Poll

Do you have an umbrella policy?  If so, is it worth it?

I have never had an umbrella policy.
12 (30.8%)
I had an umbrella policy, but cancelled because I felt it wasn't worth it.
1 (2.6%)
I have an umbrella policy, and do not feel it's worth it.
0 (0%)
I have an umbrella policy, and feel that it is worth it.
22 (56.4%)
Other (explain in comments.)
4 (10.3%)

Total Members Voted: 38

Author Topic: Umbrella policies  (Read 7612 times)

retiredat58

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Umbrella policies
« on: February 29, 2016, 10:49:53 AM »
Does anyone have one and are they worth it ?

honeybbq

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Re: Umbrella policies
« Reply #1 on: February 29, 2016, 11:05:54 AM »
Yes. I have a 2 Mil one. Only worth it if I get sued. But it's cheap. So I do it.

BeanCounter

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Re: Umbrella policies
« Reply #2 on: February 29, 2016, 11:08:10 AM »
Once our invested assets topped $500k (the max our regular insurance would cover) we got one. It's probably overkill as an event that we would need it is unlikely, but for $200ish a year I sleep better.  People get sue crazy out there, and if they think you've got deep pockets they could really go for it.

Nederstash

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Re: Umbrella policies
« Reply #3 on: February 29, 2016, 11:34:38 AM »
Don't open inside. And for pete's sake don't leave them on my hardwood floors to dry.


iris lily

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Re: Umbrella policies
« Reply #4 on: February 29, 2016, 11:47:39 AM »
Don't open inside. And for pete's sake don't leave them on my hardwood floors to dry.
hahaha, ok.

I have umbreqlla insurance, it is cheap. We nsure for the big events and self insure for the small ones.

Altons Bobs

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Re: Umbrella policies
« Reply #5 on: February 29, 2016, 12:56:11 PM »
Yes, have one, don't know if it's worth it, hope we won't ever find out. :-D

desertadapted

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Re: Umbrella policies
« Reply #6 on: February 29, 2016, 12:58:46 PM »
Absolutely! Accidents happen, and the thought of losing the hard work I've put in towards FI makes me crazy.  As noted by some others on the thread, the ~$200 a year is worth it for me from a peace of mind perspective.  I'm acquainted with a number of PI lawyers, and it's an extremely rare case that won't settle for policy limits (or less) if you're well insured - meaning even if the alleged harm exceeds the policy they usually don't pursue things further.  Note that in my experience, you need to have maxed out your liability/uninsured motorist coverage to be eligible for an umbrella.  This has the practical effect of substantially increasing my auto insurance premiums on what are otherwise old cars (no collision insurance).   

tonycar17

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Re: Umbrella policies
« Reply #7 on: February 29, 2016, 01:02:54 PM »
Yes we have one - $149 annually for $1MM in incremental coverage beyond what our existing insurance policies cover in regards to liability.

Hope to never need it, but it helps me, and more importantly the Mrs. sleep better as we move further along the path to FI. 

TC

sallylee

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Re: Umbrella policies
« Reply #8 on: February 29, 2016, 01:20:28 PM »
Does umbrella insurance cover other things if lawsuit is not related to home or auto?

StacheInAFlash

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Re: Umbrella policies
« Reply #9 on: February 29, 2016, 03:01:30 PM »
$106 for $1 million. I consider it a nightly, $0.29 good night sleep tax.

arebelspy

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Re: Umbrella policies
« Reply #10 on: February 29, 2016, 03:21:58 PM »

Does umbrella insurance cover other things if lawsuit is not related to home or auto?

They cover what is specified in their policy.
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Tjat

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Re: Umbrella policies
« Reply #11 on: February 29, 2016, 05:18:11 PM »

Does umbrella insurance cover other things if lawsuit is not related to home or auto?

They cover what is specified in their policy.

In general yes, it provides coverage for claims unrelated to home/auto and also provides secondary coverage once your primary policies are exhausted. But arebelspy is correct in that you'll want to read your policy and make sure you understand what is insured.

