Umbrella Insurance

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idoc5
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Umbrella Insurance

Post by idoc5 »

I am looking into purchasing an umbrella insurance policy and had some quick questions. Are the policies just “umbrellas” over your auto policy or property policy or can you buy an umbrella policy that covers all aspects of liability that may occur (bundling auto, property, etc)?

Also, what is the best company for personal umbrella insurance? I am looking for $2M coverage currently.

Thank you!
UnLearnYourself
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Re: Umbrella Insurance

Post by UnLearnYourself »

idoc5 wrote: Tue Jan 11, 2022 11:56 am I am looking into purchasing an umbrella insurance policy and had some quick questions. Are the policies just “umbrellas” over your auto policy or property policy or can you buy an umbrella policy that covers all aspects of liability that may occur (bundling auto, property, etc)?

Also, what is the best company for personal umbrella insurance? I am looking for $2M coverage currently.

Thank you!
I used the same broker who I deal with for my home and auto. And my understanding is that yes, it extends coverage over both my home and autos. I got another $1mil and it was cheap, couple hundred bucks per year but helps me sleep well at night living in an owner occupied 3 family and having some extra liability related to tenants, as well as covers my tail from 'ambulance chasers' who may be inclined to exploit an auto accident if we are found to be at fault at any point.
TheRealJohnDoe
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Re: Umbrella Insurance

Post by TheRealJohnDoe »

I don't quite know which of your alternatives is correct. They both are correct. An umbrella policy provides coverage over and above your auto and homeowner's liability coverage and extends to cover just about anything that those policies wouldn't cover. You may be able to adjust your liability in those policies if you have an umbrella policy to pick up where they leave off. Details differ by insurers and policies, but that's the idea.

One thing about umbrella coverage that is often misunderstood. There is a rule of thumb that you should have umbrella coverage about equal to your net worth. If you have $2M that someone could go after, then you should have $2M in umbrella coverage to "protect it." But it doesn't work that way. You can't insure your net worth like you can a house and you can't totally avoid the possibility of losing everything you have. If your network is $2M and your umbrella is $2M, someone could sue and recover $4M and completely wipe you out.

So having an umbrella policy is a good idea so if someone comes after you, you'll have lawyers fighting in your defense. But you can still lose sleep at night. As a side note, you might want to check the laws in your state to see how much of your retirement accounts are shielded.
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tadamsmar
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Re: Umbrella Insurance

Post by tadamsmar »

idoc5 wrote: Tue Jan 11, 2022 11:56 am I am looking into purchasing an umbrella insurance policy and had some quick questions. Are the policies just “umbrellas” over your auto policy or property policy or can you buy an umbrella policy that covers all aspects of liability that may occur (bundling auto, property, etc)?

Also, what is the best company for personal umbrella insurance? I am looking for $2M coverage currently.

Thank you!
Mine covers auto and home. I also covers boats, rental homes, rental farms you own based on the questions asked in the application. It covers autos and homes where you cosigned a loan, but there are probably limits on how much of that will be covered. There are limits on the number rental properties if I recall correctly. It does not cover professional liability for most business owners.

With my policy, I have to also carry auto and home liability insurance with specific lower limits.
Last edited by tadamsmar on Tue Jan 11, 2022 12:25 pm, edited 2 times in total.
brawlrats
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Re: Umbrella Insurance

Post by brawlrats »

TheRealJohnDoe wrote: Tue Jan 11, 2022 12:16 pm a side note, you might want to check the laws in your state to see how much of your retirement accounts are shielded.
401k plans and up to $1 million in rollover IRAs is covered by federal ERISA law.

