I've worked in Property & Casualty insurance for almost 20 years, mostly in commercial liability. I don't buy a personal umbrella; I buy $1M primary liability limits on both my homeowners and my auto policy.
At my last renewal, a $1M Umbrella over $300k homeowners liability and $500k auto (the minimum primary limits Cincinnati requires for an Umbrella) was going to be $179, or $346 including uninsured/underinsured motorist (UM/UIM) coverage, while the separate increases to $1M primary limit was going to be $20 on homeowners and $127 on auto, and that auto includes UM/UIM. $1M overall felt fine to me, I didn't think I needed $1.3m/$1.5m total, and I put a lot of value on UM/UIM personally.
From a pure risk perspective, no one really needs high limits on the primary or an Umbrella policy. The insurance industry overall makes a TON of money* on that coverage, and has for decades. Any given individual is very, very, very unlikely to get involved in a lawsuit that goes that high, and if they are, there are a lot of ways to protect assets other than insurance.
That said, it does happen, and if it makes you feel better to have that coverage, it's pretty cheap peace of mind.
Happens all the time…Insurance companies operate off of subrogation, meaning, what they do is make you ‘whole’ financially, and then they in-turn have the legal right to go after the offender to be compensated for it. If you hit someone’s car and cause $3 million worth of damage but your insurance only covers $500,000 of it, it’s not the owner of the car that comes after you…it’s their insurance company and the insurance company’s legion of lawyers, and at that level they are going to come after you hard and fast.
This does happen, but it's pretty rare. Insurance companies write off subro opportunities dozens of times per day because you can't get blood from a stone. If you don't look like you have money (hello mustachians) and they find out your liability limit is pretty low, they're not likely to go through a whole discovery process to find out how much you have outside of protected assets. Possible, especially if it's a large claim, but not likely.
I pay mid-100s for a million but it's just me and I rarely drive. Two things about umbrella policies to keep in mind.
- You need to read the fine print. "True" umbrella policies are a dying breed. You may not be getting what you think you're getting, I e. a generic increase of coverage for all things to a high amount
- It isn't all that different in practice, but be aware you're buying coverage for paying lawyers and judgements NOT getting to keep at least X if something bad happens. Unscrupulous agents use this scare tactic to sell 7 million dollar policies to low risk retirees with 7 million dollars in a brokerage account.
The second one is definitely true, although see my point above. If you have $7M in assets and a $7M umbrella, and you cause $15M in damages, they can go after you for the whole thing. It's just that those kinds of losses are exceptionally rare, even to large insurance companies. If your agent tells you this, ask her what the total indemnity was on the last 5 umbrella claims that she saw directly (not just heard about). The issue in the industry is a frequency of severity one (primary limits have stayed the same for decades, and $300k doesn't buy what it used to), not a nuclear verdicts issue, but nuclear verdicts is a better sales tactic.
The first one is not true, particularly on personal lines that are very heavily regulated by state DOIs. I'm super curious as to what you think your umbrella should be covering but isn't.
NY state. I have a $1 million umbrella policy, and my last annual premium was $450. After reading this thread, I think I'm overpaying!
I like the suggestion about checking out Costco's insurance. I'll look into that the next time mine comes up for renewal.
NY is a hot-button state for a variety of liability issues, so you're almost certainly going to pay more than me in a flyover state. But yeah, definitely check out other options and talk to an independent agent.
I am a little taken aback that I've never even heard of umbrella insurance, let alone considered getting it.
Can someone briefly summarize what it covers, and in what circs it would be useful to have?
Also, does it cover wildfire loss? B/c that is becoming a major concern of mine in retirement...
An umbrella policy provides excess liability coverage over your primary liability coverages (homeowners/renters, auto, boat, etc.)
https://www.irmi.com/articles/expert-commentary/personal-umbrella-insurance-101It wouldn't typically cover wildfire, that would be your property insurance instead. I mean, technically it could if YOU caused the wildfire, and wildfire is an industry liability issue for construction companies, but generally, you need to look at property insurance.
*Insurance profitability side note: the industry measures profitability with "combined ratios", which is the loss ratio (losses over premium) plus expense ratio (expenses over premium). Umbrella loss ratios long-term are 30-50%, and expenses are 20-40% (higher than a lot of other lines), putting the combined ratio around 50-90%. Anything under 100% is profitable, but over 100% can also be profitable given that insurance companies invest the money, and Umbrella as a long-tail line has an outsized share of investment income. For comparison, personal auto as a whole has been in the 110s for more than a decade, and homeowners has been around 100 for about 7 years.
(If any actuaries are reading this, I didn't forget ALAE, I was trying to simplify.)
