Author Topic: Umbrella insurance policy for renters without a car?  (Read 1444 times)

tempesttenor

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Umbrella insurance policy for renters without a car?
« on: February 04, 2020, 03:48:12 PM »
Hey folks, I'm trying to buy an umbrella insurance policy for my wife and myself to protect our brokerage and retirement assets. We neither own a (clown) car nor do we own a home (renters 4 lyfe), so we don't have auto or homeowners insurance policies. We rent our apartment and have renters insurance.

I've called around a bunch of insurance companies and all of them require either homeowners or auto insurance in order give us an umbrella policy. Has anyone in the same situation been able to purchase an umbrella policy? Is it worth it to buy non-owner auto insurance just to be able to get an umbrella policy?

tempesttenor

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Re: Umbrella insurance policy for renters without a car?
« Reply #1 on: February 04, 2020, 04:04:47 PM »
A friend suggested that we could be added to our parents' auto policies and that would count as having auto insurance. Can anyone corroborate if that would work?

norajean

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Re: Umbrella insurance policy for renters without a car?
« Reply #2 on: February 04, 2020, 04:58:36 PM »
If you don't own a home or drive much, your liability is pretty small.  The umbrella has to sit in excess of some other coverage (home, auto) which you don't have and don't need. I would say you don't need umbrella so be happy without it.

dodojojo

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Re: Umbrella insurance policy for renters without a car?
« Reply #3 on: February 04, 2020, 06:26:13 PM »
Same boat as the OP.  Wondered if I could get renter's insurance and then try to get umbrella along with it?

My concern is cycling--afraid I may be liable if I cause an accident.

spartana

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Re: Umbrella insurance policy for renters without a car?
« Reply #4 on: February 04, 2020, 08:00:25 PM »
My insurance company requires you to have two other policies to get an umbrella policy. In my case that was home and far liability. And at certain levels
 When I went car less recently I had to get a non car owners policy of the same limits to keep my umbrella policy. I was going to get one anyways because I rent often and it was the same cost as my former car liability coverage. Personally I don't think you need it.

Paul der Krake

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Re: Umbrella insurance policy for renters without a car?
« Reply #5 on: February 05, 2020, 01:26:01 AM »
Paging @FiveSigmas

reeshau

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Re: Umbrella insurance policy for renters without a car?
« Reply #6 on: February 05, 2020, 04:13:02 AM »
All are correct, that *most* companies require underlying policies.  And even some companies that offer standalone umbrella policies (meaning, the only policy from them) write their umbrellas as if you have coverage from someone else's policy, by setting certain underlying liability limits in the policy--like a deductible in your health insurance, only with a lot bigger numbers.

I was looking for this option when we moved to Ireland in 2018, as we are renting and living an urban, European lifestyle (i.e. no car) but have significant assets in the US.  We did eventually get a car here, so I also have an umbrella here, and got it before my US one expired.

Here is an old article on the topic; old enough that I would say it can get you googling for an answer, but I wouldn't trust any of the details.  I was looking at someone major other than auto-owners, but I forget who it was.  This is a small enough niche that everyone else is not a household name; you will have to be comfortable with their ratings, not their familiarity.

https://www.irmi.com/articles/expert-commentary/comparing-stand-alone-personal-umbrella-policies

yachi

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Re: Umbrella insurance policy for renters without a car?
« Reply #7 on: February 05, 2020, 06:48:15 AM »
Is there a particular risk that you are trying to cover? 
1) You design roller coasters in your spare time - Maybe get a Design Professional Liability Policy
2) You rent a boat on weekends - Check policies at your rental location for liability coverage
3) You purposely set fires out side people's homes  - Realize an umbrella policy is not going to cover willful criminal acts, and start paying a lawyer instead

A larger umbrella insurance policy provides the peace of mind that your insurance company will bring a heavy hitting lawyer to bat  to protect their liability.  You would be better served by hiring your own heavy hitting lawyer, because he'll protect you in case of #3, whereas the insurance lawyer may not.  If you can cover the cost of representation, you don't need the insurance policy.

You could consult with a lawyer to understand your risks of a lawsuit ahead of time.  If you're concerned about someone injuring themselves in your apartment complex, you'll want to identify risks and ask the apartment complex to fix them.  This would reduce your liability and make the complex safer at the same time.  If you're concerned about frivolous lawsuits, the lawyer may be able to estimate costs to fight them for you.  In addition, you could maybe countersue to recover your lawyers costs.

