Looking for Actual Experiences with Umbrella Insurance

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denovo
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Looking for Actual Experiences with Umbrella Insurance

Post by denovo » Mon Jan 06, 2014 8:24 pm

Umbrella insurance is a topic that comes up often, with a lot of debates over coverage policies , specifically whether or not opposing parties will settle for the coverage limits and the benefits of having attorneys for the insurance company providing a vigorous defense in all claims.

I was looking for any BH's who have had any experience dealing with umbrella insurance, either as a defendant, plaintiff, or a professional (i.e. a lawyer in litigation).
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john94549
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Re: Looking for Actual Experiences with Umbrella Insurance

Post by john94549 » Mon Jan 06, 2014 10:18 pm

As I believe I mentioned in another thread on this topic: In over thirty years of insurance defense practice, I can recall of no instance where umbrella (aka excess) coverage was invaded.

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Re: Looking for Actual Experiences with Umbrella Insurance

Post by Howie » Mon Jan 06, 2014 10:42 pm

Not having knowledge of the other thread, and based on the reply above, I ask whether it makes sense to carry such insurance?

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Re: Looking for Actual Experiences with Umbrella Insurance

Post by obgraham » Mon Jan 06, 2014 11:50 pm

Again at the risk of repeating another thread:

Some years back I ran up the back of a guy stopped in the road. Automatically my fault. Insurance paid up to fix his car, and mine. Then a few months later, the process server shows up at my door: I caused this poor yoof to lose his chance to be the world champion skateboarder, and they wanted a boatload of cash. Umbrella carrier took over, hired lawyers and investigated, and shortly thereafter turned up the scam he was trying to perpetrate. Neighbors pointed out that he was still managing to skate perfectly well in his back yard. Case dropped pretty quickly after that. Total legal costs over 10K, just for that, for a case that went nowhere. My costs: $0.00.

So yes, there is value to umbrella coverage, unless you want to spend all your own cash.

denovo
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Re: Looking for Actual Experiences with Umbrella Insurance

Post by denovo » Mon Jan 06, 2014 11:59 pm

Just curious, wouldn't your auto insurer have handled this claim? Or was the alleged claim higher than your auto liability coverage (500k?) hence the trigger.
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freebeer
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Re: Looking for Actual Experiences with Umbrella Insurance

Post by freebeer » Tue Jan 07, 2014 12:11 am

denovo wrote:Just curious, wouldn't your auto insurer have handled this claim? Or was the alleged claim higher than your auto liability coverage (500k?) hence the trigger.
and even if the claim was higher than the auto liability coverage limit, the auto insurer would still defend the claim (giving the driver at fault the chance but not requirement to hire independent counsel) so in the particular situation recounted it's not obvious why having umbrella insurance ultimately mattered either in terms of outcome or cost.

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bottlecap
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Re: Looking for Actual Experiences with Umbrella Insurance

Post by bottlecap » Tue Jan 07, 2014 12:32 am

I couldn,t find any statistics, but I know the umbrella coverage is invaded sometimes. This, if true, is eye-popping: http://www.osfirm.com/verdicts.html

JT

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pjstack
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Re: Looking for Actual Experiences with Umbrella Insurance

Post by pjstack » Tue Jan 07, 2014 3:09 am

I'm always surprised at the number of people who are afraid that springing for a couple of hundred bucks for a million dollars of coverage will somehow be "wasted".

Heck, buy the bare minimum of coverage required by law! Nothing is ever going to happen to you!

I certainly hope all my insurance premiums will be wasted. I really do. I hope my fire insurance is wasted. I hope my auto insurance is wasted. I especially hope my umbrella insurance is wasted.

But, just in case, I bought insurance. I think "just in case" is the entire rationale. (IMHO)

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frugaltype
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Re: Looking for Actual Experiences with Umbrella Insurance

Post by frugaltype » Tue Jan 07, 2014 4:10 am

obgraham wrote:Some years back I ran up the back of a guy stopped in the road.
Wandering slightly off topic, I was in an accident once where I was stopped, second in a queue of cars at a stop sign, and for some reason the first car, some giant SUV, started backing up...onto the hood of my car. I was trapped by the cars in back and couldn't get out the driver's side door because cars were coming in the other direction.

Fortunately, the SUV driver stopped before he went through my windshield and drove over me, but what the heck, someone doesn't notice he's driving over a car on a suburban road?? I was, of course, honking like crazy, and eventually either that or the change in altitude got through to him. There's no defense against a certain degree of stupidity.

