcabler wrote: Tue Jun 11, 2024 5:34 am Calculate your net worth, then subtract those items that are exempt from judgment. Then subtract the minimum liability for one person that you have via your auto or homeowners insurance, whichever one is lowest, since that will pay first. Whatever is left is what would have to come out of your pocket in the event of a judgment. Umbrella insurance is generally sold in multiples of $1M, so $1M is the minimum coverage you can purchase.
Future earnings are not judgment proof. Be sure to add those into this calculation.
Yup.

Cheers.
Call_Me_Op
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Re: Umbrella Insurance

Post by Call_Me_Op »

It is better to have it if you are a worrier. it is quite cheap if you live a typical lifestyle.
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FoolMeOnce
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Re: Umbrella Insurance

Post by FoolMeOnce »

dcabler wrote: Tue Jun 11, 2024 5:34 am
tman9940 wrote: Mon Jun 10, 2024 9:18 pm I have a net worth of a little over 700k..at 38 years old. Do you think I need umbrella insurance? Single-no kids- no house.

I’m not entirely sure how it works..I just know it’s like “extra” insurance in the event I get sued. If someone could help explain it I would love that. Thanks for any advice!
There are some types of accounts that are federally protected from lawsuits, such as 401Ks. Depending on your state, other accounts may also have such protections (such as IRAs). Your homestead may likewise be.

Calculate your net worth, then subtract those items that are exempt from judgment. Then subtract the minimum liability for one person that you have via your auto or homeowners insurance, whichever one is lowest, since that will pay first. Whatever is left is what would have to come out of your pocket in the event of a judgment. Umbrella insurance is generally sold in multiples of $1M, so $1M is the minimum coverage you can purchase.

If after the calculation, the number is fairly small right now, for example $5,000, then I probably wouldn't purchase umbrella coverage. On the other hand, it could still be well below $1M and still be large enough to warrant umbrella coverage if you don't want to ever write such a large check, especially if it can be purchased relatively inexpensively.

I just went through a check on our coverage in the last week and opted to keep the level we currently have. We're a couple of hundred $K over a threshold and rounded up to the next $1M because writing that check would be too painful if we lost a lawsuit. Will continue to check periodically.

Cheers.
To be clear to the OP, you still might have to write that check even with umbrella coverage greater than your exposed assets. Just depends on the amount of your liability if you cause an injury.
NYCaviator
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Re: Umbrella Insurance

Post by NYCaviator »

People need to stop thinking about umbrella insurance in terms of their net worth and what's in retirement accounts vs. not. One needs to think in terms of their future earning potential, liabilities, and public profile/profession. It's also a matter of being a responsible adult. If you cause an accident, you want to make sure you have sufficient coverage not just to protect your assets, but to make the other person(s) whole.

If you have a good job, buy an umbrella. It's a few hundred bucks a year.

And I think $5m is the new $1m. It's shocking what medical bills cost these days and you want to have sufficient coverage that your policies will pay for the damages, regardless of whether you have a 1m net worth or a 5m net worth. Theres a greater chance of a 5m umbrella covering the damages than a 1m, but whether you want to pay for the extra coverage is up to you.
terran
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Re: Umbrella Insurance

Post by terran »

I would. Also remember that in addition to your savings you're also protecting future earnings. Umbrella insurance is even more important if there are things that make you look like a good lawsuit target: expensive house/cars, lucrative looking profession, etc.
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Rocinante Rider
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Re: Umbrella Insurance

Post by Rocinante Rider »

NYCaviator wrote: Tue Jun 11, 2024 7:02 am People need to stop thinking about umbrella insurance in terms of their net worth and what's in retirement accounts vs. not. One needs to think in terms of their future earning potential, liabilities, and public profile/profession. It's also a matter of being a responsible adult. If you cause an accident, you want to make sure you have sufficient coverage not just to protect your assets, but to make the other person(s) whole.

If you have a good job, buy an umbrella. It's a few hundred bucks a year.