FiveSigmas

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Re: Umbrella insurance policy for renters without a car?
« Reply #8 on: February 05, 2020, 11:08:42 AM »
I'm not quite in the same situation as TT, as I am a homeowner (but don't have a car or car insurance).

Like others have mentioned, my provider normally requires that one purchase both homeowner's and car insurance through them (and max out the liability limits on those policies) prior to getting an umbrella policy. They were willing to accommodate me, though, after I convinced them there was no chance I would get behind the wheel of a motor vehicle.

Edit: Apparently, you need to be behind the wheel, not the seat to operate a car.
« Last Edit: February 05, 2020, 11:13:24 AM by FiveSigmas »

merula

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Re: Umbrella insurance policy for renters without a car?
« Reply #9 on: February 05, 2020, 12:56:21 PM »
Hi, OP. I work in insurance, have for nearly 15 years, and my specialty is Umbrella (though in full disclosure, I work primarily with commercial umbrellas).

I don't recommend Umbrellas for most people, but probably even less for your situation. Insurance companies make boatloads of money on umbrella policies, they're much more profitable than other kinds of insurance, so they have a strong incentive to talk up the need for this.

You might injure someone. Maybe someone gets hurt in your apartment, or you borrow a friend's car and it turns out they don't have insurance. The hurt person could sue you. What happens if they sue you? Well, your retirement accounts aren't subject to that judgment (ERISA); if you owned a home, at least some part of the home's value would be protected as well. So you're really not as exposed to loss as the insurance companies want you to think.

I would recommend looking at the liability limit on your Renters insurance policy. If it's not $300k or $500k, call the company to increase it. You can also buy "Non Owner Auto Insurance", which would cover you if you rent a car or borrow a friend's car, but you need to have a drivers license for that. (If you get this, also get the uninsured motorist and/or personal injury coverages, as that will protect you if you're injured by a car while walking or biking.) More info: https://www.thebalance.com/what-is-non-owners-insurance-527421.

Feel free to DM me with any other questions.

Paul der Krake

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Re: Umbrella insurance policy for renters without a car?
« Reply #10 on: February 05, 2020, 01:24:56 PM »
Hi, OP. I work in insurance, have for nearly 15 years, and my specialty is Umbrella (though in full disclosure, I work primarily with commercial umbrellas).

I don't recommend Umbrellas for most people, but probably even less for your situation. Insurance companies make boatloads of money on umbrella policies, they're much more profitable than other kinds of insurance, so they have a strong incentive to talk up the need for this.

You might injure someone. Maybe someone gets hurt in your apartment, or you borrow a friend's car and it turns out they don't have insurance. The hurt person could sue you. What happens if they sue you? Well, your retirement accounts aren't subject to that judgment (ERISA); if you owned a home, at least some part of the home's value would be protected as well. So you're really not as exposed to loss as the insurance companies want you to think.

I would recommend looking at the liability limit on your Renters insurance policy. If it's not $300k or $500k, call the company to increase it. You can also buy "Non Owner Auto Insurance", which would cover you if you rent a car or borrow a friend's car, but you need to have a drivers license for that. (If you get this, also get the uninsured motorist and/or personal injury coverages, as that will protect you if you're injured by a car while walking or biking.) More info: https://www.thebalance.com/what-is-non-owners-insurance-527421.
I totally get not unnecessarily over-insuring, that makes a lot of sense. At which amount of taxable, non-ERISA protected assets do you start recommending an umbrella policy? I'm a renter with about 400k of taxable and couldn't even get a competitively priced renters policy that goes over 300k  if I wanted to.

That insurance companies make boatloads of money on that particular line doesn't really tell us that much aside that it's not a price-sensitive market , presumably because low volume. I buy products with fat profit margins all the time. Yesterday I bought a $6 beer at a bar when I could have gotten a 6-pack for the same price two blocks down. Today, I'm writing this forum post from a device made by a company whose profit margin is pushing the 40% mark.

spartana

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Re: Umbrella insurance policy for renters without a car?
« Reply #11 on: February 05, 2020, 01:34:21 PM »
^My million dollar umbrella policy cost $198/year (home owners is $350 and non-car-owners is $600). So the umbrella seems like a minimal expense and can probably be paid for by giving up a couple of beers per month ;-). Worth the extra coverage for me due to having a fair amount of "cash".
« Last Edit: February 05, 2020, 01:36:51 PM by spartana »

reeshau

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Re: Umbrella insurance policy for renters without a car?
« Reply #12 on: February 05, 2020, 02:08:51 PM »
That's exactly why I was looking, and I think it would be fairly common here, if anywhere:  ready to FIRE, and about 50% of my assets outside of retirement accounts.  And, as a renter, no home equity to shelter either.

