Do you have an umbrella policy?

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visualguy
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Re: Do you have an umbrella policy?

Post by visualguy » Wed Jan 10, 2018 1:22 am

It costs so little because the insurance companies have to pay only extremely rarely on these... Some umbrella (say, $2M) makes sense, but the question is if it ever happens in the real world that people (individuals, not trucking companies or similar) lose personal assets due to a traffic accident even when they have $2M in liability coverage. It would be interesting to hear from someone who knows - I've definitely been curious about this. As long as this information is hard to find, I guess the safe thing to do is to err on the side of over-insuring...

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Sandtrap
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Re: Do you have an umbrella policy?

Post by Sandtrap » Wed Jan 10, 2018 1:25 am

Yes.
I posted a thread on this not too long ago.
Responses were outstanding and very helpful
viewtopic.php?f=1&t=233708&hilit=umbrella+policy+usaa
j :D

Hogan773
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Re: Do you have an umbrella policy?

Post by Hogan773 » Wed Jan 10, 2018 10:06 am

visualguy wrote:
Wed Jan 10, 2018 12:40 am
The important question is what actually happens in the real world in terms of judgement against individual drivers (not companies). My understanding based on previous threads on this topic, and some other research, is that a scenario where someone gets a judgement over $2M that goes after their personal assets pretty much doesn't happen for traffic accidents (without DUI or some truly gross negligence).

It's one of those things that seems like a real risk, but I haven't seen information that it actually happens in practice. Seems like more information is needed to determine if an umbrella over $2M is of any extra benefit, regardless of assets. Unless there was some alarming information/examples on this from knowledgeable sources, I don't think I would lose any sleep with "only" $2M in umbrella even with much more in assets. Sure, the premiums are pretty low for umbrella, but there's a good reason for that, and it's still money that could be used for something else.
Yes you are thinking exactly as I am

When buying insurance one must be making a determination of whether there is any real likelihood of occurrence. While I know "anything can happen" I take some comfort that neither my wife nor I drink and drive nor do we drive "recklessly". So yes we could I suppose get into a freak accident where we T-bone a bus full of 24 year old neurosurgeons and now we have gazillions of dollars of claim but your question is still good...in an ACCIDENT where there is no malicious intent or recklessness, there must be some standard that says the defendant was part of an ACCIDENT and therefore cleaning them out of house and home and all future earnings is extreme.

Currently my head is at a place where I think $2mm or maybe $3mm is enough regardless of net worth. That said, when my son gets to driving age in the next 3 years I could definitely see myself splurging to buy up to a higher level of umbrella.

Like said above, yes it might be "only $250 or $300 or $400 more per year" for higher umbrella limits but the money could go to other things too. I guess the logic is that if your net worth is truly $5mm or $10mm or whatever then you can afford to pay the extra $400 per year to really get deep liability coverage as asset protection strategy, even if the probability is incredibly low that you would ever really get a judgment against you for traffic accidents etc.

Hogan773
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Re: Do you have an umbrella policy?

Post by Hogan773 » Wed Jan 10, 2018 10:25 am

Sandtrap wrote:
Wed Jan 10, 2018 1:25 am
Yes.
I posted a thread on this not too long ago.
Responses were outstanding and very helpful
viewtopic.php?f=1&t=233708&hilit=umbrella+policy+usaa
j :D
I read your thread and I really liked the following post from TXInjn:

To use an imperfect analogy: if you were constructing a building at the seashore, would your seawall be the height of the largest wave (plus some margin), or the height of the building? Clearly what matters is the tallest wave you might encounter.

As others have said, ANY size umbrella policy can be defeated with a large enough liability - however, once you get past $2M or so, there is a vanishingly small likelihood in general, and even lower probability among Bogleheads, that you would be liable for that amount. Is it possible you could crash into a car of surgeons and VCs who're carpooling together, while you're drunk and texting? Sure - but very low chance of that happening to this crowd.


Great analogy of the seawall being designed to protect against the highest wave and not the height of the [portfolio]. Yes people can always pull out the one in a million example of a settlement that is $20 million and blows way past your whole portfolio plus insurance, but that has to be so far down the tail risk as to just be random noise really. If that did happen then I have some IRA assets and 401K assets and hopefully my wife and/or I can still be working, so I don't think we would be on the streets in a cardboard box in any case.

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Sandtrap
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Re: Do you have an umbrella policy?

Post by Sandtrap » Wed Jan 10, 2018 10:42 am

Hogan773 wrote:
Wed Jan 10, 2018 10:25 am
Sandtrap wrote:
Wed Jan 10, 2018 1:25 am
Yes.
I posted a thread on this not too long ago.
Responses were outstanding and very helpful
viewtopic.php?f=1&t=233708&hilit=umbrella+policy+usaa
j :D
I read your thread and I really liked the following post from TXInjn:

To use an imperfect analogy: if you were constructing a building at the seashore, would your seawall be the height of the largest wave (plus some margin), or the height of the building? Clearly what matters is the tallest wave you might encounter.

As others have said, ANY size umbrella policy can be defeated with a large enough liability - however, once you get past $2M or so, there is a vanishingly small likelihood in general, and even lower probability among Bogleheads, that you would be liable for that amount. Is it possible you could crash into a car of surgeons and VCs who're carpooling together, while you're drunk and texting? Sure - but very low chance of that happening to this crowd.


