Umbrella Policy- 1M or 2M?

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills.
snowday2022
Posts: 758
Joined: Sun Jan 16, 2022 1:48 pm

Re: Umbrella Policy- 1M or 2M?

Post by snowday2022 »

I don’t get how insuring up to one’s NW makes sense. If the judgment exceeds your umbrella limit, they can still go after your assets no?

Say you are worth 1M with 1M umbrella. If judgment 2M, your assets are at risk.

If you are worth 5M with 5M umbrella and the judgment is 2M, your assets are not at risk. But if the judgment is 10M, your assets are at risk.

But 10M judgment is very rare.

Seems to me the more pertinent thing should not be the size of your NW, but the typical size of a judgment.
SnowBog
Posts: 4745
Joined: Fri Dec 21, 2018 10:21 pm

Re: Umbrella Policy- 1M or 2M?

Post by SnowBog »

snowday2022 wrote: Sun Mar 31, 2024 10:06 am I don’t get how insuring up to one’s NW makes sense. If the judgment exceeds your umbrella limit, they can still go after your assets no?

Say you are worth 1M with 1M umbrella. If judgment 2M, your assets are at risk.

If you are worth 5M with 5M umbrella and the judgment is 2M, your assets are not at risk. But if the judgment is 10M, your assets are at risk.

But 10M judgment is very rare.

Seems to me the more pertinent thing should not be the size of your NW, but the typical size of a judgment.
Not sure they are mutually exclusive...

Personally, I have a bigger Umbrella policy than my "exposed" assets (although they are catching up :beer). If my portfolio keeps growing, at some point I'll probably not try to "match" my coverage. Hypothetically, if I had $10M - I'm not sure I'd "need" a $10M policy (not even sure if one is available).

But since most Umbrella Insurance is in the $1M - $5M range (which is probably more than most people will ever have), it's "easier" to think of how much of your assets are "exposed", and go with the closest policy.
User avatar
CardinalRule
Posts: 1215
Joined: Sun Jan 15, 2017 10:01 am
Location: United States

Re: Umbrella Policy- 1M or 2M?

Post by CardinalRule »

SnowBog wrote: Sun Mar 31, 2024 1:09 pm
snowday2022 wrote: Sun Mar 31, 2024 10:06 am I don’t get how insuring up to one’s NW makes sense. If the judgment exceeds your umbrella limit, they can still go after your assets no?

Say you are worth 1M with 1M umbrella. If judgment 2M, your assets are at risk.

If you are worth 5M with 5M umbrella and the judgment is 2M, your assets are not at risk. But if the judgment is 10M, your assets are at risk.

But 10M judgment is very rare.

Seems to me the more pertinent thing should not be the size of your NW, but the typical size of a judgment.
Not sure they are mutually exclusive...

Personally, I have a bigger Umbrella policy than my "exposed" assets (although they are catching up :beer). If my portfolio keeps growing, at some point I'll probably not try to "match" my coverage. Hypothetically, if I had $10M - I'm not sure I'd "need" a $10M policy (not even sure if one is available).

But since most Umbrella Insurance is in the $1M - $5M range (which is probably more than most people will ever have), it's "easier" to think of how much of your assets are "exposed", and go with the closest policy.
Funny how that works (exposed assets catching up) :happy DW and I (no kids) have had a $4 million State Farm umbrella for about a decade. It costs about $500. We were probably overinsured when we initially took out the policy, but now it seems about right.
drzzzzz
Posts: 1053
Joined: Sat Sep 22, 2012 9:56 pm

Re: Umbrella Policy- 1M or 2M?

Post by drzzzzz »

Are most getting their umbrella policy through their car insurer or an independent or other insurance agent? We are with Geico with our cars, have two houses with Geico affiliated insurers, and find Geico's umbrella policy very pricy. I haven't looked around at other ways to get an umbrella policy through another insurance company yet.
michaeljc70
Posts: 10882
Joined: Thu Oct 15, 2015 3:53 pm

Re: Umbrella Policy- 1M or 2M?