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Re: Looking for Actual Experiences with Umbrella Insurance

Post by gkaplan » Tue Jan 07, 2014 7:23 am

What does it mean that umbrella coverage is invaded?
Gordon

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Re: Looking for Actual Experiences with Umbrella Insurance

Post by abuss368 » Tue Jan 07, 2014 7:40 am

gkaplan wrote:What does it mean that umbrella coverage is invaded?
Didn't you mention this a few years back?
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tadamsmar
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Re: Looking for Actual Experiences with Umbrella Insurance

Post by tadamsmar » Tue Jan 07, 2014 8:16 am

Here are actual experiences of those that had or did not have umbrella insurance:

http://www.galleninsurance.com/wp-conte ... Policy.pdf

http://www.cravenswarren.com/insurance/ ... ge298.html

Here are some actual experiences from my umbrella insurance provider:

http://www.rlipersonalumbrella.com/scenarios.asp

Find more by googling: actual claims umbrella insurance

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Re: Looking for Actual Experiences with Umbrella Insurance

Post by gkaplan » Tue Jan 07, 2014 8:19 am

abuss368 wrote:
gkaplan wrote:What does it mean that umbrella coverage is invaded?
Didn't you mention this a few years back?
No.
Gordon

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SnapShots
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Re: Looking for Actual Experiences with Umbrella Insurance

Post by SnapShots » Tue Jan 07, 2014 8:33 am

I have a good attorney friend currently working an auto accident case where there was a death. There is lots of preparation in making the survivors looked more harmed. It is very! sad a grandparent died. The other driver was definitely at fault, as he fell asleep at the wheel and drove into the other car. The attorneys are licking their chops over a large settlement and going after everyone remotely associated, including a doctor who prescribed a medicine that might have made the driver sleepy. No stone is being left unturned.
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Re: Looking for Actual Experiences with Umbrella Insurance

Post by runner9 » Tue Jan 07, 2014 8:36 am

gkaplan wrote:
abuss368 wrote:
gkaplan wrote:What does it mean that umbrella coverage is invaded?
Didn't you mention this a few years back?
No.
Regardless, I'd also like to know what it means. I know for sure I've never know what it means or even heard the term before. :D

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tadamsmar
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Re: Looking for Actual Experiences with Umbrella Insurance

Post by tadamsmar » Tue Jan 07, 2014 9:14 am

denovo wrote: I was looking for any BH's who have had any experience dealing with umbrella insurance, either as a defendant, plaintiff, or a professional (i.e. a lawyer in litigation).
Given that the coverage vs premium ratio of 10,000 to 1 is set by statisticians, would be perhaps unlikely to find any Boglehead experience among those that see this thread.

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zzcooper123
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Re: Looking for Actual Experiences with Umbrella Insurance

Post by zzcooper123 » Tue Jan 07, 2014 9:43 am

Just look at the cost per $1000 of coverage to see that Umbrella coverage is rarely used. The "price" is excellent.
I get insurance to pool my risk against once-in-lifetime, catastrophic events.
The practice of Law is the US is to grind down the other side with legal expenses. Both plaintiff and defense attorneys benefit from this relationship. Umbrella insurance puts a highly motivated attorney on retainer.

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Re: Looking for Actual Experiences with Umbrella Insurance

Post by dowse » Tue Jan 07, 2014 9:55 am

I would like to share my experience with umbrella insurance that I haven't seen mentioned. While an adult child was still living with us, he accumulated some speeding tickets on his driving record. After exceeding some unspecified limit, we were notified that our umbrella coverage was to be cancelled. It seems that just having someone with a bad driving record living under your roof was considered a risk that the insurance company wouldn't accept. Even having his own car with his own insurance wasn't good enough. When he moved out, we were able to re-apply and obtain coverage. Of course, having him move out and become independent has many other benefits, but that one we didn't see coming at all.

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gordon9775
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Re: Looking for Actual Experiences with Umbrella Insurance

Post by gordon9775 » Tue Jan 07, 2014 11:33 am

We just signed up for our first umbrella policy, and are well past $1M in assets to cover.

I did not know the benefits, and considering the risks, I'm only sorry I didn't sign up for this years ago, when our net worth crossed the million threshold. (The story our agent tells is dramatic: six months after taking out their first umbrella policy, an elderly couple she was insuring made a left turn in front of a motorcyclist. One point five million dollars in payouts later, the couple visited the agent in tears - not for the biker, sad to say, but in gratitude for the agent's advice that saved their nestegg. Just because it's a self-serving story doesn't mean you can't learn from it.)

