Umbrella Insurance

MommyLiberty5013 · September 2016

How much coverage is enough? How do you decide?

brij2006 · September 2016

Add up your assets and you want at least enough coverage to cover those. This means everything. Retirement, house, cash, rental property, kids' college funds, etc. Do not subtract the debt liabilities though.

The minimum is $1million and they go up by $1mil after that.
Keep in mind also that if you have $500k worth of assets, then you at least want enough liability coverage on your home and auto policies to protect that. Sometimes people can get away with just increasing their liability on their individual policies to cover things, but honestly an umbrella is usually relatively cheap.

So for example. I know we're a rare breed with our assets but they lay out like this.
House - $125k
Farm Land - $750k
Retirement - $110k
Cash - $120k
Cars - $52k
College fund - $20k

So in total we have almost $1.2mil in assets. So we carry a $1mil umbrella and have $250k per person/ $500k per occurrence liability coverage on our auto's and $1mil liability on our home and the farm land.

We will be monitoring our net worth over the next few years as we will need to bump up to a $2mil umbrella. Mostly because our autos have the $250k per person then $1mil umbrella. As our retirement builds, our net worth will get over 1.25mil so we will need to increase the umbrella.

Honestly though, we have 5 cars and 90 acres of farm land so our umbrella has extra charges, but it's still only $300/year. That's a good $1mil peace of mind for $25/month.

I usually advise clients that if they're above $250k in assets, to get an umbrella. Mostly because in our auto policies we can only go up to $250k (per person) max for liability, and that's the most likely area to have a claim and lawsuit.
As an insurance agent I've only seen 1 claim tap into an umbrella policy. It was legitimately not the drivers fault either. He was driving in the fog and a guy had pulled over because of a flat tire and was standing in the road. Our client didn't see him because of the god, and hit him. He passed away, the family sued. It depleted the entire $250k in liability from his auto policy, plus tapped into his umbrella.
People don't think that it can or will happen to them, but it easily can. I can't even imagine being this mans' family, but they were very greedy and lawyered up immediately. They won even though there was a passenger in the vehicle to say that their son was standing in the middle of the road in the fog and there was nothing my client could have done to avoid hitting him.
So it can happen and if he hadn't had that umbrella policy, they could have come after his assets.

short+sassy · September 2016

@brij2006, that's a very upsetting story. Of course, for the young man who died, but I also feel bad for your client. That person also got a very raw deal. I really worry about that kind of thing. For my p/t job, I do a lot of driving around the French Quarter/Downtown area. There is not only heavy motor traffic, there is heavy pedestrian traffic.

People pay NO attention to what they are doing!!!! I have had a number of close calls where some idiot, usually staring at their cell phone, has walked right in front of my car. So far, I've always been able to slam on my brakes, safely swerve into another lane, or honk my horn if I notice they are about to walk in front of me.

The worst was just a couple months ago. My light was green. I wasn't speeding. And then when I was seconds from crossing into the intersection, some 8-year-old kid wasn't paying attention and stepped right in front of my car. I didn't even have time to brake it happened so fast. The only thing that saved his life/great injury is his dad saw what was happening, grabbed his arm, and yanked him back. That child was almost flying through the air his dad yanked him so hard, thank goodness! It was terrifying and I was shaking a bit the rest of the way home.

But it made me think about, what if? Just because their son would have been 100% at fault and there is not one blessed thing I could have done to have avoided hitting him, doesn't mean I wouldn't have been ruined financially in a lawsuit.

With all that said, where is the best place to go for an umbrella policy? Is that something typically my local agent would handle?

brij2006 · September 2016

@short+sassy You would purchase it from your local agent.

I still feel bad for this client. He was driving a semi, not even his personal vehicle, and this was on a very busy highway. There was absolutely nothing he could have done to avoid him, but the family was persistent from the start that they were owed a lot. They even called my personal cell phone while I was on vacation to give threats to me as his agent. The driver immediately offered to pay for funeral services out of his own pocket because he felt so terrible that there was nothing he could do. Its been 6 years and he still see's a counselor for the guilt he has over this and the guilt that family put onto him. They still blame him. It truly is a sad situation.

Even moreso now for me coming from the other side. My brother left a bar drunk, drove home, and ran into a tree and died. My family could have gone after the bar my brother was last at. We could have sued them for everything possible because they continued to serve my brother when it was clear he was very drunk. His tox report came back as "blackout drunk" BAC. We had quite a few people tell us to, but that just isn't who we are. It was my brothers' decision to keep drinking, not the bar. It was his decision to get into his truck and drive home that night, not theirs.
Unfortunately though, we live in a sue happy society. There has to be blame somewhere and those to blame should pay. The bartender from that night knows our family personally. We saw her at the fundraiser for my brothers' scholarship fund a couple weeks ago. She hugged me and cried and told me how much she regrets not cutting him off that night. That she feels like his accident and his death was her fault. Yet she was indirectly involved.