Post by michaeljc70 »

drzzzzz wrote: Sun Mar 31, 2024 3:22 pm Are most getting their umbrella policy through their car insurer or an independent or other insurance agent? We are with Geico with our cars, have two houses with Geico affiliated insurers, and find Geico's umbrella policy very pricy. I haven't looked around at other ways to get an umbrella policy through another insurance company yet.
My auto, home and umbrella are with the same insurer (Erie). Though I've read things contrary, I find the multi-policy discount to be significant.

If you had your umbrella with another insurer I would think that could lead to issues if there was a claim. Meaning the first insurer doesn't care beyond what your limit is and the umbrella insurer obviously does.
User avatar
Steelersfan
Posts: 4137
Joined: Thu Jun 19, 2008 8:47 pm

Re: Umbrella Policy- 1M or 2M?

Post by Steelersfan »

Getting all three through the same insurance company is usually the best way.
MikeG62
Posts: 5071
Joined: Tue Nov 15, 2016 2:20 pm
Location: New Jersey

Re: Umbrella Policy- 1M or 2M?

Post by MikeG62 »

afan wrote: Sat Mar 30, 2024 6:39 pm
MikeG62 wrote: Sat Mar 30, 2024 7:47 am I can’t answer the OP’s question because it’s whatever allows you to sleep comfortably at night. Probably a different number for different people.

We carry enough liability insurance such that (a) we would get the insurance company's A-Team of lawyers, (b) those lawyers would work really, really hard to not pay out the maximum amount of the insurance and (c) it would be unlikely the plaintiff or their attorney would risk a jury trial in the highly unlikely event they were offered the full amount of our insurance coverage (+ the underlying insurance). FWIW (which may not be much) we carry a $5 million umbrella (annual cost is around $800) on top of the underlying. The next level I think is $10 million at a cost over four times what we are paying. It's less than our at risk assets, but enough that I feel it is super highly unlikely that our at risk assets would truly be at risk in a lawsuit. Said another way, I lose no sleep at night over this risk.
These are good goals, but how do you know that %$5M is the right amount of coverage to achieve them?
I don't "know" for sure. There is always some risk that no matter how large the umbrella the plaintiff's could be so profoundly impacted by the accident that an award in excess of the insurance policy maximum could happen.

At the end of the day it is a judgement call.

I posted this previously...

An aunt of my brother-in-law was killed in an auto accident a decade ago (husband was seriously injured and required multiple surgeries to be able to walk again). Owners of the vehicle were apparently an uber wealthy family (think old money) and driver was boyfriend of owners daughter. Case settled before completion of the jury trial (but well down that path) at $5 million. Four million went to husband for loss of spouse and pain and suffering and $1 million went to their only son for loss of mother. Both the woman who died and her husband were retired. I believe this was all paid for out of insurance (but I was not that close to the details beyond what I've said).

Another relative was involved in a motor vehicle accident several years ago. That person had $300K of auto liability and no umbrella. Recent college grad so not much in the way of assets. Case settled before the jury trial began at $285K.

I've been told by a lawyer friend who has seen many of these cases that they almost always settle before the jury verdict (within the policy limits).
Real Knowledge Comes Only From Experience
leland
Posts: 282
Joined: Sun Sep 12, 2021 5:21 pm
Location: PNW

Re: Umbrella Policy- 1M or 2M?

Post by leland »

Our $2M policy is going from $5xx to $7xx this year. No life changes.

My partner questions the value of it... I said better not to find out. I'd prefer a better answer, but that's the whole thing with insurance :D

That said my question is if I can actually shop around here or not. I doubt it given how insurance is regulated, but our overall insurance costs have slightly more than doubled in the past two years.
HeavyChevy
Posts: 526
Joined: Sun Oct 31, 2021 7:07 am
Location: Below the Mac bridge (Troll)

Re: Umbrella Policy- 1M or 2M?

Post by HeavyChevy »

We moved from $2M to $4M last year. Different company because our primary only writes for $2M max.