And I think $5m is the new $1m. It's shocking what medical bills cost these days and you want to have sufficient coverage that your policies will pay for the damages, regardless of whether you have a 1m net worth or a 5m net worth. Theres a greater chance of a 5m umbrella covering the damages than a 1m, but whether you want to pay for the extra coverage is up to you.
+1 It's about potential liability not net worth. Even if you're thinking only about your net worth, bear in mind that any retirement accounts that have creditor protection can still be subject to garnishment on distributions when you take them.

The incremental cost per million of coverage typically gets lower going from one to five million. $5M of umbrella plus say 250k of underlying liability coverage (e.g., on auto policy), makes a plaintiff more motivated to settle a reasonable claim for the policy limit of $5.25M.
Last edited by Rocinante Rider on Tue Jun 11, 2024 8:16 am, edited 1 time in total.
mtwhmemn
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Re: Umbrella Insurance

Post by mtwhmemn »

When I did my most recent insurance review, I found increasing my umbrella insurance from 1MM to 2MM wasn't very expensive. I also was able to lower limits on my cars and home with the new knowledge that the umbrella picks up where the car/home limits leave off. I have more/better coverage now at the same or couple percent more total cost per year.
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Re: Umbrella Insurance

Post by SlurpleBrain »

I work in insurance and while I am more on the commercial side, I do work with umbrella policies.

I'd say it is definitely worth getting a $1M umbrella right now. You might not own a home, but I believe a judgment could be made against future earnings. Also, auto liability laws vary wildly state to state. Some states' legal environments are a complete racket. The jurisdiction is decided based on where the accident happened, not your home state.

You can't ever fully prevent a fatal or serious injury accident from happening. Some people think "Well, I'm a good driver, so I don't need high liability limits." That line of thought is absurd. You could become involved in an accident through no fault of your own other than being at the wrong place at the wrong time and they need to pin the blame on someone. Also, when driving a vehicle all it takes is a momentary slip in focus for something serious to happen. I have seen enough gnarly claims.
Chardo
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Re: Umbrella Insurance

Post by Chardo »

I don't insure my umbrellas. I just replace them. They're cheap enough.
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Re: Umbrella Insurance

Post by FeralCat »

An acquaintance of mine has been paying half of his total annual income since the age of 18, to a passenger of his car who was injured during an accident. The driver wasn't even 100-percent at fault. It's a really sad story, as the driver decided not to start a family because of the financial stress. I have umbrella insurance at 1M, and have been thinking of increasing to 2M because of recent inflation. I should get on this. I would also have a lot of guilt if I injured someone and couldn't fully compensate them for loss in earnings, for example.
exodusNH
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Re: Umbrella Insurance

Post by exodusNH »

tman9940 wrote: Tue Jun 11, 2024 6:15 am
rossington wrote: Tue Jun 11, 2024 4:56 am
tman9940 wrote: Mon Jun 10, 2024 9:18 pm I have a net worth of a little over 700k..at 38 years old. Do you think I need umbrella insurance? Single-no kids- no house.

I’m not entirely sure how it works..I just know it’s like “extra” insurance in the event I get sued. If someone could help explain it I would love that. Thanks for any advice!
Hello OP,
If the majority of your NW is in retirement accounts then these are most likely protected from lawsuits. So you don't need umbrella insurance at this time.
Thanks! So the majority of my NW is in a taxable brokerage account. I have about 20% of that in a Roth..and some in cash.
If you can find an umbrella quote that includes excess coverage of under/uninsured motorists, it's worth considering.
FeralCat
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Re: Umbrella Insurance

Post by FeralCat »

exodusNH wrote: Tue Jun 11, 2024 9:21 am
tman9940 wrote: Tue Jun 11, 2024 6:15 am
rossington wrote: Tue Jun 11, 2024 4:56 am
tman9940 wrote: Mon Jun 10, 2024 9:18 pm I have a net worth of a little over 700k..at 38 years old. Do you think I need umbrella insurance? Single-no kids- no house.