It's so hard, but I wish that people would understand how much their "sue happy" mentality may do to someone. I completely understand if something is legitimately someone else's fault, but in these situations it just wasn't. Yet in both situations a lawsuit can happen.

All the more reason to have plenty of insurance coverage. Especially liability. My brother just had his auto liability of $250k, yet he was worth a little over $1mil. He did not have an umbrella policy. Had he hit and killed someone that night, that family or that person could have sued his estate. He had assets. He had things. He was leaving a legacy to us. That all could have been blown away with just 1 night of bad judgement and lack of proper liability coverage. So many don't realize that.

jtmh2012 · September 2016

brij2006 said:

All the more reason to have plenty of insurance coverage. Especially liability.

I don't ask this to be argumentative and I'm sure there are good reasons for each type of policy, but at what point is there enough?

We have home, auto, and though various sources some life insurance, but it seems like each time I have to talk to someone who sells some sort of insurance that they're trying to sell me more. I could easily see myself just transferring my entire paycheck to the insurance company.

We're not rich, but we do have enough assets that they might start to look interesting to someone who is sue happy.

short+sassy · September 2016

brij2006 said:

@short+sassy You would purchase it from your local agent.

I still feel bad for this client. He was driving a semi, not even his personal vehicle, and this was on a very busy highway. There was absolutely nothing he could have done to avoid him, but the family was persistent from the start that they were owed a lot. They even called my personal cell phone while I was on vacation to give threats to me as his agent. The driver immediately offered to pay for funeral services out of his own pocket because he felt so terrible that there was nothing he could do. Its been 6 years and he still see's a counselor for the guilt he has over this and the guilt that family put onto him. They still blame him. It truly is a sad situation.

Even moreso now for me coming from the other side. My brother left a bar drunk, drove home, and ran into a tree and died. My family could have gone after the bar my brother was last at. We could have sued them for everything possible because they continued to serve my brother when it was clear he was very drunk. His tox report came back as "blackout drunk" BAC. We had quite a few people tell us to, but that just isn't who we are. It was my brothers' decision to keep drinking, not the bar. It was his decision to get into his truck and drive home that night, not theirs.
Unfortunately though, we live in a sue happy society. There has to be blame somewhere and those to blame should pay. The bartender from that night knows our family personally. We saw her at the fundraiser for my brothers' scholarship fund a couple weeks ago. She hugged me and cried and told me how much she regrets not cutting him off that night. That she feels like his accident and his death was her fault. Yet she was indirectly involved.

It's so hard, but I wish that people would understand how much their "sue happy" mentality may do to someone. I completely understand if something is legitimately someone else's fault, but in these situations it just wasn't. Yet in both situations a lawsuit can happen.

All the more reason to have plenty of insurance coverage. Especially liability. My brother just had his auto liability of $250k, yet he was worth a little over $1mil. He did not have an umbrella policy. Had he hit and killed someone that night, that family or that person could have sued his estate. He had assets. He had things. He was leaving a legacy to us. That all could have been blown away with just 1 night of bad judgement and lack of proper liability coverage. So many don't realize that.

The bolded is so true. There can be such a ripple effect when an untimely tragedy occurs. The family feels terrible, but often so do the witnesses and/or anyone even remotely involved.

I think that's admirable your family chose not sue the bar/bartender. People can just get so blinded by greed and even anger at how unfair life can be sometimes. Certainly the bartender is still haunted by her own guilt and I'm sure that would have been even more if there had been anger and blame coming from you all.

My H has been married before and his previous FIL was too old to safely drive anymore, but did it anyway. One night, the FIL used the wrong ramp and was driving 60MPH the wrong way down the freeway. He got in a head-on collision that killed himself and 4/5 people in the other car. The one person who survived had serious injuries. The FIL had worked hard his whole life, had retired with a nice nest egg and property. And, tragically but rightfully so, none of it went to his family. His entire estate, plus whatever the max. of the policy was went to the surviving victim and the heirs of the other victims.

Here is a bit of a crazy DUI story. I used to manage a big convenience store/gas station. We were under the same "dram" laws that servers/bartenders are. As in, we are not supposed to sell alcohol to someone who is intoxicated. But I personally took it a step further. If someone was obviously intoxicated and they got into their car to leave, I'd call the local police.

A guy came in...on a Sunday morning no less...so drunk he could barely even walk. He wasn't trying to buy alcohol but, when he left, I saw him walk over to one of the pumps where apparently he had parked his car. He picked the gas dispenser up. I shut his pump off and called the police. He spent a couple minutes trying to figure out what was wrong and then called me over the speaker asking for help. I stalled him and about one minute later the police arrived and arrested him.