Edited to clarify IRA coverage.
Last edited by brawlrats on Tue Jan 11, 2022 2:18 pm, edited 2 times in total.
furwut
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Re: Umbrella Insurance

Post by furwut »

Both property and umbrella are general liability policies that cover a wide range (but not all) risk exposures. For instance, property liability specifically excludes auto risk but can cover other risks that don't occur in the home. But neither would cover specific occupational risks like, say, medical liability for a doctor. You will have to read the policy documents.
TheRealJohnDoe
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Re: Umbrella Insurance

Post by TheRealJohnDoe »

brawlrats wrote: Tue Jan 11, 2022 12:23 pm 401k plans and up to $1 million in IRAs is covered by federal ERISA law.
That's too broad a statement. Not all IRAs are covered under ERISA. If they weren't funded as a benefit from employer to employee, then the protection of the account falls to state law.

See https://www.nolo.com/legal-encyclopedia ... ounts.html for more details.
brawlrats
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Re: Umbrella Insurance

Post by brawlrats »

TheRealJohnDoe wrote: Tue Jan 11, 2022 1:20 pm
brawlrats wrote: Tue Jan 11, 2022 12:23 pm 401k plans and up to $1 million in IRAs is covered by federal ERISA law.
That's too broad a statement. Not all IRAs are covered under ERISA. If they weren't funded as a benefit from employer to employee, then the protection of the account falls to state law.

See https://www.nolo.com/legal-encyclopedia ... ounts.html for more details.
Yes, thanks. I meant to say "rollover IRAs" in my post. I've corrected it.
doobiedoo
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Re: Umbrella Insurance

Post by doobiedoo »

idoc5 wrote: Tue Jan 11, 2022 11:56 am ... Are the policies just “umbrellas” over your auto policy or property policy or can you buy an umbrella policy that covers all aspects of liability that may occur (bundling auto, property, etc)?

Also, what is the best company for personal umbrella insurance? I am looking for $2M coverage currently.

Thank you!
Umbrella insurance typically requires separate auto and home insurance policies with minimum liability limits in the $300-$500k range. [E.g. $500k coverage on home insurance liability coverage.]

Because of that, your auto or home insurance carrier is a good candidate to write your umbrella liability policy. Many insurance companies only sell umbrella policies to existing clients of auto or home insurance. This means if you shop around for home insurance and your umbrella policy is with the same company, you should shop around for umbrella policies too.
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Munir
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Re: Umbrella Insurance

Post by Munir »

If I don't own a car nor a home (or any property), should I still have an umbrella policy?
exodusNH
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Re: Umbrella Insurance

Post by exodusNH »

Munir wrote: Tue Jan 11, 2022 3:01 pm If I don't own a car nor a home (or any property), should I still have an umbrella policy?
Presumably, you rent. You might inquire about adding it to your renter's policy.
exodusNH
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Re: Umbrella Insurance

Post by exodusNH »

idoc5 wrote: Tue Jan 11, 2022 11:56 am I am looking into purchasing an umbrella insurance policy and had some quick questions. Are the policies just “umbrellas” over your auto policy or property policy or can you buy an umbrella policy that covers all aspects of liability that may occur (bundling auto, property, etc)?

Also, what is the best company for personal umbrella insurance? I am looking for $2M coverage currently.

Thank you!
Umbrella sits on top of your auto and home liability. Your umbrella provider will tell you what the underlying liability limits should be.

Make sure you call around if you're getting all three. Certain providers (e.g. State Farm) offer big discounts when you hold multiple lines of insurance.
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Munir
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Re: Umbrella Insurance

Post by Munir »

exodusNH wrote: Tue Jan 11, 2022 3:21 pm
Munir wrote: Tue Jan 11, 2022 3:01 pm If I don't own a car nor a home (or any property), should I still have an umbrella policy?
Presumably, you rent. You might inquire about adding it to your renter's policy.
I was hoping not to have an umbrella policy at all if I don't need it. I do have a renter's policy.
exodusNH
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Re: Umbrella Insurance

Post by exodusNH »

Munir wrote: Tue Jan 11, 2022 4:23 pm
exodusNH wrote: Tue Jan 11, 2022 3:21 pm
Munir wrote: Tue Jan 11, 2022 3:01 pm If I don't own a car nor a home (or any property), should I still have an umbrella policy?
Presumably, you rent. You might inquire about adding it to your renter's policy.
I was hoping not to have an umbrella policy at all if I don't need it. I do have a renter's policy.
No one needs it. The most likely uses come from when you're driving.

