How much umbrella insurance?

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Topic Author
mtwhmemn
Posts: 103
Joined: Tue Jul 03, 2018 12:07 pm

How much umbrella insurance?

Post by mtwhmemn » Wed Dec 04, 2019 3:47 pm

We are a married couple in NC and want to insure against a lawsuit in the case we lose a suit for more than our auto policy will pay for bodily injury. (I have 250,000 bodily injury per each person now. $500,000 bodily injury each occurrence)

We have ~75+% of our money in a SIMPLE IRA, SEP IRA, 403b & 401k. ~15% in ROTH. The reason I mention the account types is I think they may be treated differently in their protection in a lawsuit.

~5% of my money is in home equity, rest is cash.

So, without going into detail about how much money I have in the various accounts, how much umbrella insurance should I have per million dollars spread out as above?

Silk McCue
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Joined: Thu Feb 25, 2016 7:11 pm

Re: How much umbrella insurance?

Post by Silk McCue » Wed Dec 04, 2019 4:13 pm

Regarding protection for various retirement accounts in NC.

https://trustcounselpa.com/ira-may-risk/

Cheers

Topic Author
mtwhmemn
Posts: 103
Joined: Tue Jul 03, 2018 12:07 pm

Re: How much umbrella insurance?

Post by mtwhmemn » Wed Dec 04, 2019 5:24 pm

Silk McCue wrote:
Wed Dec 04, 2019 4:13 pm
Regarding protection for various retirement accounts in NC.

https://trustcounselpa.com/ira-may-risk/

Cheers
From link: "Thus, if you have a SEP, SIMPLE, or inherited IRA, it may be at risk if you are ever sued." says I have a problem.

Thanks.

Silk McCue
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Joined: Thu Feb 25, 2016 7:11 pm

Re: How much umbrella insurance?

Post by Silk McCue » Wed Dec 04, 2019 5:55 pm

mtwhmemn wrote:
Wed Dec 04, 2019 5:24 pm
Silk McCue wrote:
Wed Dec 04, 2019 4:13 pm
Regarding protection for various retirement accounts in NC.

https://trustcounselpa.com/ira-may-risk/

Cheers
From link: "Thus, if you have a SEP, SIMPLE, or inherited IRA, it may be at risk if you are ever sued." says I have a problem.

Thanks.
You are welcome.

It also says “ If you are no longer contributing to the SEP or SIMPLE, you may be able to roll it into a standard IRA so that it’s fully protected (under NC law and up to $1 million in bankruptcy).”

I carry a $1M umbrella policy, “just because, just in case”. We live in Florida and have all our retirement assets, pension, and homestead protected.

Cheers

Topic Author
mtwhmemn
Posts: 103
Joined: Tue Jul 03, 2018 12:07 pm

Re: How much umbrella insurance?

Post by mtwhmemn » Wed Dec 04, 2019 6:04 pm

Silk McCue wrote:
Wed Dec 04, 2019 5:55 pm
mtwhmemn wrote:
Wed Dec 04, 2019 5:24 pm
Silk McCue wrote:
Wed Dec 04, 2019 4:13 pm
Regarding protection for various retirement accounts in NC.

https://trustcounselpa.com/ira-may-risk/

Cheers
From link: "Thus, if you have a SEP, SIMPLE, or inherited IRA, it may be at risk if you are ever sued." says I have a problem.

Thanks.
You are welcome.

It also says “ If you are no longer contributing to the SEP or SIMPLE, you may be able to roll it into a standard IRA so that it’s fully protected (under NC law and up to $1 million in bankruptcy).”

I carry a $1M umbrella policy, “just because, just in case”. We live in Florida and have all our retirement assets, pension, and homestead protected.

Cheers
I will attempt to roll my SEP & SIMPLE to Traditional since I'm not contributing to them anymore. My wife has an inherited IRA that can't be converted easily. I don't really understand what "(under NC law and up to $1 million in bankruptcy)" means. Does it mean you can't lose any Traditional IRA money in a lawsuit but only $1 million is protected in bankruptcy?

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unclescrooge
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Re: How much umbrella insurance?

