Author Topic: Is Umbrella Insurance Worth it?  (Read 5908 times)

Bucksandreds

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Is Umbrella Insurance Worth it?
« on: June 08, 2015, 04:28:05 PM »
I'm young with low net worth. No dogs, no swimming pool. It's only $300 per year for $1 million but if the odds that I use it in any year are 1 in 1 million then I think $300 is far too expensive. Basically the odds that I use it in any year should be about 1 in 10,000 for it to be worth it (in my calculation) but I guarantee you that usage rate is closer to 1 in 500,000. Please someone tell me to get it and why.

Bicycle_B

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Re: Is Umbrella Insurance Worth it?
« Reply #1 on: June 08, 2015, 04:35:00 PM »
Nope.  Drive safe, be polite and invest the money.

mxt0133

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Re: Is Umbrella Insurance Worth it?
« Reply #2 on: June 08, 2015, 04:42:02 PM »
They way litigation works is if you have no money and you hit someone the lawyers will asses your assets and see if it is worth it to sue you.  It is very hard for a judge to impose wage garnishing on someone with no  assets and low income.  But if you have assets of 1 million then the lawyers will be more than happy to sue because they know you probably have insurance to protect those assets.

As long as you have reasonable coverage like 150K for personal injury and 100k of property that will more than cover 99.99% of the scenarios you will ever encounter.  If you are considering umbrella then your homeowners or rental insurance should be more than enough coverage.

ltt

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Re: Is Umbrella Insurance Worth it?
« Reply #3 on: June 08, 2015, 05:13:25 PM »
You are young with low/no net worth--you can't squeeze blood out of a turnip.  Wait until you are older with assets built up.

MDM

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Re: Is Umbrella Insurance Worth it?
« Reply #4 on: June 08, 2015, 06:27:49 PM »
There are a few similar threads if you are interested:

Ask a Mustachian / Where to find inexpensive umbrella ins. NOT through car ins?
Ask a Mustachian / Umbrella Policy
Ask a Mustachian / Umbrella Insurance?
Ask a Mustachian / Auto, Renters, and umbrella insurance policy coverage
Welcome and General Discussion / Umbrella Policies
Ask a Mustachian / Umbrella Insurance, Yay or Nay?
Ask a Mustachian / Umbrella insurance
Real Estate and Landlording / Umbrella policy vs LLC
Ask a Mustachian / Would you buy the umbrella?
Real Estate and Landlording / Are umbrella insurance policies worth it?

arebelspy

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Re: Is Umbrella Insurance Worth it?
« Reply #5 on: June 14, 2015, 12:23:56 AM »
It's possibly not needed yet in your case, but I think most Mustachians should have it.  Probably once you're over 100k in net worth, it's worth insuring for the relatively cheap amount that it costs.

Reading those other threads MDM mentioned is advisable if you're thinking about it (or wondering why you should).
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Argyle

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Re: Is Umbrella Insurance Worth it?
« Reply #6 on: June 14, 2015, 02:53:11 AM »
Mine is only $114 per year be sure to compare companies before you settle on something if you're going to buy.

AlwaysLearningToSave

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Re: Is Umbrella Insurance Worth it?
« Reply #7 on: June 14, 2015, 05:52:15 AM »
I think it is worth considering having umbrella coverage. In MMM's post on Insurance: A Tax on People Who Are Bad At Math?, MMM indicated that one instance to purchase insurance is when you cannot afford the consequence of a lack of insurance. Even if you do not currently have a large net worth, as a Mustacian, you hope to quickly build a large net worth. Finding yourself on the wrong end of a large personal injury judgment (as an example) would seriously hamper those plans. The judgment would follow you, attach to any real estate you own, and perhaps necessitate bankruptcy if you were unable so satisfy the judgment. And it is not hard for PI cases to greatly exceed a $100,000 homeowners liability limit. Finding a good rate on an umbrella policy is a relatively inexpensive way to protect your goal of FIRE. My personal calculation is that I cannot afford this consequence, as unlikely as it is.