Great analogy of the seawall being designed to protect against the highest wave and not the height of the [portfolio]. Yes people can always pull out the one in a million example of a settlement that is $20 million and blows way past your whole portfolio plus insurance, but that has to be so far down the tail risk as to just be random noise really. If that did happen then I have some IRA assets and 401K assets and hopefully my wife and/or I can still be working, so I don't think we would be on the streets in a cardboard box in any case.
Yes.
Thanks to the advice on that thread, we consolidated all our policies into USAA, ended up with higher coverages for not much more in total premiums. The umbrella coverage ended up about 30% greater than net worth. I still have R/E rentals so my potential liabilities may be greater than a retired wage earner with only a passive portfolio. For myself, the "sleep factor" is worth the little bit more in extra premiums.
Thanks everyone for your help.
mahalo,
j :D

michaeljc70
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Re: Do you have an umbrella policy?

Post by michaeljc70 » Wed Jan 10, 2018 12:01 pm

visualguy wrote:
Wed Jan 10, 2018 1:22 am
It costs so little because the insurance companies have to pay only extremely rarely on these... Some umbrella (say, $2M) makes sense, but the question is if it ever happens in the real world that people (individuals, not trucking companies or similar) lose personal assets due to a traffic accident even when they have $2M in liability coverage. It would be interesting to hear from someone who knows - I've definitely been curious about this. As long as this information is hard to find, I guess the safe thing to do is to err on the side of over-insuring...
As you said, the payouts are extremely rare. Therefore, having a judgement for more than the policy limit would be even rarer. I'm sure it happens though. If a doctor that made $700k a year gets killed in an accident that is your fault, I doubt the family is going to be happy with $1M or $2M or stop there IF they think there is more to be had. So, you could have a $1M NW, $1M umbrella and still lose everything. But how far are you going to go to insure something extremely unlikely to happen?

Hogan773
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Re: Do you have an umbrella policy?

Post by Hogan773 » Wed Jan 10, 2018 12:18 pm

michaeljc70 wrote:
Wed Jan 10, 2018 12:01 pm
visualguy wrote:
Wed Jan 10, 2018 1:22 am
It costs so little because the insurance companies have to pay only extremely rarely on these... Some umbrella (say, $2M) makes sense, but the question is if it ever happens in the real world that people (individuals, not trucking companies or similar) lose personal assets due to a traffic accident even when they have $2M in liability coverage. It would be interesting to hear from someone who knows - I've definitely been curious about this. As long as this information is hard to find, I guess the safe thing to do is to err on the side of over-insuring...
As you said, the payouts are extremely rare. Therefore, having a judgement for more than the policy limit would be even rarer. I'm sure it happens though. If a doctor that made $700k a year gets killed in an accident that is your fault, I doubt the family is going to be happy with $1M or $2M or stop there IF they think there is more to be had. So, you could have a $1M NW, $1M umbrella and still lose everything. But how far are you going to go to insure something extremely unlikely to happen?
What I don't appreciate is the extent of "fault" and how it can translate into a huge judgment. I understand DUI etc but if you are driving and a bird flies in front of your window and you are distracted for a second and you end up hitting the doctor's car, a jury will still say that you are at "fault" because your car hit theirs and thus you are on the hook to pay that family all of your $10mm in assets and ruin your life? It would seem that even in our totally screwed up legal system that we aren't seeing judgments like these very often.

The other thing to keep in mind is what was mentioned before - easy money in a settlement vs risk of a trial. If you are the doctor's family you might say it is better to just take a $2mm settlement, rather than spend years going through a trial to maybe end up grabbing $5mm but you might end up with much less or nothing at all. Maybe the doctor was looking at his phone too while driving. Lots of things can happen in a trial.

Hogan773
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Re: Do you have an umbrella policy?

Post by Hogan773 » Wed Jan 10, 2018 12:42 pm

So right now I am paying $440 on a $2mm umbrella from State Farm.

If I move my insurance over to a new company I could pay $340 on a $2mm or $410 on a $3mm.

Would you guys pocket the $100 savings (I am also going to save about $250 additional on Homeowners) and leave umbrella the same or would you "buy up" to $3mm and only pocket $30 savings?

michaeljc70
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Re: Do you have an umbrella policy?

Post by michaeljc70 » Wed Jan 10, 2018 2:19 pm

Hogan773 wrote:
Wed Jan 10, 2018 12:42 pm
So right now I am paying $440 on a $2mm umbrella from State Farm.

If I move my insurance over to a new company I could pay $340 on a $2mm or $410 on a $3mm.

Would you guys pocket the $100 savings (I am also going to save about $250 additional on Homeowners) and leave umbrella the same or would you "buy up" to $3mm and only pocket $30 savings?
I think the most common amount for an umbrella is probably $1M. I'd stick with the $2M. It is only $70 more dollars, but what if the $4M is only another $70 on top of that? You have to stop somewhere.

Pigeye Brewster
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Re: Do you have an umbrella policy?

Post by Pigeye Brewster » Wed Jan 10, 2018 4:40 pm

michaeljc70 wrote:
Wed Jan 10, 2018 12:01 pm
If a doctor that made $700k a year gets killed in an accident that is your fault, I doubt the family is going to be happy with $1M or $2M or stop there IF they think there is more to be had.
All the more reason to have a "Millionaire Next Door" lifestyle and not give anyone a basis for thinking there is more to be had... :beer

Hogan773
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Re: Do you have an umbrella policy?