Owning a mid-sized (11,000 lb) boat basically doubled the cost. Own a sizable boat that goes over 35 mph (mine doesn't) and the cost quadruples.
"It's not the best move, but it is a move." - GMHikaru
cricket49
Posts: 282
Joined: Sun Apr 05, 2015 4:14 pm

Re: Umbrella Policy- 1M or 2M?

Post by cricket49 »

guppyguy wrote: Thu Mar 28, 2024 10:55 am
cricket49 wrote: Thu Mar 28, 2024 10:51 am We paid 200.00 to increase the umbrella from 1M to 2M.
Umbrella increase was based on our net worth.
Just curious if you excluded retirements assets from the net worth total (I'm presuming they are judgement proof?)?
Yes, it includes retirement assets. I don't know all the legal aspects of a lawsuit but a friend of mine was sued and had to dissolve their IRA to settle the lawsuit. They had no other cash on hand.
Expect the best. Prepare for the worst.
tetrad
Posts: 31
Joined: Mon Apr 08, 2024 10:23 am

Re: Umbrella Policy- 1M or 2M?

Post by tetrad »

guppyguy wrote: Thu Mar 28, 2024 10:32 am Just doing an annual review of our insurance policies....we've carried a 1M umbrella policy with Amica for years. Pretty standard assets, 4 cars, 1 house, 401K.

When/why would one increase coverage from 1M to something higher, 2M being the next step up? Currently 1M coverage is $582 annually, it would be an extra $374 for 2M.

Thoughts???
I have a different take. Generally it is best to carry as large an umbrella that your insurer will sell you before it has to be separately underwritten. Generally it is cheap to that level, then there is a big jump in price. For my insurer that is $5M. Every insurer has a different max. The other number people quote is your total assets. That is just a rule of thumb because umbrella does not protect your assets when it is exceeded. The is other way is what do you consider affordable.

We all need more umbrella insurance then we can afford. What we need is 3 to 5X the largest liability ever settled. That of course is unaffordable. Or we need the law changed so that it actually protects your assets.
afan
Posts: 8259
Joined: Sun Jul 25, 2010 4:01 pm

Re: Umbrella Policy- 1M or 2M?

Post by afan »

In all the threads I have seen here on umbrella coverage, I have not heard from the two sorts of people who would have informed opinions.

It would be great to hear from a defense attorney who could tell us how much one might need and what happens to judgments above protected assets

Even better would be to hear from an actuary who prices umbrella coverage for a major insurance company. They would know the real world risk of large judgments and how much is paid. As it is, we continue to speculate, based on no knowledge of the industry.

We have a large policy but not equal to our unprotected networth.
We bought it along with auto and homeowners. It took a while to get the rates for the package. I do not know whether some of that involved underwriting the umbrella policy.

I have no idea whether our coverage is too much, too little, or just right.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama
Tdubs
Posts: 1841
Joined: Tue Apr 24, 2018 7:50 pm

Re: Umbrella Policy- 1M or 2M?

Post by Tdubs »

afan wrote: Sat Apr 13, 2024 3:49 pm In all the threads I have seen here on umbrella coverage, I have not heard from the two sorts of people who would have informed opinions.

It would be great to hear from a defense attorney who could tell us how much one might need and what happens to judgments above protected assets

Even better would be to hear from an actuary who prices umbrella coverage for a major insurance company. They would know the real world risk of large judgments and how much is paid. As it is, we continue to speculate, based on no knowledge of the industry.

We have a large policy but not equal to our unprotected networth.
We bought it along with auto and homeowners. It took a while to get the rates for the package. I do not know whether some of that involved underwriting the umbrella policy.

I have no idea whether our coverage is too much, too little, or just right.
Agree, though for the purposes of the OP's question, it is easy to imagine that even $2 million isn't enough when a death is involved in the accident or a major disability.
wander
Posts: 4452
Joined: Sat Oct 04, 2008 9:10 am

Re: Umbrella Policy- 1M or 2M?

