Umbrella Policies

[Yankuba]

Hello,

I'm a sucker for insurance. I have health insurance, auto, homeowners, life (term), a policy on my wife's engagement ring as well as a $1mil umbrella policy.

The umbrella policy is $200 per year. Essentially, it provides extra coverage if you are sued for more than the insurance company is covering you on your home or auto policy. My grandparents caused a car accident many years back and were sued for something preposterous - like $10mil. Their umbrella policy allowed the insurance company to settle with the other party for well more than the limits on their auto policy ($300k).

MMM community - is the umbrella policy worth it? Or am I being too cautious....

Thanks!

[Blonde Lawyer]

If you have significant assets you need a significant policy.  I do personal injury work.  If my client's damages are greater than the policy limit of the liable party's insurance, I require an affidavit of assets and liabilities before I will settle for policy limits.  Some assets are exempt from attachment depending on your state law.  For example, in my state, I can't touch retirement accounts and I can't touch the homestead exemption value in their primary home.  ($150k).  It's not going to be worth my time if there is $10k or so in their bank account.  If there is $50k though, it is worth pursuing. 

[Eric]

Hey Neil,
There are a fair number of folks with umbrellas here.  This thread was popular and is only a couple of months old.

http://forum.mrmoneymustache.com/ask-a-mustachian/umbrella-insurance-yay-or-nay/

[Yankuba]

Hey Neil,
There are a fair number of folks with umbrellas here.  This thread was popular and is only a couple of months old.

http://forum.mrmoneymustache.com/ask-a-mustachian/umbrella-insurance-yay-or-nay/

Great, thanks!

[brooklynmoney]

I love insurance too. I'm surprised you didn't list a long term disability policy among your collection.

[Yankuba]

I love insurance too. I'm surprised you didn't list a long term disability policy among your collection.

I looked into disability and read that a significant percentage of employees will qualify for disability at some point. But I have more than 100 days of sick leave saved up and accumulate about 8 days a year, so I can self insure against a short term disability. Anything long term would have to be very debilitating because my employer gives us the option to telework. And if I ever became paralyzed or lost my arms and legs I would probably just kill myself.

However - long term care insurance is something I need to think about! My butt isn't going to wipe itself when it's old!

[brooklynmoney]

Uh, that's quite an extreme plan for what you would do if you get severely disabled. I got it because I figure if something does happen to me then someone else will be responsible for me and I wont' want to be a financial burden to them.

[dandarc]

Agree short-term disability is a waste.  I think long-term is necessary if you are not yet FI and you can get it at a reasonable price (suppose the .45 plan is excepted, but how serious are you really about that?).  And if you're in a line of work where you'd have to have a truly debilitating injury, it isn't that expensive.