I’m not entirely sure how it works..I just know it’s like “extra” insurance in the event I get sued. If someone could help explain it I would love that. Thanks for any advice!
Hello OP,
If the majority of your NW is in retirement accounts then these are most likely protected from lawsuits. So you don't need umbrella insurance at this time.
Thanks! So the majority of my NW is in a taxable brokerage account. I have about 20% of that in a Roth..and some in cash.
If you can find an umbrella quote that includes excess coverage of under/uninsured motorists, it's worth considering.
Can you elaborate on this statement about under/uninsured car insurance and umbrella policies?
carolinaman
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Re: Umbrella Insurance

Post by carolinaman »

A major advantage of umbrella insurance is that the insurance company is your advocate in a lawsuit. This ensures that you have strong legal counsel in any litigation.
Pete3
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Re: Umbrella Insurance

Post by Pete3 »

Gradient Descent wrote: Mon Jun 10, 2024 9:26 pm Umbrella policies sit on top of your existing homeowners/renters and auto liability policies. You usually buy umbrella through the same company that provides your auto insurance.

At $700k NW, you could get a $1 mil umbrella policy (they are sold in $1m increments) to cover you. You would need to coordinate your auto and homeowners/renters liability limits.
OP - just to be clear because so many people don't understand umbrella insurance.

A $1M umbrella policy does not cover you because you have a $700K NW, this isn't like insuring a house. If you get hit with a $2M claim your NW can still be wiped out.

The dollar amount you select for your umbrella policy should have little to nothing to do with your NW, it has everything to do with your risk profile.

A high umbrella policy gives you a large buffer that has to be surpassed before they can touch your assets, it also means the insurance company will be highly motivated to defend you vigorously in court.
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Rocinante Rider
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Re: Umbrella Insurance

Post by Rocinante Rider »

Pete3 wrote: Tue Jun 11, 2024 10:21 am A high umbrella policy...also means the insurance company will be highly motivated to defend you vigorously in court.
Perhaps more significantly, a high umbrella policy means that plaintiffs and their attorneys will be highly motivated to accept a settlement at the policy limit. A plaintiff with a catastrophic injury is more likely to accept an immediate and guaranteed $5.25M settlement (as opposed to $1.25M) rather than incur the time, expense, and uncertainty of litigation. The high policy limit has at least as much, if not more, to do with motivating the plaintiff than the insurance company.
exodusNH
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Re: Umbrella Insurance

Post by exodusNH »

FeralCat wrote: Tue Jun 11, 2024 9:37 am
exodusNH wrote: Tue Jun 11, 2024 9:21 am
tman9940 wrote: Tue Jun 11, 2024 6:15 am
rossington wrote: Tue Jun 11, 2024 4:56 am
tman9940 wrote: Mon Jun 10, 2024 9:18 pm I have a net worth of a little over 700k..at 38 years old. Do you think I need umbrella insurance? Single-no kids- no house.

I’m not entirely sure how it works..I just know it’s like “extra” insurance in the event I get sued. If someone could help explain it I would love that. Thanks for any advice!
Hello OP,
If the majority of your NW is in retirement accounts then these are most likely protected from lawsuits. So you don't need umbrella insurance at this time.
Thanks! So the majority of my NW is in a taxable brokerage account. I have about 20% of that in a Roth..and some in cash.
If you can find an umbrella quote that includes excess coverage of under/uninsured motorists, it's worth considering.
Can you elaborate on this statement about under/uninsured car insurance and umbrella policies?
Many people only seem to carry minimums when it comes to liability coverage. In NH, that's only $25,000 per person with $50,000 per accident. If you've never had to consume healthcare, it might seem $25,000 would cover quite a lot, but you could burn through that with a broken leg.

Assuming you carry UI/UM on your own policy, you can probably get to $250,000-$300,000. That's a much better amount, but can still be spent down quickly.

While health insurance will cover some medical bills, you will still have copays, loss of income, pain and suffering, and the potential for modifications such as adding a wheelchair ramp or paying a nurse or other healthcare worker to help with your day-to-day.

If your umbrella has UI/UM, that will be an additional source of money from which to draw.

An umbrella can also work for you in the event that you're at fault. If you're young and have good earning potential, you may have decades of garnishment that can be avoided. E.g., you cause an accident where you injure two young doctors. The umbrella can help here.
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BolderBoy
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Re: Umbrella Insurance

Post by BolderBoy »

Glad to see so many folks pointing at future earnings being an exposure needing protection.