Post by wander »

If my portfolio is $1M and law suit against me is $1M, then I am broke. If I own a $1M policity, and law suit is $2M, then am also broke. Should I buy a $1M policy at all if the outcome is the same? I think lawyers have ways to find and drain my accounts.
simplextableau
Posts: 444
Joined: Wed Oct 05, 2016 9:20 pm

Re: Umbrella Policy- 1M or 2M?

Post by simplextableau »

Tdubs wrote: Sat Apr 13, 2024 3:57 pm
afan wrote: Sat Apr 13, 2024 3:49 pm In all the threads I have seen here on umbrella coverage, I have not heard from the two sorts of people who would have informed opinions.

It would be great to hear from a defense attorney who could tell us how much one might need and what happens to judgments above protected assets

Even better would be to hear from an actuary who prices umbrella coverage for a major insurance company. They would know the real world risk of large judgments and how much is paid. As it is, we continue to speculate, based on no knowledge of the industry.

We have a large policy but not equal to our unprotected networth.
We bought it along with auto and homeowners. It took a while to get the rates for the package. I do not know whether some of that involved underwriting the umbrella policy.

I have no idea whether our coverage is too much, too little, or just right.
Agree, though for the purposes of the OP's question, it is easy to imagine that even $2 million isn't enough when a death is involved in the accident or a major disability.
People with knowledge occasionally chime in, but it falls on deaf ears and a new umbrella insurance thread is posted every week.

See viewtopic.php?t=393487

viewtopic.php?p=6974420#p6974420

And so forth. For the love of God, please just buy a 1 to 2 million umbrella policy and never raise the subject again. I don’t know what’s wrong with all of you people :D
snowday2022
Posts: 758
Joined: Sun Jan 16, 2022 1:48 pm

Re: Umbrella Policy- 1M or 2M?

Post by snowday2022 »

simplextableau wrote: Sat Apr 13, 2024 4:24 pm
Tdubs wrote: Sat Apr 13, 2024 3:57 pm
afan wrote: Sat Apr 13, 2024 3:49 pm In all the threads I have seen here on umbrella coverage, I have not heard from the two sorts of people who would have informed opinions.

It would be great to hear from a defense attorney who could tell us how much one might need and what happens to judgments above protected assets

Even better would be to hear from an actuary who prices umbrella coverage for a major insurance company. They would know the real world risk of large judgments and how much is paid. As it is, we continue to speculate, based on no knowledge of the industry.

We have a large policy but not equal to our unprotected networth.
We bought it along with auto and homeowners. It took a while to get the rates for the package. I do not know whether some of that involved underwriting the umbrella policy.

I have no idea whether our coverage is too much, too little, or just right.
Agree, though for the purposes of the OP's question, it is easy to imagine that even $2 million isn't enough when a death is involved in the accident or a major disability.
People with knowledge occasionally chime in, but it falls on deaf ears and a new umbrella insurance thread is posted every week.

See viewtopic.php?t=393487

viewtopic.php?p=6974420#p6974420

And so forth. For the love of God, please just buy a 1 to 2 million umbrella policy and never raise the subject again. I don’t know what’s wrong with all of you people :D
I asked my brother who is a litigation attorney. He said 1M is enough for everybody, and went so far as to say that smaller or NO policy may be better. He said attorneys will likely discover the size of your umbrella and seek that amount exactly/only, as it’s harder to go after personal assets and people with high NW find ways to shield them from judgments. Basically impossible to garnish your wages or to wait for RMDs because the attorneys want their share of the money NOW.
hoofaman
Posts: 981
Joined: Tue Jul 14, 2020 3:39 pm

Re: Umbrella Policy- 1M or 2M?

Post by hoofaman »

journeyL wrote: Fri Mar 29, 2024 9:19 pm My $2M State Farm umbrella is over $1600 a year. Where is everyone finding the $300-500 policies? I always hear this but have no idea where to get a policy for such a low cost.
We have state farm and a $3m umbrella and it's $600/year for us
Post Reply