To get umbrella, our insurer, like most insurers, requires us to cost-share a little, in the form of accepting higher (1K) deductibles on our auto policy. As I have not filed an auto claim in 20 years, this seemed a reasonable tradeoff.

For another $88 a year we can ensure up to $2M. When I turn fifty my premiums will decline and the extra million will effectively cost me what I am paying now. Of course, at that point my healthcare premiums will skyrocket ...

But there's a lesson here for me. Insurance, for the most part, is not a moving target -- we are. At age 30 I was a freelancer with a small IRA from my old desk job. Today I have a paid-off house, an inheritance, a bride, two sizable IRAs and therefore a whole helluva lot more risk. And yet except for the discussion with the agent when we first took out our mortgage, we did not have a conversation about how to deal with all this risk until a month ago. :oops:
Last edited by gordon9775 on Tue Jan 07, 2014 12:04 pm, edited 1 time in total.
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Re: Looking for Actual Experiences with Umbrella Insurance

Post by abuss368 » Tue Jan 07, 2014 11:54 am

gordon9775 wrote:We just signed up for our first umbrella policy, and are well past $1M in assets to cover.

I did not know the benefits, and considering the risks, I'm only sorry I didn't sign up for this years ago, when our net worth crossed the million threshold. (The story our agent tells is quite similar: six months after taking out their first umbrella policy, an elderly couple she was insuring made a left turn in front of a motorcyclist. One point five million dollars in payouts later, the couple visited the agent in tears - not for the biker, sad to say, but in gratitude for the agent's advice that saved their nestegg. Just because it's a self-serving story doesn't mean you can't learn from it.)

To get umbrella, our insurer, like most insurers, requires us to cost-share a little, in the form of accepting higher (1K) deductibles on our auto policy. As I have not filed an auto claim in 20 years, this seemed a reasonable tradeoff.

For another $88 a year we can ensure up to $2M. When I turn fifty my premiums will decline and the extra million will effectively cost me what I am paying now. Of course, at that point my healthcare premiums will skyrocket ...

But there's a lesson here for me. Insurance, for the most part, is not a moving target -- we are. At age 30 I was a freelancer with a small IRA from my old desk job. Today I have a paid-off house, an inheritance, a bride, two sizable IRAs and therefore a whole helluva lot more risk. And yet except for the discussion with the agent when we first took out our mortgage, we did not have a conversation about how to deal with all this risk until a month ago. :oops:
That is an incredible story.

Thank you for sharing.
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Re: Looking for Actual Experiences with Umbrella Insurance

Post by IlliniDave » Tue Jan 07, 2014 11:59 am

pjstack wrote:
I certainly hope all my insurance premiums will be wasted. I really do. I hope my fire insurance is wasted. I hope my auto insurance is wasted. I especially hope my umbrella insurance is wasted.
Life insurance is always the one I want most to be a "waste" :D

I'm willing to lower deductibles, and even coverage against loss for myself (e.g., drop collision on an older used vehicle). Liability is a realm where I don't mind being over-insured.
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tadamsmar
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Re: Looking for Actual Experiences with Umbrella Insurance

Post by tadamsmar » Tue Jan 07, 2014 12:33 pm

gordon9775 wrote:But there's a lesson here for me. Insurance, for the most part, is not a moving target -- we are. At age 30 I was a freelancer with a small IRA from my old desk job. Today I have a paid-off house, an inheritance, a bride, two sizable IRAs and therefore a whole helluva lot more risk. And yet except for the discussion with the agent when we first took out our mortgage, we did not have a conversation about how to deal with all this risk until a month ago. :oops:
Not sure there is a helluva lot more risk, there might be less risk. At 30 you had future earning potential (wages) that was not protected from being garnished in a law suit. Now, much of your net worth may be protected by law or regulations from law suits.
Last edited by tadamsmar on Tue Jan 07, 2014 12:34 pm, edited 1 time in total.

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Re: Looking for Actual Experiences with Umbrella Insurance