At home, your renter's insurance has liability coverage. You'd have to do something that would leave you liable: e.g. start a fire because you ran a space heater on an extension cord. Or hosted a party and served alcohol. Then let someone drive or someone takes a header off your porch. That sort of thing.
TheRealJohnDoe
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Re: Umbrella Insurance

Post by TheRealJohnDoe »

Munir wrote: Tue Jan 11, 2022 3:01 pm I was hoping not to have an umbrella policy at all if I don't need it. I do have a renter's policy.
The primary scenario where you wouldn't need umbrella insurance is if you had very few assets (outside of 401(k), rollover IRAs, and perhaps other retirement accounts depending on your state). In that scenario, you are judgment proof .. nobody wants to come after your money.
furwut
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Re: Umbrella Insurance

Post by furwut »

Munir wrote: Tue Jan 11, 2022 3:01 pm If I don't own a car nor a home (or any property), should I still have an umbrella policy?
If you drive a car you still need to think how you will be covered in event of a crash.
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Max_Monetti
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Re: Umbrella Insurance

Post by Max_Monetti »

Search the forums for “ umbrella policy “
Lots of great info- gave me an understanding of how it works and why you may/ may not need it.
Was interesting to learn How most lawsuits get paid out
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AQ
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Re: Umbrella Insurance

Post by AQ »

I have auto / home / umbrella insurance from the same company (by the way, one issue is that with umbrella insurance it's more difficult to shop around for best rates since most insurance companies require you move all three policies to the new company).

Could someone confirm if an umbrella policy cover the following scenarios?

1. Invite a friend to come over for dinner. The friend falls and injured himself at my home. Or a food poisoning made the friend sick and hospitalized.
2. Hire a handyman to fix yard fence but the handyman hurt himself in my yard.
3. If the umbrella cover scenario 2, does it require due diligence on me to check a handyman's license/insurance, etc.?
Ninjadoc
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Re: Umbrella Insurance

Post by Ninjadoc »

Good topic post. Good to know my umbrella policy covers any auto or property liability, as long as insurance liability premiums are met for each of those policies. Also I checked and it does not mention a limit to # of rental properties the umbrella policy can apply to. Is that normal?
softwaregeek
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Re: Umbrella Insurance

Post by softwaregeek »

Ninjadoc wrote: Wed Jan 12, 2022 3:23 am Good topic post. Good to know my umbrella policy covers any auto or property liability, as long as insurance liability premiums are met for each of those policies. Also I checked and it does not mention a limit to # of rental properties the umbrella policy can apply to. Is that normal?
Yes, because premium increases with each rental, each driver, each car.
softwaregeek
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Re: Umbrella Insurance

Post by softwaregeek »

AQ wrote: Tue Jan 11, 2022 10:51 pm I have auto / home / umbrella insurance from the same company (by the way, one issue is that with umbrella insurance it's more difficult to shop around for best rates since most insurance companies require you move all three policies to the new company).

Could someone confirm if an umbrella policy cover the following scenarios?

1. Invite a friend to come over for dinner. The friend falls and injured himself at my home. Or a food poisoning made the friend sick and hospitalized.
2. Hire a handyman to fix yard fence but the handyman hurt himself in my yard.
3. If the umbrella cover scenario 2, does it require due diligence on me to check a handyman's license/insurance, etc.?
Not all umbrella is the same. Some “follows form” meaning it is an extension of underlying policies. Other policies are broader. Likely both of these would be covered by homeowners insurance and anything covered under that would have umbrella coverage on top. Given that most insurance companies require 300-500k underlying coverage below umbrella, it’s unlikely the umbrella would come into play in the situation specified. Unless you negligently ran over the handyman with a riding lawnmower and killed him, for example. Then umbrella is needed.
NYCaviator
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Re: Umbrella Insurance

Post by NYCaviator »

This exact topic comes up almost every day on this forum. A quick search will yield more info than you probably ever wish to read.