A friend sued a driver who hit him causing substantial, permanent disability. The driver filed for bankruptcy protection but my friend was able to convince the judge not to discharge this particular debt. Judge agreed and and awarded 50% of future earnings to the injured party. Every year for many years, after the at-fault driver was writing checks...right up until he committed suicide.
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Re: Umbrella Insurance

Post by FrugalProfessor »

What if future earnings are zero for someone in or near retirement? What teeth does garnishing wages have if there are no future wages? Can a judge force someone to unretire?

If this person has all of their assets sheltered in retirement accounts, doesn't that significantly reduce their exposure?
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exodusNH
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Re: Umbrella Insurance

Post by exodusNH »

FrugalProfessor wrote: Tue Jun 11, 2024 1:52 pm What if future earnings are zero for someone in or near retirement? What teeth does garnishing wages have if there are no future wages? Can a judge force someone to unretire?

If this person has all of their assets sheltered in retirement accounts, doesn't that significantly reduce their exposure?
Once you withdraw the money, it's no longer in a retirement account.
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Rocinante Rider
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Re: Umbrella Insurance

Post by Rocinante Rider »

FrugalProfessor wrote: Tue Jun 11, 2024 1:52 pm What if future earnings are zero for someone in or near retirement? What teeth does garnishing wages have if there are no future wages? Can a judge force someone to unretire?

If this person has all of their assets sheltered in retirement accounts, doesn't that significantly reduce their exposure?
You can't be forced back to work, but many retirement accounts lack creditor protection. For example, most 403b and governmental 457b accounts are non-ERISA and thus not protected. Non-governmental 457b accounts are also vulnerable to the employer's creditors. IRA account protections can vary (e.g., in different states), and distributions/RMDs could be subject to garnishment. Thus, you might have some accounts that can't be seized, but you'd be unable to withdraw assets from those accounts without at least partial garnishment of those withdrawals.
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BolderBoy
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Re: Umbrella Insurance

Post by BolderBoy »

Rocinante Rider wrote: Tue Jun 11, 2024 2:14 pm
FrugalProfessor wrote: Tue Jun 11, 2024 1:52 pm What if future earnings are zero for someone in or near retirement? What teeth does garnishing wages have if there are no future wages? Can a judge force someone to unretire?

If this person has all of their assets sheltered in retirement accounts, doesn't that significantly reduce their exposure?
You can't be forced back to work, but many retirement accounts lack creditor protection. For example, most 403b and governmental 457b accounts are non-ERISA and thus not protected. Non-governmental 457b accounts are also vulnerable to the employer's creditors. IRA account protections can vary (e.g., in different states), and distributions/RMDs could be subject to garnishment. Thus, you might have some accounts that can't be seized, but you'd be unable to withdraw assets from those accounts without at least partial garnishment of those withdrawals.
And aren't the estates one leaves after death fully exposed (including all retirement accounts?) I'm thinking about the OJ situation here.

IANAL.
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tman9940
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Re: Umbrella Insurance

Post by tman9940 »

BolderBoy wrote: Tue Jun 11, 2024 1:33 pm Glad to see so many folks pointing at future earnings being an exposure needing protection.

A friend sued a driver who hit him causing substantial, permanent disability. The driver filed for bankruptcy protection but my friend was able to convince the judge not to discharge this particular debt. Judge agreed and and awarded 50% of future earnings to the injured party. Every year for many years, after the at-fault driver was writing checks...right up until he committed suicide.
Wow…that’s just an awful situation all around. THAT is something I’d like to avoid, obviously.
rossington
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Re: Umbrella Insurance

Post by rossington »

tman9940 wrote: Tue Jun 11, 2024 4:47 pm
BolderBoy wrote: Tue Jun 11, 2024 1:33 pm Glad to see so many folks pointing at future earnings being an exposure needing protection.