Post by freebeer » Tue Jan 07, 2014 12:34 pm

abuss368 wrote:
gordon9775 wrote:...The story our agent tells is quite similar: six months after taking out their first umbrella policy, an elderly couple she was insuring made a left turn in front of a motorcyclist. One point five million dollars in payouts later, the couple visited the agent in tears - not for the biker, sad to say, but in gratitude for the agent's advice that saved their nestegg. Just because it's a self-serving story doesn't mean you can't learn from it...
That is an incredible story...
Yes, and it might even be true. Of course that doesn't have any real bearing on whether this class of insurance is worthwhile. How many of Bogleheads carry earthquake riders on our homeowners insurance policies? Or LTC care insurance? Clearly there are heartstring-tugging stories aplenty where such policies paid out, or conversely the lack of insurance caused significant financial distress, but yet they are widely viewed as "bad deals" by BH's while somehow umbrella insurance is viewed by many BH's as "appropriate" or even "necessary" (for higher net-worth households). Perhaps it's partly psychological based on the perception of unlimited downside exposure of possible lawsuits, i.e. "losing everything", although even then the widely recommended umbrella insurance in the amount of one's net worth doesn't protect against a judgment that's 2x of one's net worth. It could be that because umbrella insurance is relatively cheap that it seems like a good deal vs. earthquake/LTC policies which are not but BH's are not in general inclined towards "long shot" bets which by implication umbrella insurance is. And we definitely don't buy flight insurance which is also a cheap "long shot" bet. So absent any real data on the probability of a claim utilizing an umbrella policy, and how actuarially fair such policies are (I suspect that they are way more profitable for both insurers and agents because there is less competition, mostly being adders sold to existing captured customers) it's not at all clear to me that it is appropriate or necessary and I remain puzzled on how people do a rational evaluation of which policies to get vs. avoid.

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gordon9775
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Re: Looking for Actual Experiences with Umbrella Insurance

Post by gordon9775 » Tue Jan 07, 2014 12:39 pm

Most of us are not in insurance. But we are all in personal finance. So what we do is weigh the amount we can expect to shell out for a product over the long-term against its potential long-term benefits and the potential long-term risks of not having that product. That's why I don't buy flight insurance but I do, when traveling abroad, purchase an inclusive travel insurance plan which may or may not include flight protection but does cover a number of other hazards (healthcare, non-redundant auto coverage, etc.).

Which reminds me, I neglected to share this aboce:

My premium increase when umbrella policy is added and deductibles are increased on auto policy: 0.5% :P

If the premium increase was 10%, say, we could have a conversation about quantifying risk. But there's no point here. And for most people reading this board that will be the case.

Basically I am shifting my coverage to exposure I care less about (paying $500 more in deductible on a fender-bender) to exposure I care more about (not losing my shirt).
Last edited by gordon9775 on Tue Jan 07, 2014 12:45 pm, edited 2 times in total.
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TimeRunner
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Re: Looking for Actual Experiences with Umbrella Insurance

Post by TimeRunner » Tue Jan 07, 2014 12:43 pm

I have nothing to document this, but I believe that just having Umbrella insurance might keep another party from engaging you in a liability lawsuit, because they know they are facing more than just you paying an attorney out of your pocket.
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Re: Looking for Actual Experiences with Umbrella Insurance

Post by Quasimodo » Tue Jan 07, 2014 12:46 pm

I thought pjstack's comments were very good, as were others who advocate carrying an umbrella policy.

Our umbrella policy premium isn't even noticeable in the context of driving expenses for one car. Like pjstack, I also hope our premium goes to pay someone else's claim.

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tadamsmar
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Re: Looking for Actual Experiences with Umbrella Insurance

Post by tadamsmar » Tue Jan 07, 2014 12:49 pm

TimeRunner wrote:I have nothing to document this, but I believe that just having Umbrella insurance might keep another party from engaging you in a liability lawsuit, because they know they are facing more than just you paying an attorney out of your pocket.
If you look at actual experiences:

http://www.bogleheads.org/forum/viewtop ... 0#p1913260

one is forced to admit the obvious: the thing that keeps another party from engaging you in a lawsuit is to avoid being liable for breaking someone's neck, damaging someone's brain, etc.

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TimeRunner
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Re: Looking for Actual Experiences with Umbrella Insurance

Post by TimeRunner » Tue Jan 07, 2014 1:23 pm

tadamsmar wrote:
TimeRunner wrote:I have nothing to document this, but I believe that just having Umbrella insurance might keep another party from engaging you in a liability lawsuit, because they know they are facing more than just you paying an attorney out of your pocket.
If you look at actual experiences:

http://www.bogleheads.org/forum/viewtop ... 0#p1913260

one is forced to admit the obvious: the thing that keeps another party from engaging you in a lawsuit is to avoid being liable for breaking someone's neck, damaging someone's brain, etc.
Yes. I should have said "questionable liability lawsuit". I don't disagree...like saying the best way to not get a DUI is to not drink and drive. Yes, quite true.
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Re: Looking for Actual Experiences with Umbrella Insurance

