Author Topic: Protect your 'stash by purchasing more car insurance?  (Read 5534 times)

MNM

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Protect your 'stash by purchasing more car insurance?
« on: December 19, 2014, 11:37:24 AM »
Recently I was on the wrong end of an accident, getting hit by a car while riding my bike.  In the ensuing months, it's become clear that the amount of the injury and damages might not be covered by insurance -- certainly not the other guy's, and my own "underinsured" policy might be stretched to the limit when all is said and done.

This has gotten me thinking: the guy who hit me is basically judgment-proof, because even if I were to get a judgment against him, he doesn't have any assets, so I wouldn't be able to collect.  This is fine in my case because I don't actually want to sue him personally, and want to keep it all in the insurance company realm.

BUT... what about a mustachian who has amassed, and will continue to amass, a substantial amount of wealth?  What if I were at fault in an accident and the person I injured DID want to sue me?  I don't think I live from a fearful point of view, but for an extra handful of dollars a year, it might be well worth the peace of mind.

My current policy limits are 250,000/500,000 for bodily injury, and I'm thinking about doubling it. 

Has anyone else thought about this?  Any thoughts from the mustachian community?

themagicman

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Re: Protect your 'stash by purchasing more car insurance?
« Reply #1 on: December 19, 2014, 11:44:17 AM »
Recently I was on the wrong end of an accident, getting hit by a car while riding my bike.  In the ensuing months, it's become clear that the amount of the injury and damages might not be covered by insurance -- certainly not the other guy's, and my own "underinsured" policy might be stretched to the limit when all is said and done.

This has gotten me thinking: the guy who hit me is basically judgment-proof, because even if I were to get a judgment against him, he doesn't have any assets, so I wouldn't be able to collect.  This is fine in my case because I don't actually want to sue him personally, and want to keep it all in the insurance company realm.

BUT... what about a mustachian who has amassed, and will continue to amass, a substantial amount of wealth?  What if I were at fault in an accident and the person I injured DID want to sue me?  I don't think I live from a fearful point of view, but for an extra handful of dollars a year, it might be well worth the peace of mind.

My current policy limits are 250,000/500,000 for bodily injury, and I'm thinking about doubling it. 

Has anyone else thought about this?  Any thoughts from the mustachian community?

I have the same limits of you and think that it is plenty! If you were to get sued, I think the lawyers for him would try for your insurance limit (Which your insurance company would heavily fight in your favor)

If you decide you do want to up your limits, then I would look into an umbrella policy instead of doubling your limits!

jba302

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Re: Protect your 'stash by purchasing more car insurance?
« Reply #2 on: December 19, 2014, 12:01:51 PM »
You would really have to do some damage to get past a $250k policy limit. Beyond that, (I'm sure depending on the state but for a good general statement) it's very uncommon to go after personal assets. The courts are truly not interested in placing undue hardship on you, and certain asset classes have protections as well (primary residence, 401k, etc).

Having this concern, your best bet would be to do some research into what assets are at true risk and then develop a plan from there. You may be funding protection of things that don't require it and/or are extraordinarily unlikely to be at risk. There's a good reason these policies are so cheap.

This reminded me of what my drivers ed teacher told us when we talked about insurance limits- "If you hit someone bad enough that the limits will be a problem, you're better off hitting them again." He was... an odd person.

gimp

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Re: Protect your 'stash by purchasing more car insurance?
« Reply #3 on: December 19, 2014, 12:10:18 PM »
I have a 500k/500k policy because I often find myself driving next to cars that are in the $300k-500k or more range. Anywhere else, I'd probably be fine with 250. But the difference in price from 250 to 500 is, like, $5 for six months.

TreeTired

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Re: Protect your 'stash by purchasing more car insurance?
« Reply #4 on: December 19, 2014, 12:18:11 PM »
Very common for folks to purchase an umbrella liability policy.  The standard recommendation used to be $1mm, now it is probably $5mm.   They are relatively cheap insurance policies.

Taran Wanderer

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Re: Protect your 'stash by purchasing more car insurance?
« Reply #5 on: December 19, 2014, 12:33:39 PM »
We have a $1 million umbrella policy that kicks in after our $500k auto liability limits and our homeowner general liability limits. It's $168 per year. As far as insurance goes, my philosophy is to insure against "unaffordable losses". So, we have higher than average deductibles - we can pay for minor events out of the emergency 'stache. This saves money on our base coverage, which frees up dollars to pay for this umbrella policy, protecting the long term 'stache. 

DoubleDown

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Re: Protect your 'stash by purchasing more car insurance?
« Reply #6 on: December 19, 2014, 12:48:57 PM »
I am 100% in favor of getting higher limits to protect your wealth. When I had a roommate who was in the insurance industry, he explained to me that you can usually purchase much higher limits for very little additional premiums. He was right. I called my insurance company and was able to drastically increase my limits for only a few dollars more. Same goes in reverse for lowering deductibles on collision/comprehensive if you carry those -- much lower deductibles for barely an increase in premiums (consider the psychology here, because many times people won't bother to make claims and eat the cost of damages because the deductible is so high, thereby defeating the entire purpose of carrying insurance).