Look to your current home/auto provider for the umbrella. Removes the risk of one carrier not working well with another.
557880yvi
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Re: Umbrella Insurance

Post by 557880yvi »

Don't think I saw this mentioned, but getting an Umbrella policy can pay for itself (or almost). We purchased an Umbrella over our auto and home insurances and were able to reduce the coverage amounts to the minimums then the Umbrella took over from there. So the reduction in cost of the underlying auto and home has paid for the Umbrella for many years, all with greatly increased coverages. This is with USAA so the same cost savings may not be available with other insurers, but certainly worth a call to your insurance company.
Last edited by 557880yvi on Thu Jan 13, 2022 8:14 am, edited 1 time in total.
oregoncopflier
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Re: Umbrella Insurance

Post by oregoncopflier »

I think how much you need it depends on how much you have. If you have $10M+, I think the negative impact of spending $1-2k/year is well outweighed by the benefit of reducing your tail risk of a massive liability payout. That risk one of the few things that could make you "no longer wealthy," whereas paying $1k/year for umbrella definitely will not make you poor.
Tal-
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Re: Umbrella Insurance

Post by Tal- »

softwaregeek wrote: Wed Jan 12, 2022 3:40 am
AQ wrote: Tue Jan 11, 2022 10:51 pm I have auto / home / umbrella insurance from the same company (by the way, one issue is that with umbrella insurance it's more difficult to shop around for best rates since most insurance companies require you move all three policies to the new company).

Could someone confirm if an umbrella policy cover the following scenarios?

1. Invite a friend to come over for dinner. The friend falls and injured himself at my home. Or a food poisoning made the friend sick and hospitalized.
2. Hire a handyman to fix yard fence but the handyman hurt himself in my yard.
3. If the umbrella cover scenario 2, does it require due diligence on me to check a handyman's license/insurance, etc.?
Not all umbrella is the same. Some “follows form” meaning it is an extension of underlying policies. Other policies are broader. Likely both of these would be covered by homeowners insurance and anything covered under that would have umbrella coverage on top. Given that most insurance companies require 300-500k underlying coverage below umbrella, it’s unlikely the umbrella would come into play in the situation specified. Unless you negligently ran over the handyman with a riding lawnmower and killed him, for example. Then umbrella is needed.
First - great info. Thanks.

Second - wow - that turned dark in a hurry...
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sperry8
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Re: Umbrella Insurance

Post by sperry8 »

557880yvi wrote: Wed Jan 12, 2022 3:47 pm Don't think I saw this mentioned, but getting an Umbrella policy can pay for itself (or almost). We purchased an Umbrella over our auto and home insurances and were able to reduce the coverage amounts to the minimums then the Umbrella took over from there. So the reduction in cost of the underlying auto and home has paid for the Umbrella for many years, all with greatly increased coverages. This is with USAA so the same cost savings may not be available with other insurers, but certainly worth a call to your insurance company.
Very interesting. I got a quote from USAA for umbrella and she didn't mention I could lower coverage amounts to the minimums if I wrote the policy. I may call back to ask what happens to auto policy if I do that...
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exodusNH
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Re: Umbrella Insurance

Post by exodusNH »

sperry8 wrote: Thu Sep 22, 2022 4:18 pm
557880yvi wrote: Wed Jan 12, 2022 3:47 pm Don't think I saw this mentioned, but getting an Umbrella policy can pay for itself (or almost). We purchased an Umbrella over our auto and home insurances and were able to reduce the coverage amounts to the minimums then the Umbrella took over from there. So the reduction in cost of the underlying auto and home has paid for the Umbrella for many years, all with greatly increased coverages. This is with USAA so the same cost savings may not be available with other insurers, but certainly worth a call to your insurance company.
Very interesting. I got a quote from USAA for umbrella and she didn't mention I could lower coverage amounts to the minimums if I wrote the policy. I may call back to ask what happens to auto policy if I do that...
The umbrella policy probably requires a certain minimum on your homeowner's and auto. I.e., if your state minimum auto liability is 25/50, the umbrella might require you to have 100/250 before they'll write your umbrella. They umbrella company will tell you what you need.
Luckywon
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Re: Umbrella Insurance