Another advantage is that if you are sued, your carrier will represent you even if the lawsuit is completely frivolous.

seattlecyclone

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Re: Umbrella policies
« Reply #12 on: February 29, 2016, 06:38:07 PM »
Once our invested assets topped $500k (the max our regular insurance would cover) we got one. It's probably overkill as an event that we would need it is unlikely, but for $200ish a year I sleep better.  People get sue crazy out there, and if they think you've got deep pockets they could really go for it.

Please don't be under the impression that umbrella insurance somehow "shields" a certain amount of assets. Buying a $1 million policy does not guarantee that you'll be able to keep the first $1 million of your stash if you were to be found liable for damages in a lawsuit. Instead it means that the insurance company will pay as much as $1 million in damages. If you have that policy and you settle a lawsuit for $1.5 million, you'll owe that last $500k out of your pocket whether your net worth is $500k or $500 million.

The right amount of insurance to buy has very little to do with the value of your assets. Instead you should buy a policy that will cover the largest amount that you're likely to be found liable for in the event you are sued. What is that amount? I honestly have no idea. However the common insurance salesman rule of thumb that your umbrella coverage should be roughly equal to your net worth makes essentially no sense.

sallylee

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Re: Umbrella policies
« Reply #13 on: February 29, 2016, 07:38:43 PM »
Anyone here have AAA and know what they cover?

desertadapted

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Re: Umbrella policies
« Reply #14 on: February 29, 2016, 09:22:26 PM »
I respectfully disagree, seattlecyclone.  The rule of thumb is a solid baseline in light of imperfect information.  They're called accidents for a reason, making a realistic estimate of potential future liability near impossible.  Using the rule of thumb as a starting point gives you a meaningful amount to have your insurance company settle with.   There are low barriers to entry for a $1m or $2m policy, making overestimating potential liability relatively painless.  In my admittedly anecdotal experience, it's an extremely rare case where a PI lawyer tries to go all the way with a well insured individual defendant, particularly in light of limits on pre-judgment asset discovery in many States. 

CDP45

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Re: Umbrella policies
« Reply #15 on: February 29, 2016, 09:41:05 PM »
https://www.trustedchoice.com/umbrella-insurance/coverage-faq/#-6288951

When choosing your coverage limits, consider three things:

    The risks you may face. Consider risks as a homeowner or renter, the risk of causing an accident during your work commute, and any potentially dangerous activities you participate in that could put those around you at risk.
    The value of your assets. These include properties, possessions, stocks, bonds, savings and retirement funds. The more assets you have to protect, the higher the umbrella policy limit you should consider.
    The potential loss of future income. Because liability lawsuits can result in loss of both current assets and future income, even those with few assets to protect may want to consider the long-term ramifications of a serious claim.

When you review your future income, consider your earning potential. You not have many assets now, but if you’re on track for a high paying career, you could be involved in a lawsuit that can target money you haven’t earned yet.

Speak with an independent insurance agent to determine your specific risk factors and learn more about how to protect your current and future assets.

arizonawildcats

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Re: Umbrella policies
« Reply #16 on: February 29, 2016, 10:33:40 PM »
Quote
Does umbrella insurance cover other things if lawsuit is not related to home or auto?

Yes, for example most umbrella policies will cover “Personal Injury” which normally includes slander, libel, wrongful eviction or false arrest.   

seattlecyclone

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Re: Umbrella policies
« Reply #17 on: February 29, 2016, 11:17:50 PM »
I respectfully disagree, seattlecyclone.  The rule of thumb is a solid baseline in light of imperfect information.  They're called accidents for a reason, making a realistic estimate of potential future liability near impossible.  Using the rule of thumb as a starting point gives you a meaningful amount to have your insurance company settle with.   There are low barriers to entry for a $1m or $2m policy, making overestimating potential liability relatively painless.  In my admittedly anecdotal experience, it's an extremely rare case where a PI lawyer tries to go all the way with a well insured individual defendant, particularly in light of limits on pre-judgment asset discovery in many States. 