Post by livesoft » Tue Jan 07, 2014 1:35 pm

gordon9775 wrote:For another $88 a year we can ensure up to $2M. When I turn fifty my premiums will decline and the extra million will effectively cost me what I am paying now. Of course, at that point my healthcare premiums will skyrocket ...
Ha! Ha! You neglect to factor in the 18-year-old twin sons who are driving your cars when you are age fifty.
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Re: Looking for Actual Experiences with Umbrella Insurance

Post by denovo » Tue Jan 07, 2014 2:04 pm

livesoft wrote:
gordon9775 wrote:For another $88 a year we can ensure up to $2M. When I turn fifty my premiums will decline and the extra million will effectively cost me what I am paying now. Of course, at that point my healthcare premiums will skyrocket ...
Ha! Ha! You neglect to factor in the 18-year-old twin sons who are driving your cars when you are age fifty.

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Re: Looking for Actual Experiences with Umbrella Insurance

Post by BSA44 » Tue Jan 07, 2014 2:20 pm

freebeer wrote:
Yes, and it might even be true. Of course that doesn't have any real bearing on whether this class of insurance is worthwhile. How many of Bogleheads carry earthquake riders on our homeowners insurance policies? Or LTC care insurance? Clearly there are heartstring-tugging stories aplenty where such policies paid out, or conversely the lack of insurance caused significant financial distress, but yet they are widely viewed as "bad deals" by BH's while somehow umbrella insurance is viewed by many BH's as "appropriate" or even "necessary" (for higher net-worth households). Perhaps it's partly psychological based on the perception of unlimited downside exposure of possible lawsuits, i.e. "losing everything", although even then the widely recommended umbrella insurance in the amount of one's net worth doesn't protect against a judgment that's 2x of one's net worth. It could be that because umbrella insurance is relatively cheap that it seems like a good deal vs. earthquake/LTC policies which are not but BH's are not in general inclined towards "long shot" bets which by implication umbrella insurance is. And we definitely don't buy flight insurance which is also a cheap "long shot" bet. So absent any real data on the probability of a claim utilizing an umbrella policy, and how actuarially fair such policies are (I suspect that they are way more profitable for both insurers and agents because there is less competition, mostly being adders sold to existing captured customers) it's not at all clear to me that it is appropriate or necessary and I remain puzzled on how people do a rational evaluation of which policies to get vs. avoid.
+1
pjstack wrote:I'm always surprised at the number of people who are afraid that springing for a couple of hundred bucks for a million dollars of coverage will somehow be "wasted".
^An almost identical argument to this could be used for buying lottery tickets.

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Re: Looking for Actual Experiences with Umbrella Insurance

Post by frugaltype » Tue Jan 07, 2014 2:22 pm

freebeer wrote: How many of Bogleheads carry earthquake riders on our homeowners insurance policies?
i did, when I lived in earthquake country. although I don't remember if it was a rider or a separate policy. For some years it cost less than $100. Then came Loma Prieta and the premiums went through the roof.

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Re: Looking for Actual Experiences with Umbrella Insurance

Post by gordon9775 » Tue Jan 07, 2014 2:45 pm

Andrew0504 wrote:
pjstack wrote:I'm always surprised at the number of people who are afraid that springing for a couple of hundred bucks for a million dollars of coverage will somehow be "wasted".
^An almost identical argument to this could be used for buying lottery tickets.
Really?

Really?

:confused

Buy ticket, don't win, out some money.
Don't buy ticket, don't win, out no money.
Buy ticket, lightning strikes, BIG WIN.
Buy insurance, no claims, out some money.
Buy insurance, claim, out no money
Don't buy insurance, lightning strikes, CATASTROPHIC LOSS.
‘Well done, good and faithful servant. You have been faithful over a little; I will set you over much.’ Matthew 25:21

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Re: Looking for Actual Experiences with Umbrella Insurance

Post by livesoft » Tue Jan 07, 2014 2:57 pm

denovo wrote:Wouldn't it be smarter to transfer title to the kids to avoid liability?
OK, make them 16 years old or 17 years old. Or don't let them drive. But if you don't let them drive, they will probably be driving other people's cars. Plus you will not have trained them in driving nor will they have had much practice driving if you don't let them drive.

My rule: If my kid has a license and is in the car with me, they are driving because they need the practice. Plus I am a great backseat driver … among the best.
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Re: Looking for Actual Experiences with Umbrella Insurance

Post by BSA44 » Tue Jan 07, 2014 3:11 pm

gordon9775 wrote:
Andrew0504 wrote:
pjstack wrote:I'm always surprised at the number of people who are afraid that springing for a couple of hundred bucks for a million dollars of coverage will somehow be "wasted".
^An almost identical argument to this could be used for buying lottery tickets.
Really?