Post by Luckywon »

brawlrats wrote: Tue Jan 11, 2022 12:23 pm
TheRealJohnDoe wrote: Tue Jan 11, 2022 12:16 pm a side note, you might want to check the laws in your state to see how much of your retirement accounts are shielded.
401k plans and up to $1 million in rollover IRAs is covered by federal ERISA law.

Edited to clarify IRA coverage.
Not solo 401k plans though.
investor4life
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Re: Umbrella Insurance

Post by investor4life »

sperry8 wrote: Thu Sep 22, 2022 4:18 pm
557880yvi wrote: Wed Jan 12, 2022 3:47 pm Don't think I saw this mentioned, but getting an Umbrella policy can pay for itself (or almost). We purchased an Umbrella over our auto and home insurances and were able to reduce the coverage amounts to the minimums then the Umbrella took over from there. So the reduction in cost of the underlying auto and home has paid for the Umbrella for many years, all with greatly increased coverages. This is with USAA so the same cost savings may not be available with other insurers, but certainly worth a call to your insurance company.
Very interesting. I got a quote from USAA for umbrella and she didn't mention I could lower coverage amounts to the minimums if I wrote the policy. I may call back to ask what happens to auto policy if I do that...
My insurance company (State Farm) required me to raise my automobile liability from 100/300 to 250/500 before underwriting umbrella coverage. The peace of mind is worth every penny.
random_walker_77
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Re: Umbrella Insurance

Post by random_walker_77 »

TheRealJohnDoe wrote: Tue Jan 11, 2022 12:16 pm I don't quite know which of your alternatives is correct. They both are correct. An umbrella policy provides coverage over and above your auto and homeowner's liability coverage and extends to cover just about anything that those policies wouldn't cover. You may be able to adjust your liability in those policies if you have an umbrella policy to pick up where they leave off. Details differ by insurers and policies, but that's the idea.

One thing about umbrella coverage that is often misunderstood. There is a rule of thumb that you should have umbrella coverage about equal to your net worth. If you have $2M that someone could go after, then you should have $2M in umbrella coverage to "protect it." But it doesn't work that way. You can't insure your net worth like you can a house and you can't totally avoid the possibility of losing everything you have. If your network is $2M and your umbrella is $2M, someone could sue and recover $4M and completely wipe you out.

So having an umbrella policy is a good idea so if someone comes after you, you'll have lawyers fighting in your defense. But you can still lose sleep at night. As a side note, you might want to check the laws in your state to see how much of your retirement accounts are shielded.
While this is true, it's also the case that if the victim offers to settle for policy limits, if the insurance company decides to fight the suit, then they likely open themselves up to liability for the full amount over the policy limits. (This is to align incentives, and avoid the heads-I-win-tails-you-lose problem. Otherwise insurance will always choose to fight since if they win, they avoid paying out, and if they lose, the amount over the coverage limit is your problem.) To read up on this look for "duty to settle" and "taking the lid off the policy"

Given this, you want umbrella coverage high enough that a plaintiff would look favorably at settling for policy limits. Settling gets them the money quickly, is less work for the lawyer, and doesn't entail the risk of a trial or of collecting if you declare bankruptcy. So long as the amount is sufficient that they'd offer to settle for policy limits, then you've mostly eliminated the risk of a massive judgment that wipes you out.
quantAndHold
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Re: Umbrella Insurance

Post by quantAndHold »

random_walker_77 wrote: Thu Sep 22, 2022 5:22 pm
TheRealJohnDoe wrote: Tue Jan 11, 2022 12:16 pm I don't quite know which of your alternatives is correct. They both are correct. An umbrella policy provides coverage over and above your auto and homeowner's liability coverage and extends to cover just about anything that those policies wouldn't cover. You may be able to adjust your liability in those policies if you have an umbrella policy to pick up where they leave off. Details differ by insurers and policies, but that's the idea.