Post by Hogan773 » Wed Jan 10, 2018 5:04 pm

Pigeye Brewster wrote:
Wed Jan 10, 2018 4:40 pm
michaeljc70 wrote:
Wed Jan 10, 2018 12:01 pm
If a doctor that made $700k a year gets killed in an accident that is your fault, I doubt the family is going to be happy with $1M or $2M or stop there IF they think there is more to be had.
All the more reason to have a "Millionaire Next Door" lifestyle and not give anyone a basis for thinking there is more to be had... :beer
Haha true but I'm sure any lawyer will research their way right through that in about 2 mins....

3funder
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Re: Do you have an umbrella policy?

Post by 3funder » Wed Jan 10, 2018 5:12 pm

No. I've never been particularly interested in purchasing one.

j0nnyg1984
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Re: Do you have an umbrella policy?

Post by j0nnyg1984 » Wed Jan 10, 2018 5:23 pm

yes, 1mm, it's $127 a year through state farm.

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samsoes
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Re: Do you have an umbrella policy?

Post by samsoes » Wed Jan 10, 2018 7:55 pm

Umbrella policy liability limits don't shield or protect assets. That seems to be a misconception.

Due to a devastating tragedy here in my local community, I've come to learn that an umbrella policy only means a bigger payday for plaintiffs in a lawsuit. If you have $1M in assets and a $2M umbrella policy, that means $3M is up for grabs in such a lawsuit.
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AnimalSpirits
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Re: Do you have an umbrella policy?

Post by AnimalSpirits » Wed Jan 10, 2018 9:45 pm

Did a bunch of folks skip over my example of a 3 year old being injured that resulted in a $4MM settlement? The liability costs aren't for injuring rock stars and doctors, it's the cost of long term care. Sorry to be morbid, but the survival rates have much improved, but the medical costs have also skyrocketed. An example come to my mind of a crash victim with severe burns that maybe in years past would have died, but survived burns and has a $9MM settlement.

There's a reason your insurance company asks you if you have a pool, trampoline, or dogs - they don't ask if you're friends with doctors.

Very interesting to see the writing trying to save a few bucks on probably the only product that can save their entire life savings, and also buying policies solely based on the price and not having any idea of the exclusions or gaps. Does buying the cheapest thing ever work out? If you're liable for seriously injuring someone do you want the cheapest lawyer and insurance company defending you?

Do you ever see the billboards, ads on TV, and even on the radio for lawyers looking to "help" those that have been injured? There's an entire industry, ten of thousands of career lawyers that earn billions in settlements annually. If you want to go it alone against those guys, good luck!

AnimalSpirits
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Re: Do you have an umbrella policy?

Post by AnimalSpirits » Wed Jan 10, 2018 9:51 pm

Maybe everyone is an expert in reading insurance policies, but one example of someone who wasn't when purchasing insurance:
The claimant had personal auto coverage with liability limits of 250/500 and a $5 million personal umbrella. The umbrella was written with a different carrier than the underlying coverage and was subject to an underlying bodily injury limit of $500,000.

Client sustained serious injuries when he was involved in an automobile accident while using his father’s vehicle. The underlying carrier afforded defense and indemnification protection for the agency’s client subject to the underlying $250,000 bodily injury limit.

The umbrella carrier advised that its policy would not be triggered for any judgment, settlement or verdict rendered between the $250,000 actual underlying bodily injury limit and the $500,000 required limit mandated under the excess policy.
Oops, a $250,000 mistake.

michaeljc70
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Re: Do you have an umbrella policy?

Post by michaeljc70 » Wed Jan 10, 2018 11:08 pm

AnimalSpirits wrote:
Wed Jan 10, 2018 9:45 pm
Did a bunch of folks skip over my example of a 3 year old being injured that resulted in a $4MM settlement? The liability costs aren't for injuring rock stars and doctors, it's the cost of long term care. Sorry to be morbid, but the survival rates have much improved, but the medical costs have also skyrocketed. An example come to my mind of a crash victim with severe burns that maybe in years past would have died, but survived burns and has a $9MM settlement.

There's a reason your insurance company asks you if you have a pool, trampoline, or dogs - they don't ask if you're friends with doctors.

Very interesting to see the writing trying to save a few bucks on probably the only product that can save their entire life savings, and also buying policies solely based on the price and not having any idea of the exclusions or gaps. Does buying the cheapest thing ever work out? If you're liable for seriously injuring someone do you want the cheapest lawyer and insurance company defending you?

Do you ever see the billboards, ads on TV, and even on the radio for lawyers looking to "help" those that have been injured? There's an entire industry, ten of thousands of career lawyers that earn billions in settlements annually. If you want to go it alone against those guys, good luck!
An example doesn't have to be the most common case. Do you have specific statistics that show that judgements of long-term care cost cases are much more common than deaths of high earners? Do you realize if you kill someone that is 25 years old making a modest living their projected income over their lifetime could result in a judgement of millions? So paying more always yields a better lawyer? You sound like an insurance salesman.

michaeljc70
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Re: Do you have an umbrella policy?

Post by michaeljc70 » Wed Jan 10, 2018 11:08 pm

AnimalSpirits wrote:
Wed Jan 10, 2018 9:45 pm
Did a bunch of folks skip over my example of a 3 year old being injured that resulted in a $4MM settlement? The liability costs aren't for injuring rock stars and doctors, it's the cost of long term care. Sorry to be morbid, but the survival rates have much improved, but the medical costs have also skyrocketed. An example come to my mind of a crash victim with severe burns that maybe in years past would have died, but survived burns and has a $9MM settlement.