I couldn't believe it. But that same guy came into the store a few days later, totally sober and looking specifically for me. I'm sure he got into a world of trouble, but he actually thanked me for calling the police and not letting him drive that day!

LillibetteV · September 2016

Just to play devil's advocate from a litigation paralegal's perspective. Yes, some people are sue-happy (I have seen my fair share of what we call "professional plaintiffs" and just straight up liars), BUT depending on the circumstances of a wrongful death people can find closure in a lawsuit. I had a client that just wanted to know what really happened the night her daughter died and she felt that everyone involved was lying to her - the only way to even start getting at the truth was to file a lawsuit and start taking depositions under oath. She was raked through the mud by her community and the lawyers at her deposition. She wasn't looking for money she was looking for answers, but unfortunately the US system requires you to make a monetary claim and money is the only award that can be provided. Even at the end when she got paid out it (a) didn't bring her daughter back (b) didn't get her the admission of guilt or apology she craved and (c) didn't make her wealthy. Having fought for these families and seeing how destroyed they are it pains me to think that people just assumed they were trying to take advantage.

brij2006 · September 2016

@LillibetteV That is so sad.
I will say this, when my brother died we wanted answers so badly. What bar was he at last? Who was he with? What was the last text he sent that night? Why didn't they stop giving him drinks?
We know that the only answers we have are from the police investigation. It says how fast he was going at impact and 5 seconds before impact, what his BAC was, whether or not caffeine or drugs were in his system, etc. Unfortunately that is all we have. Do I wish we had more answers? Yes. Do I wish his phone hadn't been crumpled in the accident so I could read his last texts? Yes.
There are so many questions and guilt that goes into losing a close loved one that I can see how many want to seek out answers and it's unfortunate that a lawsuit has to get involved in order to get those.

LillibetteV · September 2016

@brij2006 Exactly. I also lost my sister in a car accident but no drugs or alcohol played a role. It was a normal day and just a misjudged left turn. Any time there is a sudden accidental death it leaves you feeling "why?" and while I'm with you - I wouldn't want to go through years of litigation to find those answers I can't judge people who grieve differently than I do. I do think apologies go a long way too. The bartender apologized to you. The driver of the car my sister was in apologized to me. It seems silly to people who have never been through it but it really does mean a lot. He was charged with vehicular manslaughter and I even went in front of the judge to tell him that my sister wouldn't want him in jail for making a mistake and it worked.

brij2006 · September 2016

jtmh2012 said:

brij2006 said:

All the more reason to have plenty of insurance coverage. Especially liability.

I don't ask this to be argumentative and I'm sure there are good reasons for each type of policy, but at what point is there enough?
We have home, auto, and though various sources some life insurance, but it seems like each time I have to talk to someone who sells some sort of insurance that they're trying to sell me more. I could easily see myself just transferring my entire paycheck to the insurance company.
We're not rich, but we do have enough assets that they might start to look interesting to someone who is sue happy.

Don't worry, you're not being argumentative. There is definitely a point where someone can be grossly over insured.
The figures that I listed above, that's how to figure out how much liability coverage you need.
Each person is different though. Some people feel comfortable with a $1,000 deductible on their cars and others can't even fathom coming up with that much money. So their needs will be different.

Me personally, I advise that the minimums for insurance are auto, home, life, and health insurance. Beyond that is your decision and you can weigh the pro's and con's. But at some point you will want to be self-insured on some things.
So for example, we don't carry short term disability because we have an emergency fund and we can make it on just 1 persons' income. Yet we have long-term disability on H because his job is high stress and he's on his feet for 12 hours/day. To where we don't have it on me because my job is done at a desk and I could do it with a broken leg or from home if I needed to. So we self-insure in that department.

It's really just figuring out what are really needs for your household.

short+sassy · September 2016

I actually first heard of umbrella policies on my real estate investing forum. Pretty much everyone on there has one, but those are also people at an arguably "higher risk" of being sued because they hire contractors/construction people for flips and/or have tenants.

This post is just in time for me. I've been considering getting an umbrella policy for a little while. I currently have four sets of tenants and will be adding two more sets in the next 1-2 months. I feel like I'm "big" enough now and have enough assets that I need the extra protection. Especially since it is only a few hundred bucks a year.

With that said, at least from what I have picked up, it is thankfully super rare that really bad things happen to tenants and major lawsuits are filed.

Insurance is always a gray line that is going to be different needs for different people. I tend to buy "cheap" insurance even for things that have a fairly miniscule chance of happening...like an umbrella policy. But then don't buy important types of insurance...like life and flood...because the premiums are absolutely outrageous for a fairly small benefit. I'm basically forced to self-insure for those eventualities because it's just a better mathematical choice for me. Not happy about it. But it is what it is.