Nothing wrong with overestimating your liability. These policies aren't all that expensive in the grand scheme of things. The sales pitch that you should buy a policy equal to your net worth as a protective measure seems, in my humble opinion, designed to imply the policy does something that it does not actually do.

If you underestimate your liability, the fact that you bought a $1 million policy doesn't in any sense mean that you automatically get to keep $1 million after all is said and done. It just means that the insurance company kicks in the first $1 million toward your liability, whatever that number might be. If they think it's possible to settle your case for less than $1 million they'll probably supply some good lawyers to make that happen. If they think there's no way you'll be able to settle for less than $1 million they might just tell you to get your own lawyer and will pay their bit once everything is sorted out.

LeRainDrop

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Re: Umbrella policies
« Reply #18 on: February 29, 2016, 11:29:30 PM »
Speak with an independent insurance agent to determine your specific risk factors and learn more about how to protect your current and future assets.

Anyone have tips for how to do this without getting an agent involved?  Thanks!

honeybbq

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Re: Umbrella policies
« Reply #19 on: March 01, 2016, 09:26:25 AM »
Speak with an independent insurance agent to determine your specific risk factors and learn more about how to protect your current and future assets.

Anyone have tips for how to do this without getting an agent involved?  Thanks!

Huh? Just call  your insurance company and get a policy. Somebody has to do it...?

BlueMR2

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Re: Umbrella policies
« Reply #20 on: March 01, 2016, 09:58:38 AM »
They cover what is specified in their policy.

This.  Read it carefully.  It's interesting to see how little actual risk they will cover.  If you do anything where you think you might have exposure and need an umbrella, well, you're probably not going to be covered by it anyways.

Also, where on Earth are you guys finding these super low rates?  I just got done doing another round of quotes and I can't do less than $750 per million.  Yeah, the upfront quote is "oh, it'll be about $200", but then once all the surcharges are added on, it's ballooned over 3 times!

arebelspy

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Re: Umbrella policies
« Reply #21 on: March 01, 2016, 10:00:17 AM »
It's super low if you have very little liabilities.  I have multiple rentals, and my quotes are much higher.

If you own things like Jet Skis or whatever rates go up.
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Clean Shaven

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Re: Umbrella policies
« Reply #22 on: March 01, 2016, 12:29:06 PM »
IMHO: umbrella policies are worthwhile if you have assets that exceed the coverage limits of your primary insurance policy for homeowners (or renters) and (if you own a car) auto.

Some simple examples:

(1) If you are an 18 year old student who rents, has no net worth, and no car, an umbrella policy is unnecessary.

(2) If you are a 45 year old husband-and-wife couple, with two kids of driving age, own three cars (one driven by kids), have $500K in liquid assets and $300K in home equity, you should strongly consider an umbrella policy.

An umbrella policy extends the limits of the underlying primary policies over which it is written.  For most ordinary people, that means it is a second layer of insurance over your homeowners and auto policies.  An umbrella policy generally requires increasing your primary auto coverage to 250/500 or 300/500.  It may require changes to your homeowners policy as well.  For auto, umbrella policies generally do not increase UM/UIM limits (if anyone knows of any insurers writing umbrella policies that do provide this coverage, please speak up, I'm interested).  Typical umbrella policy limits are $1MM or $2MM. 

An excess policy is similar to an umbrella policy, but is written specifically over a single primary layer.  Most people will not purchase an excess policy for personal use, and instead, will purchase an umbrella policy.

****READ YOUR POLICY**** It states your rights.  My comments do not override your policy; do not rely on what I wrote here, and do not  rely on what your insurance agent told you informally.  If it's not in your written policy and/or declarations sheet(s), it doesn't matter.

LeRainDrop

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Re: Umbrella policies
« Reply #23 on: March 01, 2016, 08:20:05 PM »
Speak with an independent insurance agent to determine your specific risk factors and learn more about how to protect your current and future assets.