I now carry a much higher limit on my auto liability, plus an umbrella policy for any other liability.

arebelspy

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Re: Protect your 'stash by purchasing more car insurance?
« Reply #7 on: December 19, 2014, 02:00:32 PM »
+1 for an Umbrella policy.  Then it won't just protect against car accidents you are liable for, but other type of accidents as well (depending on coverage).  Cheap and well worth it.
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ysette9

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Re: Protect your 'stash by purchasing more car insurance?
« Reply #8 on: December 20, 2014, 04:14:58 PM »
I don't have much new to add here and I agree with the previous posters about carrying more insurance. I hadn't paid attention to this until my financial institution (USAA) pointed it out a couple of years back. We are insured up to around our net worth. I think the auto policies are at $500K and then we have a $1M umbrella policy. I was surprised at how little the extra coverage cost by bumping up from $250K to $500K. Well worth the peace of mind in my opinion. Overall we carry a lot of insurance and it isn't insignificant when it is all added together (auto, renter, term and life, valuable personal property, etc.) but we are risk-averse, so this fits into what it takes for me to sleep well at night*.

*Okay, hypothetically sleep well at night. With a six-month old in the house that is still just a dream!

Gin1984

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Re: Protect your 'stash by purchasing more car insurance?
« Reply #9 on: December 20, 2014, 04:37:59 PM »
Also keep in mind, money in your 401k and IRAs are not able to be affixed for judgement.

ClaycordJCA

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Re: Protect your 'stash by purchasing more car insurance?
« Reply #10 on: December 20, 2014, 04:42:27 PM »
Umbrella policy, here too. Particularly with two teenage drivers.

Wendyimhome

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Re: Protect your 'stash by purchasing more car insurance?
« Reply #11 on: December 20, 2014, 09:50:29 PM »
As said by others, an umbrella policy is the answer here.  An earlier post suggested you would really have to do some damage to owe more than $250K.  While true, it's pretty easy to do that with a car or truck.  If a kid darts in front of you, you could easily be facing a wrongful death case.  Even mid-speed collisions can produce serious injuries, and it doesn't take long for a persons medical bills and lost earnings to pile up.  There are plenty of malingerers out there in the world of claimants.  As a defense attorney, I see these cases all of the time.  Keep in mind, the injured party is also awarded damages for "pain and suffering," which is pretty much whatever number a jury decides to give.

Also, I don't know where you live, but if you are in a large city, juries tend to be pretty scary with such things.  I'd get that umbrella policy pronto.

BlueMR2

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Re: Protect your 'stash by purchasing more car insurance?
« Reply #12 on: December 21, 2014, 01:45:46 PM »
+1 for an Umbrella policy.  Then it won't just protect against car accidents you are liable for, but other type of accidents as well (depending on coverage).  Cheap and well worth it.

I'd also vote for an umbrella.  Or at least checking one out to see if it works for you.

Unfortunately for me, because I own extra cars (nevermind the fact that my total mileage/usage of said cars is really low), I fall into a special high risk group which makes umbrella insurance too expensive to be worthwhile (My quotes have all come in at around $700-800 a year per million).

kpd905

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Re: Protect your 'stash by purchasing more car insurance?
« Reply #13 on: December 21, 2014, 01:51:06 PM »
Seems like an umbrella policy is a unanimous decision around here.  How much do some of you pay for that, and what is the amount it covers?

tennisray

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Re: Protect your 'stash by purchasing more car insurance?
« Reply #14 on: December 21, 2014, 05:24:02 PM »
Call your insurance agent.  I'm sure it's different depending on your state.  I live in GA and I pay $180 for $1million umbrella coverage.  That's not all, though.  Most carriers make you up your auto liability to 500k (if you didn't already have that protection), so your auto premium may rise slightly, too.

I agree that it is unlikely that you go above the 250k limit...but we live in a litigious society and I felt like it was worth the extra premium for my family (a lot of the neighborhood kids like to hang out and play in my yard, climb my trees, etc.)

Lyngi

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Re: Protect your 'stash by purchasing more car insurance?
« Reply #15 on: December 21, 2014, 05:51:17 PM »
i max out my Under/uninsured coverage for my own protection.  I have also maxed out my liability coverage because I have a new teenage driver, and soon a second teenage driver.  Most of my assets are 401k, IRA and primary residence.  I actually have most of my other cash assets (not many, but growing) set up in a trust.   The object of the trust was asset protection from, hmmmm, some unwise driving choices/ lifestyle choices made by.........  According to the attorney setting up the trust, if the accounts are set up in a trust, they are protected except from taxes or medical bills.   I do not include any vehicles in the trust as that may be a way around.   We have not had to test this theory, so I can only repeat what I have been told.   ***disclaimer, I am not an attorney, this is not legal advice**

DoubleDown

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Re: Protect your 'stash by purchasing more car insurance?
« Reply #16 on: December 22, 2014, 08:31:46 AM »
YMMV, but keep in mind that many (most?) insurers will require you to increase the limits on your auto and/or home liability policies before they'll issue you an umbrella policy. So, it may not be just a simple vote for an umbrella policy -- you may need to do both.

jba302

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Re: Protect your 'stash by purchasing more car insurance?
« Reply #17 on: December 22, 2014, 11:34:55 AM »
. Your umbrella police generally only protects your stache from a judgement based on your own negligence against someone else (does that make sense?). Anyway, you should also keep an umbrella policy. My umbrella policy is $150 p/year for 1 million dollars in coverage. I believe that also kicks in after my professional malpractice as an attorney in case this advice it somehow incorrect.

If you have any questions about accident and injury cases generally you can send me a private message.

Just to delineate here in case of confusion, a personal umbrella policy does not cover professional malpractice. You would need a professional liability (also known as E&O) to cover malpractice, and perhaps a business umbrella or excess on top of that depending on your limits. Personal umbrellas are essentially just limit increases to auto and homeowners.