One thing about umbrella coverage that is often misunderstood. There is a rule of thumb that you should have umbrella coverage about equal to your net worth. If you have $2M that someone could go after, then you should have $2M in umbrella coverage to "protect it." But it doesn't work that way. You can't insure your net worth like you can a house and you can't totally avoid the possibility of losing everything you have. If your network is $2M and your umbrella is $2M, someone could sue and recover $4M and completely wipe you out.

So having an umbrella policy is a good idea so if someone comes after you, you'll have lawyers fighting in your defense. But you can still lose sleep at night. As a side note, you might want to check the laws in your state to see how much of your retirement accounts are shielded.
While this is true, it's also the case that if the victim offers to settle for policy limits, if the insurance company decides to fight the suit, then they likely open themselves up to liability for the full amount over the policy limits. (This is to align incentives, and avoid the heads-I-win-tails-you-lose problem. Otherwise insurance will always choose to fight since if they win, they avoid paying out, and if they lose, the amount over the coverage limit is your problem.) To read up on this look for "duty to settle" and "taking the lid off the policy"

Given this, you want umbrella coverage high enough that a plaintiff would look favorably at settling for policy limits. Settling gets them the money quickly, is less work for the lawyer, and doesn't entail the risk of a trial or of collecting if you declare bankruptcy. So long as the amount is sufficient that they'd offer to settle for policy limits, then you've mostly eliminated the risk of a massive judgment that wipes you out.
You also want an umbrella policy with a high enough limit so that the insurance company doesn’t want to risk paying the policy limit. A friend had an auto policy with a $100k limit but no umbrella. Got into an accident and got sued for $2m. The insurance company was perfectly willing to fight that and risk losing, because the policy limit was $100k. Friend had to pay their own lawyer $20k to convince both sides to settle for an amount within the policy limits.
Yes, I’m really that pedantic.
random_walker_77
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Re: Umbrella Insurance

Post by random_walker_77 »

quantAndHold wrote: Thu Sep 22, 2022 6:02 pm
random_walker_77 wrote: Thu Sep 22, 2022 5:22 pm
While this is true, it's also the case that if the victim offers to settle for policy limits, if the insurance company decides to fight the suit, then they likely open themselves up to liability for the full amount over the policy limits. (This is to align incentives, and avoid the heads-I-win-tails-you-lose problem. Otherwise insurance will always choose to fight since if they win, they avoid paying out, and if they lose, the amount over the coverage limit is your problem.) To read up on this look for "duty to settle" and "taking the lid off the policy"

Given this, you want umbrella coverage high enough that a plaintiff would look favorably at settling for policy limits. Settling gets them the money quickly, is less work for the lawyer, and doesn't entail the risk of a trial or of collecting if you declare bankruptcy. So long as the amount is sufficient that they'd offer to settle for policy limits, then you've mostly eliminated the risk of a massive judgment that wipes you out.
You also want an umbrella policy with a high enough limit so that the insurance company doesn’t want to risk paying the policy limit. A friend had an auto policy with a $100k limit but no umbrella. Got into an accident and got sued for $2m. The insurance company was perfectly willing to fight that and risk losing, because the policy limit was $100k. Friend had to pay their own lawyer $20k to convince both sides to settle for an amount within the policy limits.
Yes, too low is a problem. It's almost even worse if the company said, "it's not worth paying a lawyer" and just cut you a check, and walked away.

(and your example is one where the limits are so low that the plaintiff isn't willing to be satisfied taking the policy limits)
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