I'm also not put off by the relative profit margins, though of course I would welcome them to be competed down.  Umbrella claims tend to be jackpots, rather than sweating if the body shop bill is more than your deductible.  Avoiding a $1 million dollar verdict with an on-staff lawyer is relatively cheap to provide, but gives me that value of the $1 million cost avoidance.  That is a recipe for fat margins.  As @spartana mentions, for a relatively nominal amount, I don't have to contemplate those meteor-strike events.

merula

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Re: Umbrella insurance policy for renters without a car?
« Reply #13 on: February 06, 2020, 07:35:00 AM »
Whether you should buy an umbrella depends on your personal risk tolerance. I have <$100k of exposed assets (my home is completely protected under my state's law), most of my money is in ERISA-protected accounts, and I feel comfortable with my $300k limits.

First off, from a personal insurance perspective, the bulk of the exposure to liability is from driving. That's probably why the OP couldn't get an umbrella over their renters insurance, because the insurance company relies on the auto pricing to get to their premium. They can't even calculate how to charge without it. Which is why the first step I would recommend is to get an Auto policy if you have a driver's license, and get a $300k or $500k limit there.

Second, I think it's important to understand how "profitable" is determined in the insurance industry. When you or I are determining whether our insurance has been "worth it", we look at how much we've been paid (losses) compared to how much we paid the insurance company (premium). The insurance company looks at that too; they call it the "loss ratio", losses divided by premium. They also look at their business expenses and get an "expense ratio" by dividing total expenses by premiums collected. Loss ratio plus expense ratio equals "combined ratio". If the combined ratio is under 100%, the insurance company made money, if it's over 100%, they lost money*.

The industry average for auto loss ratio has been between 70-80% for the past 10 years. Industry average expense ratio has been 25-35% over the same time, for a combined ratio of 95%-115%. The industry lost money on auto for most of that time, partially because they didn't adequately account for the impact of smartphones on accident rates, and the <100% combineds are pretty new.

In contrast, umbrella loss ratios have been 30-35%, and expense ratios are 30-40%, leading to industry combineds of 60-75%. That's what I mean when I say that it's insanely profitable.

So, yeah, it's really cheap peace of mind. No argument. But what you could actually expect as your fraction of the overall risk is about a third of that premium.

The final thing that I think a lot of people don't realize is how personal liability claims typically work. If your average John and Jane get into an accident, even assuming they're both insured, they likely don't have limits over $50k, which doesn't go far towards medical bills. Let's say that police assigned fault to John, and Jane has injuries well over John's limit. Jane can certainly sue John, but every attorney she's going to talk to is going to say "yeah, he's definitely at fault, but you can't get blood from a stone, so it's not going to be financially worth a suit". Attorneys often say that without even doing any research into John's actual assets; they'll judge based on his job title, the kind of car he was driving and the neighborhood he lives in.

A mustachian, driving a below-average car, with an unremarkable job and modest house, is not going to smell like profit to anyone involved, and if you already have an insurance limit that's many times the average and well above the legal requirements, in my opinion you've gone above what can reasonably be expected to compensate someone you're liable to.

However, maybe your risk tolerance for stuff like this is low, or maybe you're not as "stealth" with your wealth as many on here, or your job is one generally assumed to be well-paid. If that's the case, please contact an independent insurance agent to buy your insurance. These are experts who can help you find an insurance company to meet your needs (maybe there's someone out there writing $1M liability limits on renters policies?). I've been with mine for forever, and have never been able to find a better price, because they put me with a company that has a specialty coverage for "leisure" vehicles (driven <7500 miles/year and not used for commuting).

*Or, they lost money before investment income was accounted for, but that gets too complicated for our purposes here.

tempesttenor

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Re: Umbrella insurance policy for renters without a car?
« Reply #14 on: February 22, 2020, 03:48:39 PM »
Thanks for the advice everyone. I'll hold off on buying an umbrella policy for now because as many posters said, I probably don't fit the risk profile of someone who needs it.