There's a reason your insurance company asks you if you have a pool, trampoline, or dogs - they don't ask if you're friends with doctors.

Very interesting to see the writing trying to save a few bucks on probably the only product that can save their entire life savings, and also buying policies solely based on the price and not having any idea of the exclusions or gaps. Does buying the cheapest thing ever work out? If you're liable for seriously injuring someone do you want the cheapest lawyer and insurance company defending you?

Do you ever see the billboards, ads on TV, and even on the radio for lawyers looking to "help" those that have been injured? There's an entire industry, ten of thousands of career lawyers that earn billions in settlements annually. If you want to go it alone against those guys, good luck!
An example doesn't have to be the most common case. Do you have specific statistics that show that judgements of long-term care cost cases are much more common than deaths of high earners? Do you realize if you kill someone that is 25 years old making a modest living their projected income over their lifetime could result in a judgement of millions? So paying more always yields a better lawyer? You sound like an insurance salesman.

AnimalSpirits
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Re: Do you have an umbrella policy?

Post by AnimalSpirits » Thu Jan 11, 2018 1:01 am

michaeljc70 wrote:
Wed Jan 10, 2018 11:08 pm

An example doesn't have to be the most common case. Do you have specific statistics that show that judgements of long-term care cost cases are much more common than deaths of high earners? Do you realize if you kill someone that is 25 years old making a modest living their projected income over their lifetime could result in a judgement of millions? So paying more always yields a better lawyer? You sound like an insurance salesman.
Well here's a statistic: 2.5 million Americans went to the emergency department (ED)—and nearly 200,000 were then hospitalized—for crash injuries in 2012. So the most common case is not death, but death is much less expensive than paralysis.

One of my points is that long-term medical costs are mutually exclusive from income rates, and that the catastrophic cost is not in killing someone, even if they are a high earner (highest earning years are typically at end of career so future earnings are greatly reduced). The dependents of someone 25 years old with modest income will typically take a lump sum that has been discounted for future years or a structured settlement compared to costs of lifetime care if that person lives.

Getting professional advice from an independent agent for a product most people can't understand fully might result in paying more, but at least you'll be better informed and if they screw up it's on them vs. a layman clicking on a website only comparing a limit and a price. Please enlighten me if I'm mistaken about your knowledge of umbrella coverage.

I'm a great salesman trying to convince people to pay $100 more per year, wow at 15% commission I'd only have to make like 3000 sales to earn a living wage!

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Re: Do you have an umbrella policy?

Post by boglerdude » Thu Jan 11, 2018 4:10 am

No one's suggesting to go without an umbrella. We're just trying to find a rationale for 1? 5? 10? 100MM of coverage?
samsoes wrote:
Wed Jan 10, 2018 7:55 pm
Due to a devastating tragedy here in my local community, I've come to learn that an umbrella policy only means a bigger payday for plaintiffs in a lawsuit. If you have $1M in assets and a $2M umbrella policy, that means $3M is up for grabs in such a lawsuit.
Well, details please. . .do we finally have an example of a 1MM+ settlement offer being rejected, and then a judgement exceeding the insurance? :)

deltaneutral83
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Re: Do you have an umbrella policy?

Post by deltaneutral83 » Thu Jan 11, 2018 12:05 pm

AnimalSpirits wrote:
Wed Jan 10, 2018 9:45 pm
Did a bunch of folks skip over my example of a 3 year old being injured that resulted in a $4MM settlement? The liability costs aren't for injuring rock stars and doctors, it's the cost of long term care.
Probabilities. Having a $2MM umbrella reduces your exposure significantly over none at all. Someone of sizable assets worth going after who causes an auto accident that winds up putting someone in a wheel chair for 40 years would blow through $10MM in health care costs I would guess. Do umbrellas even go past $5MM for regular citizens? My point is that there is some exposure you can't insure against but it's about reducing that to a SWAN level. I personally incorporate this knowledge into my driving and would never have a pool anyhow, and the boat thing is certainly a risk. My guess is that someone with wealth to lose would be much more concerned about their 16/17 year old kid in a car/boat causing harm than they would be worried about themselves or their spouse doing harm. I don't have any expertise on the subject, just thinking out loud.

ncbill
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Re: Do you have an umbrella policy?

Post by ncbill » Thu Jan 11, 2018 12:36 pm

AnimalSpirits wrote:
Wed Jan 10, 2018 9:45 pm
Did a bunch of folks skip over my example of a 3-year-old being injured that resulted in a $4.5MM settlement? The liability costs aren't for injuring rock stars and doctors, it's the cost of long-term care. Sorry to be morbid, but the survival rates have much improved, but the medical costs have also skyrocketed. An example comes to my mind of a crash victim with severe burns that maybe in years past would have died, but survived burns and has a $9MM settlement.
Again, a settlement is voluntary.
No context, but that amount likely means the truck was owned by a company, not an individual with a $5 million umbrella.

Years ago I was peripherally involved in a nasty personal injury suit against my employer.

The plaintiff, requiring long-term care, rejected a $2 million (IIRC) settlement and went to trial, which took several years, but lost.

So, bird in the hand vs. maybe none in the bush -- which would you choose as plaintiff, or recommend as their attorney?