Post by unclescrooge » Wed Dec 04, 2019 6:08 pm

I carry personal liability on my auto for $1 million.

I have a separate umbrella policy for $1 million.

Increasing the liability limits on my auto policy was much cheaper than my umbrella.

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cowdogman
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Location: Washington State

Re: How much umbrella insurance?

Post by cowdogman » Wed Dec 04, 2019 6:16 pm

I revisit this issue from time to time and just looked at it again with my State Farm agent a few months ago.

I don't think the amount of umbrella coverage should be based on net worth. It should be based on what you think is your (realistic) maximum liability risk--which has nothing to do with your net worth. Another way to think about it: it should be enuf so that the plaintiff would have a hard time turning down a settlement offer from the insurance company.

For me the largest factor is whether you have teenage/young adult household drivers. If you do and you live in one of the many states with car owner liability statutes, then that should cause you to push up the liability limit.

Costs vary state to state, but generally umbrella coverage is relatively inexpensive up to $5M and very expensive above that. And if you have young drivers, it will push the cost up across all levels of coverage.

I think the correct range for most people is between $2M to $5M, but only you know what your potential exposure may be.

Silk McCue
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Re: How much umbrella insurance?

Post by Silk McCue » Wed Dec 04, 2019 6:18 pm

mtwhmemn wrote:
Wed Dec 04, 2019 6:04 pm

I will attempt to roll my SEP & SIMPLE to Traditional since I'm not contributing to them anymore. My wife has an inherited IRA that can't be converted easily. I don't really understand what "(under NC law and up to $1 million in bankruptcy)" means. Does it mean you can't lose any Traditional IRA money in a lawsuit but only $1 million is protected in bankruptcy?
I suggest you search other references to this topic to review other wording and sources. The wording appears to say bankruptcy only protects certain dollars to $1M. The context is not clear as to regular IRAs or Simple etc that had been moved to IRA.

Nothing can be done with the inherited IRA beside drawing it down to replace earned income that would more fully fund tax deferred funds. Of course you don’t want to go wild with risk mitigation strategies.

Cheers

illumination
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Re: How much umbrella insurance?

Post by illumination » Wed Dec 04, 2019 6:22 pm

I went through this recently, I went from like $250k to $1 million for bodily injury for like $15 more a month on my auto insurance. I thought that was an easy decision.

I don't necessarily buy into having as much insurance as your net worth, someone can always sue for more. If I have a $500k net worth and a $1 million dollar policy, they can sue for $1.5 million and my assets are at risk. It just seems it can go like this forever. Obviously, the ultra rich don't have policies like this. I don't think they even have like $20+ million umbrella policies.

I just try to insure for enough where the insurance company is almost exclusively on the hook in nearly every reasonable worse case scenario and will devote massive resources.

This type of insurance though is cheap up to a million, it's like a lunch at a fast food once a month.

But I also think though certain activities the math might change on this, but that gets into professional insurance policies.

texasdiver
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Re: How much umbrella insurance?

Post by texasdiver » Wed Dec 04, 2019 6:25 pm

I went through this 6 months ago and never found an exact rule of thumb. We went with $2 million as the difference was not that much from the $1 million when bundled with all our other insurance through Costco.

There isn’t just your current assets to consider. There are also future earnings if you or your spouse are employed in a high paying job.
Last edited by texasdiver on Wed Dec 04, 2019 10:26 pm, edited 1 time in total.

Pete3
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Re: How much umbrella insurance?

Post by Pete3 » Wed Dec 04, 2019 7:25 pm

mtwhmemn wrote:
Wed Dec 04, 2019 3:47 pm
So, without going into detail about how much money I have in the various accounts, how much umbrella insurance should I have per million dollars spread out as above?
The amount of umbrella insurance you get should have nothing to do with your net worth.

You aren't insuring your assets, you are insuring against a successful lawsuit.

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mhc
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Re: How much umbrella insurance?

Post by mhc » Thu Dec 05, 2019 9:59 am

I tend to agree that you are insuring against a lawsuit. If you want to go down the net worth path, then you also need to cover 30% of your wages (I think this is right) for the rest of your life. They can garnish your wages.

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