Really?

:confused

Buy ticket, don't win, out some money.
Don't buy ticket, don't win, out no money.
Buy ticket, lightning strikes, BIG WIN.
Buy insurance, no claims, out some money.
Buy insurance, claim, out no money
Don't buy insurance, lightning strikes, CATASTROPHIC LOSS.
You forgot two important lines:

Buy every kind of insurance that is <$300/year but potentially covers $1,000,000, claims, bankrupt (spent everything on premiums)
Buy every kind of insurance that is <$300/year but potentially covers $1,000,000, no claims, bankrupt (spent everything on premiums)

While umbrella insurance may potentially be a worthwhile investment, saying "it is worth it because it could save you $1 million" is a pointless statement. Alien Abduction Insurance would follow the same argument; should I buy it? Obviously this is an absurd example, but what about earthquake, flood, recession, terrorism, flight, divorce, ransom...etc. insurance? If you purchased every type of insurance that could prevent a catastrophic loss, you would be bankrupt. Simply looking at the amount it could save you without evaluating that actual risk of you incurring that cost is meaningless.

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Re: Looking for Actual Experiences with Umbrella Insurance

Post by Clearly_Irrational » Tue Jan 07, 2014 3:13 pm

freebeer wrote:How many of Bogleheads carry earthquake riders on our homeowners insurance policies? Or LTC care insurance?
I carry earthquake riders on all my properties. Flood insurance not so much since I always make sure not to buy in a flood zone. LTC doesn't seem to be a good bet at the moment.

I don't yet have an umbrella policy but I'm getting close to the point where I think it might make sense.

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Re: Looking for Actual Experiences with Umbrella Insurance

Post by PugetSoundguy » Tue Jan 07, 2014 3:14 pm

Umbrella coverage apparently came in handy for President Clinton.

http://www.propertycasualty360.com/1996 ... ella-cover

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Re: Looking for Actual Experiences with Umbrella Insurance

Post by tadamsmar » Tue Jan 07, 2014 4:01 pm

Andrew0504 wrote:
freebeer wrote:
Yes, and it might even be true. Of course that doesn't have any real bearing on whether this class of insurance is worthwhile. How many of Bogleheads carry earthquake riders on our homeowners insurance policies? Or LTC care insurance? Clearly there are heartstring-tugging stories aplenty where such policies paid out, or conversely the lack of insurance caused significant financial distress, but yet they are widely viewed as "bad deals" by BH's while somehow umbrella insurance is viewed by many BH's as "appropriate" or even "necessary" (for higher net-worth households). Perhaps it's partly psychological based on the perception of unlimited downside exposure of possible lawsuits, i.e. "losing everything", although even then the widely recommended umbrella insurance in the amount of one's net worth doesn't protect against a judgment that's 2x of one's net worth. It could be that because umbrella insurance is relatively cheap that it seems like a good deal vs. earthquake/LTC policies which are not but BH's are not in general inclined towards "long shot" bets which by implication umbrella insurance is. And we definitely don't buy flight insurance which is also a cheap "long shot" bet. So absent any real data on the probability of a claim utilizing an umbrella policy, and how actuarially fair such policies are (I suspect that they are way more profitable for both insurers and agents because there is less competition, mostly being adders sold to existing captured customers) it's not at all clear to me that it is appropriate or necessary and I remain puzzled on how people do a rational evaluation of which policies to get vs. avoid.
+1
pjstack wrote:I'm always surprised at the number of people who are afraid that springing for a couple of hundred bucks for a million dollars of coverage will somehow be "wasted".
^An almost identical argument to this could be used for buying lottery tickets.
The identical argument is indeed not only made, it's standard. When you map dollars with a utility function it can be the case that $1,000,000 > (10,000 X $100). Under a utility function, umbrella insurance and a lottery ticket can be a good deal.

If some sort of utility function is not applicable, then there would be no reason to by any kind of voluntary insurance because the expected value is negative.

ajcp
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Re: Looking for Actual Experiences with Umbrella Insurance

Post by ajcp » Tue Jan 07, 2014 4:08 pm

tadamsmar wrote:
The identical argument is indeed not only made, it's standard. When you map dollars with a utility function it can be the case that $1,000,000 > (10,000 X $100). Under a utility function, umbrella insurance and a lottery ticket can be a good deal.