A friend sued a driver who hit him causing substantial, permanent disability. The driver filed for bankruptcy protection but my friend was able to convince the judge not to discharge this particular debt. Judge agreed and and awarded 50% of future earnings to the injured party. Every year for many years, after the at-fault driver was writing checks...right up until he committed suicide.
Wow…that’s just an awful situation all around. THAT is something I’d like to avoid, obviously.
OP,
Wage garnishments and settlements exceeding your maximum insurance limits are something plaintiffs lawyers try to avoid. They want the largest payout as quickly as possible for their clients. It also differs by state as to what whether or not wages can be garnished in personal injury cases. So take a look at your state's laws.
Again you probably don't "need" the umbrella insurance but if it helps you SWAN then you should shop around and check into the costs.
Compared to potential legal fees it is a good deal.
"Success is going from failure to failure without loss of enthusiasm." Winston Churchill.
DetroitRick
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Re: Umbrella Insurance

Post by DetroitRick »

A lot of this back and forth reminds me of why I opted to finally get an umbrella policy years ago. Net worth doesn't directly matter, it's the size of a potential judgement against you. And how that judgement extends into the future. In this day and age, and legal environment, how would anyone make such a guess? At the extremes, the need is obvious - this is not a tool needed by the poor and it is extremely needed by the wealthy and visible. The rest of us in the middle ground just make guesses and use judgement. Where you are, what you do, how you spend your life, can all influence the need to some degree. But at some point, it's just a reasonable precaution to take and risk is nearly impossible to judge.

As to coverage vs. cost -
Once I decided to shop policies, the readily available options that met my basic reasonability test ranged from $1 mil to $5 mil. After that, an extensive underwriting review would have been required by my potential insurers (this was 14 years ago). Between $1 to $5 mil, cost wasn't hugely different, so I went with $5. My "deep" analysis. This, as always, differs according to situation and location. But further stewing in the face of this level of protection didn't seem warranted for me. The good news, so far, is that after getting that policy 14 years ago - I've never had a premium hike, and had a huge premium reduction after about 7 years (for reasons unknown). So my current premium is even less significant than it once was (rare in insurance, but not universally true for this segment either).

When in doubt, grab some quotes. Weigh your decision with that in front of you. Take into consideration the requisite automotive coverage that will be required (it didn't impact me, but it could have), and coverage under your rental policy (I didn't have to change my own homeowners coverage level, some people do).
NYCaviator
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Re: Umbrella Insurance

Post by NYCaviator »

DetroitRick wrote: Tue Jun 11, 2024 7:01 pm A lot of this back and forth reminds me of why I opted to finally get an umbrella policy years ago. Net worth doesn't directly matter, it's the size of a potential judgement against you. And how that judgement extends into the future.
This is a great way to put it. :D

If you injure someone and they have $1m in medical bills and you have 250k in insurance, it doesn't matter if your net worth is 200k or 20m, you could be on the hook if you don't have enough insurance. That's why it's pointless to think of umbrella coverage in terms of your net worth. You need to think of it in terms of risk.

If you drive a car, that's - hands down - your biggest risk. I'm not an actuary so these are total guesses, but I would think $1m may be enough to cover 95% of claims, and $5m is probably enough to cover 99.9% of claims. I'd much rather pay a few hundred more a year to cover 99.9% of claims than gamble to save a few bucks a year.

Unless you've seen hospital bills in the last few years, I don't think people appreciate how expensive everything is. Just going into an ER and getting imaging and tests done can easily run 40-50k. That's not even for follow up care.
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Rocinante Rider
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Re: Umbrella Insurance

Post by Rocinante Rider »

NYCaviator wrote: Wed Jun 12, 2024 7:05 am If you injure someone and they have $1m in medical bills...

Unless you've seen hospital bills in the last few years, I don't think people appreciate how expensive everything is.
Very true, but medical damages can be just a small part of the liability. In addition to medical damages, other forms of special damages can include lost income/wages, rehabilitation costs, home or vehicle modifications necessitated by the injury, etc. And in addition to special damages, general damages can include pain and suffering, emotional distress, loss of consortium, loss of enjoyment in life, and disfigurement or physical impairment. Some cases also might include punitive damages. With a seriously injured plaintiff, non-medical damages could be many times greater, as much as 5:1 according to some sources. So $1M in medical could end up as $6M total.
texas lawdog
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Re: Umbrella Insurance

Post by texas lawdog »

Agree that you need to think of this in terms of risk rather than relationship to net worth.
I think most want a guide of how much to purchase and so naturally link it to net worth.

