How much liability insurance is "enough" has always been a difficult question, but for reasons very different from the ones that you've mentioned. The answer depends in part on the implications that an excess judgment would have on you and the likelihood that such an excess judgment would be pursued against you, which requires an examination of your assets that would be exposed to such excess judgments.azanon wrote: ↑Tue Nov 16, 2021 8:12 am OP - probably not, provided you have healthy limits set on all of your primary insurance policies (like auto). In almost all cases, in a worst case scenario, an attorney would probably just try to go after whatever your main policy limit is.
I think anyone that thinks this is worth it should be playing the lottery too, since the chance of winning it and actually using an umbrella policy in a court judgement are roughly equivalent.
Don't anyone get me wrong - I'm actually boglehead and VERY low risk kind of person. But that should never been confused with an obsession for absolutely zero risk. Similar to retirement plans that aim for absolutely zero risk, the cost of getting that last percent or two of risk away is exponential. Now don't take that the wrong way, I'm not claiming an umbrella policy is expensive in an of itself, but I am saying it's expensive relative to the chance you'll use it (~0.0000x%).
Also, just fwiw, I do believe in the placebo effect. As it applies here, if it's going to make you feel a lot more comfortable to own an umbrella policy day-to-day, then it's probably worth the cost. But that's because it's worth it to you psychologically.
An average family has about $8,863 in savings (https://www.cnbc.com/2019/03/11/how-muc ... y-age.html), and the median 401(k) balance is $22,217 (https://www.businessinsider.com/persona ... retirement) (and 401(k) balances enjoy substantial asset protection benefits). So, there aren't a lot of people out there with substantial exposed assets, and most of those people have sufficient liability limits. This is the reason that most people out there don't want or need much liability protection, as they simply don't have all that much to protect.
So, while it is highly uncommon to have a civil verdict where an individual defendant has $1MM in insurance, the insurance company offers its policy limits, the plaintiff rejects the offer (without a way to pursue a bad faith claim against the carrier), obtains a larger verdict and then pursues the defendant's personal assets, it is for reasons other than those that you've mentioned. Namely, most people out there just aren't the proverbial "deep pocket" and, if they are, they typically have sufficient insurance.
In other words, the way that you would go about deciding the amount of liability coverage that you need depends in large part on how attractive of a litigation target you represent. I don't think that people are suggesting that those earning $50K/year in perpetuity, for instance, need an umbrella policy at all. If, however, you have a person, like many on this board, earning hundreds of thousands a year and/or have 7 figure balances in their individual taxable accounts, then larger umbrella policies start to make a lot more sense.