Do I need Umbrella Insurance if my Assets < Liability Limits?

[AndroAsc]

As above, do I need an umbrella policy for $1mil+, if my current assets are less than the liability limits on my auto/homeowners policy?

[J295]

Respectfully, I don't believe a comparison of assets to liability limits is particularly pertinent to this decision (say you have $400k or assets and liability limits of $500k, and there is a judgment against you for $1.5 million ..... are you ok losing all of your asset and remaining liable for the remaining $600k/filing bankruptcy?).

There are a fair number of threads on "do I need an umbrella policy" that you might find helpful. We carry umbrella insurance for two primary reasons. One, to protect our personal assets. Two, to have sufficient funds to try and make someone whole in the unfortunate event they experience a loss due to our negligence.

Best of luck.

[furwut]

Two, to have sufficient funds to try and make someone whole in the unfortunate event they experience a loss due to our negligence.

+1. There is a moral argument for everybody to carry decent coverage limits. Now what those are

P.S. - I have heard of cases where judges have assigned future earnings when the policy limit was deemed woefully inadequate compensation.

[Phineas J. Whoopee]

Listen to J295.
PJW

[Larry Y]

j295 nails it!

[Gemini]

Sorry to hijack, but what if you have negative assets? I have a ton of student loans/debt and not many assets. I'm essentially "in the hole". I also rent. Does it make sense to get an umbrella policy? Does an umbrella policy apply to an individual or a family? Auto liability is solid btw and we have renters insurance.

[neurosphere]

Sorry to hijack, but what if you have negative assets? I have a ton of student loans/debt and not many assets. I'm essentially "in the hole". I also rent. Does it make sense to get an umbrella policy? Does an umbrella policy apply to an individual or a family? Auto liability is solid btw and we have renters insurance.

Well, going back to the moral issue. If you can get umbrella insurance for cheap, and your assets are temporarily negative (i.e. you future lifetime income is such that you current debt is simply an investment in your future), then (in my opinion) umbrella insurance is a very cheap way to ensure that in the (very unlikely) chance that some tragedy happens for which you are somehow involved, you will be able to compensate the other party.

If you have sufficient auto insurance and renters insurance, as you state, then you have most of your bases covered. But it's very very cheap to buy an additional $1,000,000 (for example) of umbrella insurance to cover the "gaps". I think I pay $300 for one million in umbrella. Or maybe two million. I don't remember to be honest. We rent, and our net worth is just now getting into positive territory.

Neurosphere

[Phineas J. Whoopee]

...
I don't remember to be honest. ...

Good!

To paraphrase:

I will remember that any wealth or liability insurance limits I have are to be revealed strictly on a need-to-know basis. I will also remember that no one needs to know.

PJW

[Gemini]

Sorry to hijack, but what if you have negative assets? I have a ton of student loans/debt and not many assets. I'm essentially "in the hole". I also rent. Does it make sense to get an umbrella policy? Does an umbrella policy apply to an individual or a family? Auto liability is solid btw and we have renters insurance.

Well, going back to the moral issue. If you can get umbrella insurance for cheap, and your assets are temporarily negative (i.e. you future lifetime income is such that you current debt is simply an investment in your future), then (in my opinion) umbrella insurance is a very cheap way to ensure that in the (very unlikely) chance that some tragedy happens for which you are somehow involved, you will be able to compensate the other party.

If you have sufficient auto insurance and renters insurance, as you state, then you have most of your bases covered. But it's very very cheap to buy an additional $1,000,000 (for example) of umbrella insurance to cover the "gaps". I think I pay $300 for one million in umbrella. Or maybe two million. I don't remember to be honest. We rent, and our net worth is just now getting into positive territory.

Neurosphere

Good point. I will look into an umbrella policy. Does such a policy apply to individual only for example just me or will it cover me and my family?

Also, what is ur renter insurance like? I need to review my policy and would like some pointers on what makes a for a good policy.

[Bill M]

State laws differ as to whether future earnings can be included in a lawsuit settlement. Something to check....

[corn18]

Thanks for this thread. Convinced me to add $1M of umbrella insurance to my portfolio. Cost me $405 / year. Apparently teenage children cost more for some reason.

[sesq]

Most of my assets are in classes that can't be touched by a tort or bankruptcy (e.g. 401(k)). However, I seem to recall that in my state something like 25% of my pay each year could be garnished in a judgement unless I could prove poverty. So I have an umbrella policy. I would do this even if I lived in a state that had better terms (famously Florida and Texas, IANAL), since I move a bit and who knows what that state's laws would be.

[vtjon]

Protection of my/our future earnings was my initial reason (and still primary reason) for holding an umbrella policy.

[dm200]

For a great many folks "CURRENT ASSETS" may not be the most significant risk of loss, but rather future earnings over, perhaps, decades of good income. An umbrella policy can protect those as well.

[HIinvestor]

A reason not often listed is getting an excellent attorney representing you for your umbrella policy. I've noticed that in lawsuits, frequently the top firms were hired by the insurer holding the umbrella policy who works with the other attorneys defendingbthe insured in case of any claim. The cost of defense is huge if you paid out of pocket--as an insured, it is provided as a benefit of your policy.