A couple of years ago I sent out a link on this forum showing personal injury damages awarded one year in one of the largest states (TX).

For 2023, #20 is below and helped me to rationalize getting $3M...
Amount: $2,663,748.00
Attorneys: Kelly Gray of FVF Law
Case: Family v. 18-wheeler Truck Driver
Type: Car Accident, Motor Vehicle Accident, Personal Injury, Truck Accident, Negligent Tort, Bodily Injury, Vehicular Accident

I'm rolling the dice that I don't end up in top 20.
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Rocinante Rider
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Re: Umbrella Insurance

Post by Rocinante Rider »

texas lawdog wrote: Wed Jun 12, 2024 2:25 pm A couple of years ago I sent out a link on this forum showing personal injury damages awarded one year in one of the largest states (TX).
Cases ending in pretrial settlements greatly outnumber those that end with post-trial awards. Stats I've seen indicate that no more than 5% of personal injury liability cases, including mva, go to trial. Of those that do go to trial, plaintiffs prevail in only about 10% (any good insurance company will likely settle a valid claim without trial). Thus, the top 20 awards after trial would represent less than the tip of an iceberg (approx. 0.5% of all mva personal liability cases ending in awards but 95% ending in settlements). Extrapolating from those numbers, if TX had 20 cases with awards of $2.66M or more in 2023, gives an estimate of about 4,000 cases settled. The actual number of settlements could be much more than 4,000 because there were almost certainly more awards than just the top 20, and TX has about 20,000 serious car accident injuries per year.

It's hard to get good data on the number of settlements or their amounts. My state has less than a quarter of the population of TX but had at least 3 motor vehicle- related settlements for 13M, 17M, and 25.33M in twelve months from Aug 2022 to July 2023.
texas lawdog
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Re: Umbrella Insurance

Post by texas lawdog »

Agree that vast majority will end up settling rather than go thru trial.

If it makes OP feel better, think of it as payment to go after insurance assets rather than your own assets :-o
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Re: Umbrella Insurance

Post by LittleMaggieMae »

tman9940 wrote: Mon Jun 10, 2024 9:18 pm I have a net worth of a little over 700k..at 38 years old. Do you think I need umbrella insurance? Single-no kids- no house.

I’m not entirely sure how it works..I just know it’s like “extra” insurance in the event I get sued. If someone could help explain it I would love that. Thanks for any advice!
Be aware that an umbrella policy may require you to have higher limits on your renters and car insurance. In the case of something really bad happening your renters or car insurance will be the first go to for deal with it. if MORE than what those cover is needed your umbrella policy will come into play.

I would suggest understanding what and how much your renters and car insurance covers AND your local laws and then determine if umbrella insurance is right for you.

if you have risky hobbies - like boating or a motorcycle an umbrella policy might be appropriate.
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Re: Umbrella Insurance

Post by Gradient Descent »

Pete3 wrote: Tue Jun 11, 2024 10:21 am
Gradient Descent wrote: Mon Jun 10, 2024 9:26 pm Umbrella policies sit on top of your existing homeowners/renters and auto liability policies. You usually buy umbrella through the same company that provides your auto insurance.

At $700k NW, you could get a $1 mil umbrella policy (they are sold in $1m increments) to cover you. You would need to coordinate your auto and homeowners/renters liability limits.
OP - just to be clear because so many people don't understand umbrella insurance.

A $1M umbrella policy does not cover you because you have a $700K NW, this isn't like insuring a house. If you get hit with a $2M claim your NW can still be wiped out.

The dollar amount you select for your umbrella policy should have little to nothing to do with your NW, it has everything to do with your risk profile.

A high umbrella policy gives you a large buffer that has to be surpassed before they can touch your assets, it also means the insurance company will be highly motivated to defend you vigorously in court.
Great points! I will need to revisit my coverage philosophy.
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