Hogan773
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Re: Do you have an umbrella policy?

Post by Hogan773 » Thu Jan 11, 2018 1:00 pm

boglerdude wrote:
Thu Jan 11, 2018 4:10 am
No one's suggesting to go without an umbrella. We're just trying to find a rationale for 1? 5? 10? 100MM of coverage?
samsoes wrote:
Wed Jan 10, 2018 7:55 pm
Due to a devastating tragedy here in my local community, I've come to learn that an umbrella policy only means a bigger payday for plaintiffs in a lawsuit. If you have $1M in assets and a $2M umbrella policy, that means $3M is up for grabs in such a lawsuit.
Well, details please. . .do we finally have an example of a 1MM+ settlement offer being rejected, and then a judgement exceeding the insurance? :)
Yes this is what I am seeking. A view on the right level and I don't think it is as simple as just "as much as your net worth". I sense that this mantra is simple and convenient (similar to "buy a diamond worth 3 months of salary") and would be useful in selling people an umbrella when they don't have one. And the reality is that there are lots more people with net worth of 1mm or 2mm vs 10mm or 20mm.

So the thing everyone is discussing is:

1) there really ISN'T any linkage between an umbrella and "covering your assets" especially when your assets grow higher. I guess there might be at lower levels if one assumes that the vast majority of settlements could be in the 1mm to 2mm range, so if your net worth was 2mm and you had a 2mm umbrella you would have "protected" your assets vs having 2mm net worth and NO umbrella. But if we are going to start throwing out hyperbolic judgments of 10mm or 20mm or 50mm then there is nothing special about an umbrella that protects the rest of your assets above it.

2) there is value to the umbrella of creating a layer of coverage for you and effectively buying legal representation from a company with a lot to lose.

3) choosing the right level of umbrella must therefore at some point include taking a view on the probability of likely judgments vs the cost to cover those. Not just "cover all your assets" since as we established, there is no rule that says if you have a big umbrella then people can't go after the assets above and beyond the umbrella. We could choose to buy up huge amounts of umbrella for the .00000001% chance of the $100mm judgment against us, but we probably can't even get $100mm umbrella coverage and if we did it would be prohibitively expensive. Likewise it might be that 2mm or 3mm umbrella effectively shields us from 99.5% of the likely judgments we could face in reality. That number is what we are all contemplating. If we are spending "only" $250 a year more to buy ourselves a $5mm umbrella instead of $3mm and that is really just giving us protection on a 0.025% likely scenario then maybe it is not a wise use of cash. At some point you need to assume a little bit of tail risk. If an insurer was offering an "Asteroid Rider" that was only $75 a year and covered you up to $1mm should an asteroid fall directly on your house, not sure many would buy it.

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Ody
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Re: Do you have an umbrella policy?

Post by Ody » Thu Jan 11, 2018 2:14 pm

I've been interested in an Umbrella Policy but we don't own a house yet.

Is it worth getting one if you don't own a home? We have auto insurance but that's about it.
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neilpilot
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Re: Do you have an umbrella policy?

Post by neilpilot » Thu Jan 11, 2018 2:19 pm

Ody wrote:
Thu Jan 11, 2018 2:14 pm
I've been interested in an Umbrella Policy but we don't own a house yet.

Is it worth getting one if you don't own a home? We have auto insurance but that's about it.
You are probably more at risk of exceeding your liability insurance limits in your car than at home. Also, one aspect that's often overlooked is the potential of liability for an action not related to your home or auto operation. I believe, with the exception of business/employment activities and illegal activity, the umbrella covers most all liability.

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Earl Lemongrab
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Re: Do you have an umbrella policy?

Post by Earl Lemongrab » Thu Jan 11, 2018 2:59 pm

Renter's insurance is pretty cheap, and with that and auto you should have no problem with getting an umbrella. As noted, you're much more likely to get a large judgment with an auto accident, especially if you don't have dogs or a pool.
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Re: Do you have an umbrella policy?

Post by golfCaddy » Fri Jan 12, 2018 2:25 pm

visualguy wrote:
Wed Jan 10, 2018 1:22 am
It costs so little because the insurance companies have to pay only extremely rarely on these... Some umbrella (say, $2M) makes sense, but the question is if it ever happens in the real world that people (individuals, not trucking companies or similar) lose personal assets due to a traffic accident even when they have $2M in liability coverage. It would be interesting to hear from someone who knows - I've definitely been curious about this. As long as this information is hard to find, I guess the safe thing to do is to err on the side of over-insuring...
I don't think a perfect answer to your question exists, but I found these threads interesting. One of them has comments from an attorney that litigated personal injury cases. The rest have real life examples of an umbrella being used or large verdicts.*
viewtopic.php?t=208874
viewtopic.php?t=130042
viewtopic.php?t=193378
viewtopic.php?t=131550

jumpy
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Re: Do you have an umbrella policy?

Post by jumpy » Wed Jan 17, 2018 10:19 am

AnimalSpirits wrote:
Wed Jan 10, 2018 9:45 pm
Did a bunch of folks skip over my example of a 3 year old being injured that resulted in a $4MM settlement? The liability costs aren't for injuring rock stars and doctors, it's the cost of long term care. Sorry to be morbid, but the survival rates have much improved, but the medical costs have also skyrocketed. An example come to my mind of a crash victim with severe burns that maybe in years past would have died, but survived burns and has a $9MM settlement.