If some sort of utility function is not applicable, then there would be no reason to by any kind of voluntary insurance because the expected value is negative.
Really? I've never seen those. One I can recall made the opposite argument (that even when no one wins for a few weeks and the expected value of a ticket is more than the price, the utility is still less unless your net worth is already in the millions). I'll have to see if I can find it.
Last edited by ajcp on Tue Jan 07, 2014 5:41 pm, edited 1 time in total.

Bungo
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Re: Looking for Actual Experiences with Umbrella Insurance

Post by Bungo » Tue Jan 07, 2014 4:30 pm

freebeer wrote: How many of Bogleheads carry earthquake riders on our homeowners insurance policies?
I certainly do. I also have a $5 million umbrella policy because I consider the maximum liability limits of my homeowner's and auto policies to be absurdly low. $300k maximum liability for a car accident? C'mon, this is Silicon Valley - there are people sharing freeways with me whose cars are worth nearly that much, to say nothing of their lives.

manwithnoname
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Re: Looking for Actual Experiences with Umbrella Insurance

Post by manwithnoname » Tue Jan 07, 2014 5:50 pm

denovo wrote:Umbrella insurance is a topic that comes up often, with a lot of debates over coverage policies , specifically whether or not opposing parties will settle for the coverage limits and the benefits of having attorneys for the insurance company providing a vigorous defense in all claims.

I was looking for any BH's who have had any experience dealing with umbrella insurance, either as a defendant, plaintiff, or a professional (i.e. a lawyer in litigation).
I don't have ay experience other than the following:

My daughter was on a jury that had to determine the amount of damages for a woman in her 20's who was badly disfigured and unable to work as a result of an auto accident. Driver of the other car admitted being at fault. Only question was how much damages to award. Jury awarded $2 million. I carry more than 2M in umbrella coverage so that I have that much more coverage above my auto and HO insurance. For the $400 a yr premium the umbrella coverage is priceless.
Last edited by manwithnoname on Tue Jan 07, 2014 5:55 pm, edited 1 time in total.

gkaplan
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Re: Looking for Actual Experiences with Umbrella Insurance

Post by gkaplan » Tue Jan 07, 2014 5:55 pm

It would be easier if you didn't have a car. I guess that's one good reason to live in a city, New York, Chicago, Portland, San Francisco, for example, that has relatively good and reliable public transit.
Gordon

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tadamsmar
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Re: Looking for Actual Experiences with Umbrella Insurance

Post by tadamsmar » Tue Jan 07, 2014 6:18 pm

ajcp wrote:
tadamsmar wrote:
The identical argument is indeed not only made, it's standard. When you map dollars with a utility function it can be the case that $1,000,000 > (10,000 X $100). Under a utility function, umbrella insurance and a lottery ticket can be a good deal.

If some sort of utility function is not applicable, then there would be no reason to by any kind of voluntary insurance because the expected value is negative.
Really? I've never seen those. One I can recall made the opposite argument (that even when no one wins for a few weeks and the expected value of a ticket is more than the price, the utility is still less unless your net worth is already in the millions). I'll have to see if I can find it.
A statistician once pointed out to me that the utility functions work for both insurance and lottery tickets.

For instance a $2 Powerball ticket in NC pays 38 million. The expected value is negative if $2 = 2/38,0000,000 times $38 million.

But is that ratio valid? $2 is essentially nothing, $38,000,000 is life changing and I know no other way to get it. Those amounts are in complete different categories.

jbmitt
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Re: Looking for Actual Experiences with Umbrella Insurance

Post by jbmitt » Tue Jan 07, 2014 6:28 pm

In previous posts, I've noted that I'm adjuster and I've handled claims with umbrella policies and losses well in excess of routine personal auto limits and standard umbrella policies.

Admittedly, I hope that you never have to use them. However, the reality of the matter is that many times 100k, 500k, 2 million limits are insufficient for catastrophic losses involving fatalities, and especially near death injuries with permanent disability and a lifetime of treatment. In my last fatality case, we placed a 2.3 million dollar reserve on the file as a result of a 2 vehicle motor vehicle accident.

I want to clarify umbrella vs excess coverage. Umbrella is generally broader than the underlying coverage, and can 'drop down' to cover some exposures that may not be covered under a standard ISO form policy. Excess coverage generally mirrors the underlying coverage. I'd recommend umbrella coverage based on the broader coverage. An insurer only has a duty to defend a claim up until the limits are exhausted. Umbrella policies are not frequently exhausted, but defense is included until the claim is resolved.

I do not currently have an umbrella policy as I'm single, no kids, do not own property, and have no real assets not shielded by retirement accounts. In most scenarios, if my personal auto limits are exhausted, my insurer would not issue payment without a release of all claims against me. It gets tricky when there are other factors like underinsured coverage, borrowed vehicles, high income earners, property owners.