Anyone have tips for how to do this without getting an agent involved?  Thanks!

Huh? Just call  your insurance company and get a policy. Somebody has to do it...?

Uh, no, before that.  As in, I currently don't have an umbrella policy.  How would I find a "good" one?

CDP45

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Re: Umbrella policies
« Reply #24 on: March 01, 2016, 09:08:19 PM »
Speak with an independent insurance agent to determine your specific risk factors and learn more about how to protect your current and future assets.

Anyone have tips for how to do this without getting an agent involved?  Thanks!

Huh? Just call  your insurance company and get a policy. Somebody has to do it...?

Uh, no, before that.  As in, I currently don't have an umbrella policy.  How would I find a "good" one?

That's why I recommend an independent agent. They can evaluate your exposures, and recommend coverages and policies for you that you didn't know we're available in many cases. Also they shop multiple companies for the best rates, and typically are similarly priced to captive/direct agents. A bonus also being if the agent screws up there's an errors and omissions policy available.

A complete homeowners, auto, and umbrella is like $1500/yr, most people pay more for their cell phone plans!

electriceagle

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Re: Umbrella policies
« Reply #25 on: March 01, 2016, 11:04:10 PM »
I respectfully disagree, seattlecyclone.  The rule of thumb is a solid baseline in light of imperfect information.  They're called accidents for a reason, making a realistic estimate of potential future liability near impossible.  Using the rule of thumb as a starting point gives you a meaningful amount to have your insurance company settle with.   There are low barriers to entry for a $1m or $2m policy, making overestimating potential liability relatively painless.  In my admittedly anecdotal experience, it's an extremely rare case where a PI lawyer tries to go all the way with a well insured individual defendant, particularly in light of limits on pre-judgment asset discovery in many States.

An umbrella is a reasonably cheap form of sleep-at-night insurance. Typical rates are around $150/year. Get one.

A personal injury attorney who is able to pull $1M from an umbrella probably won't be eager to spend the next 3 years fighting you to get another $100-200k. Even if asset searches show that you have the money, the opposing lawyer knows that you're likely to spend it all paying your lawyer to delay and appeal. In the end, you'll punch the bankruptcy button and walk away with retirement funds and anything protected by homestead. Why bother?

dragoncar

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Re: Umbrella policies
« Reply #26 on: March 01, 2016, 11:50:22 PM »
They cover what is specified in their policy.

This.  Read it carefully.  It's interesting to see how little actual risk they will cover.  If you do anything where you think you might have exposure and need an umbrella, well, you're probably not going to be covered by it anyways.

Also, where on Earth are you guys finding these super low rates?  I just got done doing another round of quotes and I can't do less than $750 per million.  Yeah, the upfront quote is "oh, it'll be about $200", but then once all the surcharges are added on, it's ballooned over 3 times!

Yes, read it carefully, but I personally think most umbrella policies cover the most likely risks.  The most likely way I'm going to be on the receiving end of a lawsuit is probably an auto collision.  Lets say someone dies and they decide it's my fault.  It's not uncommon for people around here to make $200k/year.  So what are the damages for a 35 year old dead spouse?  30 years of expected earnings before retirement = $6 million.  Yikes.  I'm not insured for that much, but I do know the $300k max on my auto policy ain't gonna cut it.  I'm very interested in the idea that these cases settle for policy limits if you are "well insured" and curious what limits qualify as "well insured."  Might need to tack on another million just to be safe.

dogboyslim

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Re: Umbrella policies
« Reply #27 on: March 02, 2016, 10:03:03 AM »

Does umbrella insurance cover other things if lawsuit is not related to home or auto?

They cover what is specified in their policy.

I work in insurance and this is the best answer to that question.  Limiting the discussion to personal umbrellas (this means you aren't a landlord or if you are you have very few units)...