Another valuable form of insurance often overlooked is the limit on your uninsured/underinsured motorist coverage in your auto policy. This is your hedge against being injured by another motorist not responsible enough to carry adequate insurance. This is one I consider worth paying a little extra.

Full disclosure: I am an attorney that works in a firm with a strong plaintiffs side personal injury practice group. I practice in business transactions and estate and business planning and don't do PI work, but observe my colleagues' cases. My perspective therefore maybe skewed to the risk-averse side.

forummm

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Re: Is Umbrella Insurance Worth it?
« Reply #8 on: June 14, 2015, 07:15:02 AM »
Another benefit is that the insurer will have their stable of lawyers defending against the claim. It's their millions at stake.

Bob W

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Re: Is Umbrella Insurance Worth it?
« Reply #9 on: June 14, 2015, 08:55:57 AM »
FYI,  most u policies require full coverage and low deductibles on your car, house, apt.   Wait until you have 50kand reconsider.   That would be around 1/2 percent.

curler

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Re: Is Umbrella Insurance Worth it?
« Reply #10 on: June 14, 2015, 10:43:03 AM »
FYI,  most u policies require full coverage and low deductibles on your car, house, apt.   Wait until you have 50kand reconsider.   That would be around 1/2 percent.

Why would the umbrella policy care what my deductible is?

StacheInAFlash

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Re: Is Umbrella Insurance Worth it?
« Reply #11 on: June 15, 2015, 09:01:55 PM »
$300 seems a bit high, but maybe you're in litigious area. I would definitely shop around. I pay $107 for 1 million. That is on top of the 250/500 auto coverage. Speaking as someone who has been sued for a (frivolous) auto accident don't be a penny wise and a pound foolish. People sue for all sorts of shit these days, and don't think for a second that lawyers can't make your life a living hell despite you not having significant assets. If you are genuinely at fault for some sort of accident that causes serious damages, you'll be happier you're umbrella is paying out $1 Million than you're broke ass still being on the hook for a settled $100,000 amount.

AlexK

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Re: Is Umbrella Insurance Worth it?
« Reply #12 on: June 15, 2015, 09:17:33 PM »
I have it but the $300 umbrella premium cost is misleading. I have a few vehicles and rental properties insured with State Farm and each one got a discount when I bought the umbrella policy, so the umbrella policy ended up costing me only $180/yr extra. Seems cheap for $1M coverage. My assets are approaching $1M so I felt like I had a lot to lose. BTW I can still get wiped out if an incident costs me $2M, however I like the idea of State Farm's lawyers working on the case.

forummm

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Re: Is Umbrella Insurance Worth it?
« Reply #13 on: June 16, 2015, 07:19:54 AM »
I have it but the $300 umbrella premium cost is misleading. I have a few vehicles and rental properties insured with State Farm and each one got a discount when I bought the umbrella policy, so the umbrella policy ended up costing me only $180/yr extra. Seems cheap for $1M coverage. My assets are approaching $1M so I felt like I had a lot to lose. BTW I can still get wiped out if an incident costs me $2M, however I like the idea of State Farm's lawyers working on the case.

You can add more coverage to the policy. Each additional million is less expensive. Many offer up to $10 million in coverage.

arebelspy

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Re: Is Umbrella Insurance Worth it?
« Reply #14 on: June 16, 2015, 07:45:04 AM »
I have it but the $300 umbrella premium cost is misleading. I have a few vehicles and rental properties insured with State Farm and each one got a discount when I bought the umbrella policy, so the umbrella policy ended up costing me only $180/yr extra. Seems cheap for $1M coverage. My assets are approaching $1M so I felt like I had a lot to lose. BTW I can still get wiped out if an incident costs me $2M, however I like the idea of State Farm's lawyers working on the case.

And I had to up my premiums on the other policies to get the umbrella, so it cost me more than the face premium.  Definitely one where you want to run all the numbers.
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
If you want to know more about me, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.