Here is an example; lets say that I have a GF who is a resident physician. If I were driving her car and in an accident, her insurance would pay first (insurance follows the car) and then mine would pay (although hers may argue that I'm an unlisted driver, and mine would argue that it is a non-owned vehicle). It could be a pro-rata payment where each policy pays based on policy language primary vs. excess or portion of total limits. For my limits my insurer could get likely get me out of the claim/lawsuit, but hers may not and she may be faced with a 'negligent entrustment' count due to her future income potential.

Umbrella coverage, would defend me until the claim resolved, and it would protect her above her limit. In my experience, some plaintiff attorneys will back down once they know the claim will settle for the policy limits or if they are fighting an uphill battle against a much higher limit policy. It is a common tactic to serve discovery to obtain the policy information, and all policies that may offer coverage for a loss.

In a previous post, I noted that with low limits, an insurer has challenges to even litigate 'frivolous' matters just based on the off chance of an excess verdict. I will purchase umbrella coverage once I obtain larger assets, get married, have kids, or find that sugar mama physician.

dgdevil
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Re: Looking for Actual Experiences with Umbrella Insurance

Post by dgdevil » Tue Jan 07, 2014 6:56 pm

I hope the truck driver who crashed into Honey Boo Boo and family after allegedly running a red light has umbrella maxima. You know they'll take him to the cleaners.

http://www.dailymail.co.uk/tvshowbiz/ar ... s-car.html

Geologist
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Re: Looking for Actual Experiences with Umbrella Insurance

Post by Geologist » Tue Jan 07, 2014 7:02 pm

The general advice on insurance is to insure against catastrophic losses (so, for example, have high deductibles). An umbrella policy fits this category.

All sorts of insurance is seldom collected upon: much term life insurance, flood insurance, earthquake riders. This doesn't mean the premiums spent were wasted, because the insured was protected against the unlikely catastrophe while the policy was in force.

These policies, umbrellas in particular, are not for everyone, but there are certainly people who can benefit from them. I figure that I have enough net worth now that I can afford to move the risk (both the loss and the defense cost) onto an insurance company.

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dm200
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Re: Looking for Actual Experiences with Umbrella Insurance

Post by dm200 » Tue Jan 07, 2014 7:13 pm

1. According to reports like this http://www.propertycasualty360.com/1996 ... ella-cover President Bill Clinton's umbrella policy paid a significant amount towards legal bills.

2. From personal experience, lawsuits related to business activities are not covered.

RetiredIn2011
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Re: Looking for Actual Experiences with Umbrella Insurance

Post by RetiredIn2011 » Tue Jan 07, 2014 10:00 pm

Hit a pedestrian about 20 years ago. Thought I killed her. Turned out she had a bone chip on her knee. While I was greatly relieved to have not more seriously hurt her, your thoughts then turn to things like losing your house, savings, kids college, etc.

I had saved money by only taking the lowest liability coverage that the state required. I believe it was $100K. Big dumb mistake. The outcome was that she sued for $100k. The insurance company's lawyer said that we would have to prove that the accident was completely her fault (jay walking). In the end they decided to split the difference and paid her $50k. It wasn't worth fighting.

I purchased my umbrella policy the month after the accident. Had I had it before the accident, I would have slept many more nights. I recommend it to any friends when the subject comes up. The cost vs risk mitigation is a no brainer. I now carry a $2M policy and look forward to never having to use it.

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BolderBoy
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Re: Looking for Actual Experiences with Umbrella Insurance

Post by BolderBoy » Tue Jan 07, 2014 10:53 pm

What folks so often seem to overlook about an umbrella policy is that you are buying a lawyer - the larger the umbrella the more lawyers the company will put to work defending the claim. Even if you win, the legal fees can be enormous along the way. Without the umbrella, you pay all the legal fees.

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steadyeddy
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Re: Looking for Actual Experiences with Umbrella Insurance

Post by steadyeddy » Tue Jan 07, 2014 11:31 pm

Geologist wrote:The general advice on insurance is to insure against catastrophic losses (so, for example, have high deductibles). An umbrella policy fits this category.
+1

Purchasing insurance never makes mathematical sense (e.g. positive expected outcome). You typically lose at least 40% of your premium to underwriting costs, but you purchase it anyway for those risks you cannot afford to self-insure. How many people arguing against buying umbrella coverage in this thread are also paying to insure against a loss they can afford (comprehensive auto coverage, iphone damage, etc)?

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