There's a reason your insurance company asks you if you have a pool, trampoline, or dogs - they don't ask if you're friends with doctors.

Very interesting to see the writing trying to save a few bucks on probably the only product that can save their entire life savings, and also buying policies solely based on the price and not having any idea of the exclusions or gaps. Does buying the cheapest thing ever work out? If you're liable for seriously injuring someone do you want the cheapest lawyer and insurance company defending you?

Do you ever see the billboards, ads on TV, and even on the radio for lawyers looking to "help" those that have been injured? There's an entire industry, ten of thousands of career lawyers that earn billions in settlements annually. If you want to go it alone against those guys, good luck!
Great post. Turn on the TV and you see non-stop commercials for slip-and-fall lawyers in Michigan. Drive to Chicago and it's billboard after billboard of slip-and-fall guys in Indiana and Illinois.

I have $1M umbrella coverage, but am going to up it after reading this thread.

Unless tort reform happens (LOL!!), then lawyers will remain a very real threat to your future. Better safe than sorry.

To put it in investing terms, would you put all your money in Google? I would say the chances they go out of business any time soon is near zero, but you'd still be foolish to put your life savings in their stock. In the same vein, it would be foolish to discount the threat that trial lawyers present. True, they probably won't steal all of your money, but why take the chance?

michaeljc70
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Re: Do you have an umbrella policy?

Post by michaeljc70 » Wed Jan 17, 2018 2:13 pm

I will confess, I should have one but don't. I got a quote a while ago and it was pretty high I thought (maybe $350 for $1M). I haven't been with my insurance company that long so I really don't want to change. Maybe I will put it all out to quote again. The fact that I haven't gotten the umbrella yet tells me it doesn't keep me up at night.

neilpilot
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Location: Memphis area

Re: Do you have an umbrella policy?

Post by neilpilot » Wed Jan 17, 2018 2:50 pm

michaeljc70 wrote:
Wed Jan 17, 2018 2:13 pm
I will confess, I should have one but don't. I got a quote a while ago and it was pretty high I thought (maybe $350 for $1M). I haven't been with my insurance company that long so I really don't want to change. Maybe I will put it all out to quote again. The fact that I haven't gotten the umbrella yet tells me it doesn't keep me up at night.
It's the liability claim that will keep you up at night, especially without that umbrella.

michaeljc70
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Re: Do you have an umbrella policy?

Post by michaeljc70 » Wed Jan 17, 2018 2:55 pm

neilpilot wrote:
Wed Jan 17, 2018 2:50 pm
michaeljc70 wrote:
Wed Jan 17, 2018 2:13 pm
I will confess, I should have one but don't. I got a quote a while ago and it was pretty high I thought (maybe $350 for $1M). I haven't been with my insurance company that long so I really don't want to change. Maybe I will put it all out to quote again. The fact that I haven't gotten the umbrella yet tells me it doesn't keep me up at night.
It's the liability claim that will keep you up at night, especially without that umbrella.
There is a .001% chance of having an auto lawsuit/claim between 500k and $1 million, but a .00000000000000001% of having an an auto lawsuit above $1 million. Of course, umbrellas cover other things, but if you don't have a pool, trampoline or dog, chances are the auto part is much more likely to be a bigger settlement than anything else.

neilpilot
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Location: Memphis area

Re: Do you have an umbrella policy?

Post by neilpilot » Wed Jan 17, 2018 2:59 pm

michaeljc70 wrote:
Wed Jan 17, 2018 2:55 pm
neilpilot wrote:
Wed Jan 17, 2018 2:50 pm
michaeljc70 wrote:
Wed Jan 17, 2018 2:13 pm
I will confess, I should have one but don't. I got a quote a while ago and it was pretty high I thought (maybe $350 for $1M). I haven't been with my insurance company that long so I really don't want to change. Maybe I will put it all out to quote again. The fact that I haven't gotten the umbrella yet tells me it doesn't keep me up at night.
It's the liability claim that will keep you up at night, especially without that umbrella.
There is a .001% chance of having an auto lawsuit/claim between 500k and $1 million, but a .00000000000000001% of having an an auto lawsuit above $1 million. Of course, umbrellas cover other things, but if you don't have a pool, trampoline or dog, chances are the auto part is much more likely to be a bigger settlement than anything else.
Very interestin. I know that the lawsuit odds are low; that's why the umbrella premiums are so low. But I find that ".00000000000000001%" revealing. Before I consider lowering my coverage, please post the reference to those odds.

michaeljc70
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Re: Do you have an umbrella policy?

Post by michaeljc70 » Wed Jan 17, 2018 3:04 pm

neilpilot wrote:
Wed Jan 17, 2018 2:59 pm
michaeljc70 wrote:
Wed Jan 17, 2018 2:55 pm
neilpilot wrote:
Wed Jan 17, 2018 2:50 pm
michaeljc70 wrote:
Wed Jan 17, 2018 2:13 pm
I will confess, I should have one but don't. I got a quote a while ago and it was pretty high I thought (maybe $350 for $1M). I haven't been with my insurance company that long so I really don't want to change. Maybe I will put it all out to quote again. The fact that I haven't gotten the umbrella yet tells me it doesn't keep me up at night.
It's the liability claim that will keep you up at night, especially without that umbrella.
There is a .001% chance of having an auto lawsuit/claim between 500k and $1 million, but a .00000000000000001% of having an an auto lawsuit above $1 million. Of course, umbrellas cover other things, but if you don't have a pool, trampoline or dog, chances are the auto part is much more likely to be a bigger settlement than anything else.
Very interestin. I know that the lawsuit odds are low; that's why the umbrella premiums are so low. But I find that ".00000000000000001%" revealing. Before I consider lowering my coverage, please post the reference to those odds.
I got it from Bogleheads:

viewtopic.php?t=128369

Not sure of the original source.