Things that drive rates:
  • Your underlying coverages
  • Who holds the underlying coverages

Many companies will not write an umbrella if they don't also write ALL the underlying coverages.  They do this because it makes it easier for them to extend coverage only on the risks they want to extend.  On those that accept others writing some of the underlying risks, it gets more expensive the fewer the underlying risks are written by the same company.
  • The limit chosen and the type of limit.  Some write policies that are Limit in excess of underlying rates, others write it as the ground-up limit.  Ground-up limits are less expensive, but afford less coverage.

Quick example.  You are at-fault in an auto crash and injure someone who is now paralyzed.  Damages $1.25M.  You have $250k Bodily injury coverage (lowest allowed limit by most carriers to be eligible for an umbrella).  If you have a ground-up type limit of $1M, then the umbrella pays $750k, your primary coverage pays $250k and you pay $250k.  If you have an excess limit of $1M, Umbrella pays $1M, primary coverage pays $250, you pay nothing.

Good news is that there are few options in the personal umbrella market that are of the ground-up type, but understand the coverage afforded by the policy you purchase.


  • The number and type of vehicles you own.  ATVs, Sport Bikes and Jet-skis can inflate this amount quickly
  • The presence of young drivers in the home.  This can almost triple your rate with some carriers
  • Your public presence.  Newscasters, athletes etc. can result in surcharges
  • Your employment & certain hobbies
  • business ownership and anything likely to extend additional liability
  • number, size and type of properties you own, and the states where the property is located

This list is not comprehensive, nor are rates consistent, but these are the types of things that tend to drive rates in the personal lines market.  Best advice is: read the policy, ask questions before you buy and shop IAs, captives (State Farm, Nationwide etc.), and direct sellers (Geico, etc).  Be prepared to move your whole insurance account and compare the whole thing, not just the umbrella.

Lastly, make sure the company is well capitalized.  AMBest ratings are a good measure.  If they don't advertise their AMBest rating, ask what it is.  Its not a guarantee, but in my experience they are better at rating insurance companies than Moody's is at rating bonds.  Best of luck in the search!

Gone Fishing

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Re: Umbrella policies
« Reply #28 on: March 02, 2016, 10:06:05 AM »
Can the OP add a poll?

arebelspy

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Re: Umbrella policies
« Reply #29 on: March 02, 2016, 10:16:30 AM »
[MOD NOTE: Poll added.]
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Gone Fishing

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Re: Umbrella policies
« Reply #30 on: March 02, 2016, 10:20:01 AM »
[MOD NOTE: Poll added.]

Thanks, Reb!

Lyngi

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Re: Umbrella policies
« Reply #31 on: March 04, 2016, 06:43:55 PM »
Just today I added an umbrella policy to my other coverage.  I (will) have two teenage drivers, 500K in 401k's  and about 200K in home equity.  My yearly premium was just over $500 per year.  I had to increase the coverage on my house a little.   We already max out our auto  insurance for, sigh, 4 used cars.    Face punch myself.  However, one child is away at school in a rural area.  The other has been carted to and from swim team for 2 years.  Carpooling has been sporadic.  My DH has to reschedule his clients quite often to get her there which results in lost income. 

Dicey

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Re: Umbrella policies
« Reply #32 on: March 04, 2016, 09:49:49 PM »
When I drove a company car and had no personal auto insurance policy, it was harder to find and quite expensive. Now that I'm FIRE and pay for my own damn auto insurance, the add-on of an umbrella policy was cheap, cheap, cheap in comparison. (Another unforeseen benefit of FIRE??)

I don't believe I need long-term-care insurance, but an umbrella policy is so inexpensive, I'm willing to pay for it. Hope I never need either of them.

Oh, and I always leave it out on the porch when it's raining.

icemodeled

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Re: Umbrella policies
« Reply #33 on: March 05, 2016, 08:16:53 AM »
Voted other because we have never had it, but probably should. We have rental properties and theres always a chance something happens that will result in a lawsuit. Thankfully in the 5 years we owned them, nothing like that has happened but I would rest better having it I think. The cost is normally rather low and the coverage is high. Will be something to consider soon.