Umbrella policy for personal liability.

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CivicFan

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I was talking to my insurance agent today and he suggested me to get an umbrella policy for personal liability. Right now my home insurance has $300k and the cars would get $250k per person/$500k per incident coverage per car.

The umbrella policy would add $1 million on top of that. The cost is $260 per year.

While $300k or $500k sounds enough, having worked in the health care industry has shown me that a serious incident can cost upwards of $1 million. If I am in a kind of an accident that seriously injures someone, it is probable to go bankrupt after the insurance coverage is exhausted.

What do you guys think?
 
It is a salesman doing his job, and without more info, we cant make a determination. The question really is if you are essentially lawsuit proof after your other insurance pays out or not. It is also dependent upon the laws of the state.

If you harm someone and they sue, they could take most all of what you have, but at least in some states, my impression is that they cannot take the home away from your wife/kids, and stuff like that.

If you have $500k worth of stuff, and they sue you for $500k, does it make sense for them to sue you for $1M? They will never get it.

If you are worth $10M, and they sue for $1M, youre a good target.

So you need to determine your situation. Otherwise it is just sales for a comfy feeling of insuredness.

Now, what I'd like to know, because I own multiple cars that I can't possibly drive all at once or that many miles in a year, is if I can get a standalone umbrella policy, can I reduce my auto insurance liability to a lower level and save cost there, because in reality I am buying umbrella liability protection against myself instead of to a high amount on every single car that I own.
 
I'd consider what other assets you have might be at risk in the event of a catastrophe like you're considering.

If you don't have that much to be at risk (land, investments, a business, etc), I'm not sure there's much reason to do it.

Having said that, I tend to be what some call over-insured. Part of it comes from my dad who, even back in the 1960's, had $50k/$100k on his cars. His view was if he accidentally hit and killed or incapacitated a family breadwinner, he would at least have coverage for that person or their family, and the extra cost of the liability insurance was nominal, as it pretty much still is. Fortunately, he never needed it.

I guess my point is there can be all sorts of reasons for extra coverages. Your experience in healthcare drives the point home.

I don't know how true it is that people lose their homes to liability cases. It seems to get thrown around as a horrible what-if scenario but I'm not sure if it's a real threat. Others may have more knowledge or experience in that area.

Umbrella policies are pretty cheap, effectively a bit more than $20/month (more you have a boat, etc.) for the extra coverage and peace of mind. For that kind of bottom line, that could be the bottom line.

Hope this helps.
 
If you have any real net worth then it's a good idea to insure yourself. One car accident could bankrupt you and your family with the litigious society that we live in.

I pay $213 a year for a $1 Mill policy from State Farm.

My agent told me that State Farm covered Bill Clinton in his defamation suits against Paula Jones. In fact, they paid the full amount and he still owed more.
 
Yes, it might be a salesman doing his job, but you have to make the decision based on what's best for your family. Lawyers are smart and won't waste their time suing someone who has very little assets. It's the deep pockets principle. On the other hand if you have significant savings, equity in your home, or have a well paying job, they could go after those assets.
 
Originally Posted By: JHZR2
Now, what I'd like to know, because I own multiple cars that I can't possibly drive all at once or that many miles in a year, is if I can get a standalone umbrella policy, can I reduce my auto insurance liability to a lower level and save cost there, because in reality I am buying umbrella liability protection against myself instead of to a high amount on every single car that I own.
Really sucks that the insurance company charges full rate for all vehicles even if you would never have more than one on the road at a time. The system is not set up to benefit the consumer--that is for sure.
 
I have one.

Read the policy and make sure it covers your wife and anyone else in the household.
 
Originally Posted By: TallPaul
Originally Posted By: JHZR2
Now, what I'd like to know, because I own multiple cars that I can't possibly drive all at once or that many miles in a year, is if I can get a standalone umbrella policy, can I reduce my auto insurance liability to a lower level and save cost there, because in reality I am buying umbrella liability protection against myself instead of to a high amount on every single car that I own.
Really sucks that the insurance company charges full rate for all vehicles even if you would never have more than one on the road at a time. The system is not set up to benefit the consumer--that is for sure.


+1
 
Insurance is a business. I'm not saying you don't need the umbrella policy but remember that as a customer they want you to buy as much insurance as possible so they make money.
 
As a friend of mine (who doesn't sell insurance) said, you're more likely to be sued now-days than you are to have your house burn down, and yet most people have fire insurance but not an umbrella policy.

Other things to consider, if you live in a homeowners association development, an umbrella policy may help cover a special assessment levied if the HOA gets sued and loses. If you're involved in any sort of organized activity as an officer/board member, etc, this may help if you get sued while performing your duties.

Cheap insurance, IMHO, pun intended.
crackmeup2.gif
 
My mom sells insurance, and trust me from what she's told me, an umbrella policy is WORTH IT. We have one with I think coverage for $1.5 million.
 
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One size fits all advice is always terrible advice. But that's all we can really get here. Someone armed with no facts saying to buy it or not doesn't make sense to me.

What you're insuring with the umbrella policy is the assets you have to lose. I have no idea what those are and I have no idea what the laws are in your state. Own a home? Have significant savings/investments outside a retirement fund?
 
Originally Posted By: CivicFan
Even if you have no assets, the court may garnish your earnings.


Right, but what are your earnings? Don't tell me but understand that I don't know. This affects the likelyhood that someone would try to sue you for them. If you make 7 bucks an hour buying this policy is stupid. If you make six figures it's probably not a bad thing to consider. Insurance companies usually sue for the policy max because it's in the paying insurance companies best interests to settle. If they don't accept a settlement offer for less than your limit they are liable for what the court awards at and above that. The victims insurance company knows this, and they weigh this (easy money) against how difficult (very difficult) it will be to get your assets or to get a judge to garnish your wages.
 
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Does it make sense to insure more only to be a bigger target for the lawyer to sue for more?

I have no problem if it is to protect my own assets and an honest compensation for the liability due to my fault (whether I like it or not), but just to be a bigger target so the lawyers would find more things to sue for isn't very appealing to me.
 
Originally Posted By: bepperb
..What you're insuring with the umbrella policy is the assets you have to lose. ...


The insurer will also provide the legal defense for the claim. Legal fees can be quite substantial, regardless of the merits of the claim.
 
I hate insurance and insurance companies, having said that I have an umbrella policy. In NY its costing me double what the OP was quoted, and worth every single penny of it. With things being the way they are today one lawsuit could easily burn through $500,000. I'd rather not lose my house, or anything else for that matter. OTOH if you have nothing to lose it might be a different story.

Years ago my dog nipped a young girl, a play bite, which cost State Farm Insurance $100,000, plus legal fees. I could only imagine what a real bite would have cost.
 
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