According to this NYT article, the median jury award for auto accidents is under $20k (article is 5 years old). Only 3% are over $300k. And that is of actual accidents that already occured.

http://www.nytimes.com/2012/08/25/your- ... rance.html

sfchris
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Re: Do you have an umbrella policy?

Post by sfchris » Wed Jan 17, 2018 3:54 pm

Hogan773 wrote:
Wed Jan 10, 2018 12:42 pm
So right now I am paying $440 on a $2mm umbrella from State Farm.

If I move my insurance over to a new company I could pay $340 on a $2mm or $410 on a $3mm.

Would you guys pocket the $100 savings (I am also going to save about $250 additional on Homeowners) and leave umbrella the same or would you "buy up" to $3mm and only pocket $30 savings?
That is not a simple question because Umbrella Insurance is NOT standardized. Beyond extending the base insurance, they vary widely. For example, AAA is bare bones, while Chubb is extravagant in terms of what they offer in the Umbrella.

So it depends on your life situation and how the other imsurance compares to State Farm.

talzara
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Re: Do you have an umbrella policy?

Post by talzara » Wed Jan 17, 2018 5:57 pm

neilpilot wrote:
Wed Jan 17, 2018 2:59 pm
michaeljc70 wrote:
Wed Jan 17, 2018 2:55 pm
There is a .001% chance of having an auto lawsuit/claim between 500k and $1 million, but a .00000000000000001% of having an an auto lawsuit above $1 million. Of course, umbrellas cover other things, but if you don't have a pool, trampoline or dog, chances are the auto part is much more likely to be a bigger settlement than anything else.
Very interestin. I know that the lawsuit odds are low; that's why the umbrella premiums are so low. But I find that ".00000000000000001%" revealing. Before I consider lowering my coverage, please post the reference to those odds.
The probabilities are much higher than that.

About 0.03% of umbrella policies make a claim every year, and the average loss is about $500,000. If you drive from age 20 to age 80, then your lifetime risk of making an umbrella claim is about 2.1%. (85% of the umbrella premium goes to pay for excess auto liability.)

This is also borne out by the crash statistics. There were over 37,000 traffic-related deaths per year in the United States, which is about 0.011%. With life expectancy at 79 years, the lifetime risk of dying in a traffic accident is about 0.9%. This is only deaths, and umbrella policies would also pay out in case of serious injury.

Keep in mind that the average car in the U.S. is driven 13,000 miles a year. If you drive less, then your risk is less.

LSLover
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Re: Do you have an umbrella policy?

Post by LSLover » Wed Jan 17, 2018 6:00 pm

talzara wrote:
Wed Jan 17, 2018 5:57 pm
neilpilot wrote:
Wed Jan 17, 2018 2:59 pm
michaeljc70 wrote:
The probabilities are much higher than that.

About 0.03% of umbrella policies make a claim every year, and the average loss is about $500,000. If you drive from age 20 to age 80, then your lifetime risk of making an umbrella claim is about 2.1%. (85% of the umbrella premium goes to pay for excess auto liability.)

This is also borne out by the crash statistics. There were over 37,000 traffic-related deaths per year in the United States, which is about 0.011%. With life expectancy at 79 years, the lifetime risk of dying in a traffic accident is about 0.9%. This is only deaths, and umbrella policies would also pay out in case of serious injury.
Do you have a reference for that?

talzara
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Re: Do you have an umbrella policy?

Post by talzara » Wed Jan 17, 2018 6:09 pm

LSLover wrote:
Wed Jan 17, 2018 6:00 pm
talzara wrote:
Wed Jan 17, 2018 5:57 pm
About 0.03% of umbrella policies make a claim every year, and the average loss is about $500,000. If you drive from age 20 to age 80, then your lifetime risk of making an umbrella claim is about 2.1%. (85% of the umbrella premium goes to pay for excess auto liability.)

This is also borne out by the crash statistics. There were over 37,000 traffic-related deaths per year in the United States, which is about 0.011%. With life expectancy at 79 years, the lifetime risk of dying in a traffic accident is about 0.9%. This is only deaths, and umbrella policies would also pay out in case of serious injury.
Do you have a reference for that?
The 0.03% frequency and $500,000 severity comes from rate filings. Some companies are higher, and some are lower, but they're all in this range. Rate filings are public record in most states.

Traffic death statistics are from NHTSA: https://www.nhtsa.gov/press-releases/us ... crash-data

michaeljc70
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Re: Do you have an umbrella policy?

Post by michaeljc70 » Wed Jan 17, 2018 6:12 pm

talzara wrote:
Wed Jan 17, 2018 6:09 pm
LSLover wrote:
Wed Jan 17, 2018 6:00 pm
talzara wrote:
Wed Jan 17, 2018 5:57 pm
About 0.03% of umbrella policies make a claim every year, and the average loss is about $500,000. If you drive from age 20 to age 80, then your lifetime risk of making an umbrella claim is about 2.1%. (85% of the umbrella premium goes to pay for excess auto liability.)