MommyLiberty5013 · September 2016

Based on the discussion here are my questions...

1. If the main point of umbrella insurance is to protect assets in the event you are sued, what prevents the person suing you from taking assets as well as the insurance payout? Can they just say, "Oh, you have a $2M policy too? I'll have that as well." Is there a legal block from people being able to do this?

2. What about wage garnishment? It's my understanding that lawsuits can take future wages too. Or, am I incorrect? Maybe it varies by state. If so, does umbrella protect against this?

3. Lastly, how about self-defense? If an intruder breaks into my home and I bash him upside the head with a baseball bat, incapacitating him, but not killing him and he attempts to sue me in civil court even after the state filed no charges against me criminally, would an umbrella policy pay for court costs and attorney fees? What if I shot him instead with a gun and he was wounded? Or, what if he died as a result? If his family attempted to sue me, would umbrella kick in then?

4. Okay I lied. One more question. What if I lock my firearm up, but my home is burglarized and the gun is stolen. It is later used in the commission of a crime and is traced back to me. Would umbrella cover any criminal or civil costs arising from this case?

I am already pursuing asking this question with my insurance agency. I'm curious for peoples' feedback here.

LillibetteV · September 2016

@MommyLiberty5013 the answers will vary by state for the self defense and gun questions. The amount someone can sue you for isn't directly related to how much insurance or assets you have. If you're sued and the amount in controversy is $500k and you happen to have a $2million policy then that protects you from having to pay out of your own pocket (assuming you didn't do something to cause your insurance to deny coverage). However if in that same $500k lawsuit you only have $250k in insurance coverage then the person suing you can then go after your assets or wages to make up the insurance shortage.

brij2006 · September 2016

@MommyLiberty5013 Your regular homeowners liability actually covers the self-defense and firearm scenario. So if that amount is depleted, then the umbrella coverage would kick in.

Your first question is a true concern. It is possible for someone to sue for more, but at some point you can file bankruptcy to get them from taking everything.
Now, you can do that even without an umbrella. However, why work so hard to have a $1mil net worth just to file bankruptcy and hand it all away with a lawsuit? Where you could have paid $300/year for an umbrella policy to hopefully pay out enough to the claimant to still be able to keep all of your assets. Having $300k liability on your homeowners policy but with a net worth of $1mil, is just not enough. If it's a bad enough situation, they will come after you because they know you have more than $300k.
I don't know the legal side of this, so I could be wrong. But I believe the wage garnishment is mostly used when someone is uninsured or underinsured. Most of the time you would not see wage garnishment when someone has been paid $1mil in a lawsuit.

*Side Scenario* So I'm in Illinois. We passed the conceal and carry law last year. I had a client ask me if they were covered if they were to use their conceal and carry to defend themselves outside of their home, and if they were to be sued. I honestly didn't know but did some research. Sure enough, the insurance companies do protect your liability for that. I was actually kind of surprised.

MommyLiberty5013 · October 2016

Update: Just got our umbrella policy today. $2M. But, we altered a few things in Auto and Homeowners so we actually have $2.3M in total coverage of liability. With all the changes, we're only going to pay $25 per month more for it all.

The agent DID say that future wage earnings should be a factor in how much to buy. And, he said that some retirement plans are not permitted to be taken in the event a person is sued. However, others can be touched by people suing you once you cash them out. And, he said lawyers are good at getting to the retirement money.

Anyway, as DH's income increases, we will increase our coverages.

Also, I asked about self-defense and specifically firearms. Every body should check their own companies, but with mine, firearms are considered personal property and aren't considered any more dangerous than a knife in the kitchen. The liability coverage is for the person, not the device, tool or weapon used in self-defense.

hoffse · October 2016

Glad you got a policy.

H and I each have one provided as a perk through our jobs because lawyers get sued so often (joy). We are just waiting for the first time that happens. We have to have certain personal limits on our home, cars, etc. but then the umbrella kicks in after that. It's pretty high.

The reason most lawyers don't pursue claims beyond insurance is for a few reasons. First, (and probably the biggest reason) very often the insurance limits are high enough that their clients' claims would not legitimately hit the ceiling of the insurance coverage without claiming punitive damages or really high "pain and suffering" type claims. Nobody is going to get punitives for slipping and falling on your driveway.

Second, the likelihood of recovery is a lot higher from the insurance companies. Like Brij said the easy answer is to file for bankrutpcy if they do go after your personal assets. Or the person might already be insolvent. Remember, the MM board does not represent the general population.

Most personal injury lawyers are paid on commission (1/3 - don't even get me started on that), so they are incentivized to take the the path of least resistance to get the fastest settlement so that they can get paid and move on to the next client.

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