This is also borne out by the crash statistics. There were over 37,000 traffic-related deaths per year in the United States, which is about 0.011%. With life expectancy at 79 years, the lifetime risk of dying in a traffic accident is about 0.9%. This is only deaths, and umbrella policies would also pay out in case of serious injury.
Do you have a reference for that?
The 0.03% frequency and $500,000 severity comes from rate filings. Some companies are higher, and some are lower, but they're all in this range. Rate filings are public record in most states.

Traffic death statistics are from NHTSA: https://www.nhtsa.gov/press-releases/us ... crash-data
You can get $500k coverage on just about any auto policy without an umbrella though.

talzara
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Re: Do you have an umbrella policy?

Post by talzara » Wed Jan 17, 2018 6:25 pm

michaeljc70 wrote:
Wed Jan 17, 2018 6:12 pm
You can get $500k coverage on just about any auto policy without an umbrella though.
$500k is the average claim, not the maximum claim. Also, the underlying auto policy must max out before the umbrella pays anything.

If you have a $1 million umbrella, the total settlement might be $1.5 million. $500k from the underlying auto policy, and $1 million from the umbrella.

However, $500k is not the maximum liability limit that you can get on a primary automobile policy. Many companies will sell $1 million if you ask. There are a few that will sell $2 million.

AnimalSpirits
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Re: Do you have an umbrella policy?

Post by AnimalSpirits » Sat Jan 20, 2018 1:18 am

talzara wrote:
Wed Jan 17, 2018 6:25 pm
michaeljc70 wrote:
Wed Jan 17, 2018 6:12 pm
You can get $500k coverage on just about any auto policy without an umbrella though.
$500k is the average claim, not the maximum claim. Also, the underlying auto policy must max out before the umbrella pays anything.

If you have a $1 million umbrella, the total settlement might be $1.5 million. $500k from the underlying auto policy, and $1 million from the umbrella.

However, $500k is not the maximum liability limit that you can get on a primary automobile policy. Many companies will sell $1 million if you ask. There are a few that will sell $2 million.
Thank you Talzara, it seems an actuary is among is?

I want to restate this fact: 2.5 million Americans went to the emergency department (ED)—and nearly 200,000 were then hospitalized—for crash injuries in 2012. So the most common case is not death, but death is much less expensive than paralysis.

Once your vehicle hits another, you've lost all control over how injured the victims will be. Maybe that person is medically fragile, maybe it's a child that has permanent disabilities going forward. Medical costs are exponentially increasing, lifesaving treatments are better than ever. Saving $100/yr??

ChicagoBear7
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Re: Do you have an umbrella policy?

Post by ChicagoBear7 » Mon Jan 22, 2018 1:56 pm

sfchris wrote:
Wed Jan 17, 2018 3:54 pm
Hogan773 wrote:
Wed Jan 10, 2018 12:42 pm
So right now I am paying $440 on a $2mm umbrella from State Farm.

If I move my insurance over to a new company I could pay $340 on a $2mm or $410 on a $3mm.

Would you guys pocket the $100 savings (I am also going to save about $250 additional on Homeowners) and leave umbrella the same or would you "buy up" to $3mm and only pocket $30 savings?
That is not a simple question because Umbrella Insurance is NOT standardized. Beyond extending the base insurance, they vary widely. For example, AAA is bare bones, while Chubb is extravagant in terms of what they offer in the Umbrella.

So it depends on your life situation and how the other imsurance compares to State Farm.
sfchris is right!! Umbrella policies are NOT standardized!

To get a better understanding of this issue, do an online search of Jack Hungelmann. He is the author of the "Insurance for Dummies" book and is frequently cited in various risk management publications. He has written several articles that are available online about umbrella policies.

In particular, he did a comparison a couple years ago of umbrella from a dozen or so different companies sold in his home state; not two of the policies were exactly the same. (He cautions that policies can vary by state, so you need to confirm coverage with an agent/broker in your state.) Some policies like Chubb and Auto Owners were quite expansive and covered a dozen or so other liability instances not directly covered by home or auto policies, some others were absolutely bare bones. He indicated the expansiveness of the umbrella is especially important if, for example, you rent vacation homes, rent boats, rent ATVs or snowmobiles, rent banquet halls for parties etc. The reason being, that frequently the paperwork you sign when you rent these things includes assumption of liability, hold harmless, duty to defend etc... Many of the better umbrellas will pick of this liability for no additional premium.

Hungelmann goes so far as to say you should pick out the umbrella that gives you the best coverage for the money (with the assistance of an independent broker/agent/risk consultant) and then get your underlying home and auto policies.

darrvao777
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Re: Do you have an umbrella policy?

Post by darrvao777 » Mon Jan 22, 2018 2:39 pm

Yes, $5M

Sola Scriptura
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Re: Do you have an umbrella policy?

Post by Sola Scriptura » Wed Mar 21, 2018 3:23 pm

For those of you who stated you carry $5M policies, do you mean $5M per occurrence or $5M aggregate?

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BogleFanGal
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Re: Do you have an umbrella policy?

Post by BogleFanGal » Wed Mar 21, 2018 10:17 pm

We have 1mil...i wanted more, but to go to 2mil was more than double the cost. My insurer apparently does NOT like higher umbrella policies! So stayed with what I had for now. Just can't bring myself to pay more than 2x as much.

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