How much liability insurance?

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goshenBogle
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How much liability insurance?

Post by goshenBogle »

In addition to our home insurance policy, we have an additional $1 million liability policy. Our assets are approximately $4.5 million consisting of our investment portfolio (taxable & non-taxable) + condo. 95% of these assets are in a revocable trust with my wife and I as trustees. So my question is: If we are sued for liability, can the other party go after our assets if they are in a trust? My guess is the answer is "yes" but I am interested in the opinion of others.
Thank you.
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Lee_WSP
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Re: How much liability insurance?

Post by Lee_WSP »

Of course they can. If the judgment exceeds the policy limit, your insurance company will tell you "sorry bud, you're on your own now."

What the limit does is if the plaintiff's damages are close to the limit, they will just settle. If they deem it unlikely to recover the excess from you, they'll settle for the limit. If they think you're a big fat cash cow, they're coming after you with everything they've got.

All that said... what exactly are you thinking is going to cause such liability? The most likely is a car accident (think hitting a six person filled van causing massive life debilitating injuries). The second most likely is property damage due to some home issue (you cause a flood that damages all the houses on the street or burn them all down). The third most likely is some intentional or negligent act on your part (dog bite, fist fight, etc) (this is probably going to be the smallest dollar amount at stake since the damage one person can cause on their own negligently is much smaller than the previous two examples (unless you cause a fire or flood or something disastrous)).
NYCaviator
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Re: How much liability insurance?

Post by NYCaviator »

The cost of a $1m vs $5+m umbrella is negligible when you consider the peace of mind it gives.
Van
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Re: How much liability insurance?

Post by Van »

I carry 5 million. If the stuff hits the fan, I figure a loss of that size will get the insurance companies attention and they will put up their best defense.
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Lee_WSP
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Re: How much liability insurance?

Post by Lee_WSP »

If your coverage is greater than your judgement proud assets, it makes you more of a Target. The insurance company doesn't care either way.
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willthrill81
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Re: How much liability insurance?

Post by willthrill81 »

I would recommend that you always carry enough liability insurance to cover 100% of your assets that are not protected from creditors (e.g. 401k plans, which are covered by ERISA; many states offer full protection to IRAs).
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megabad
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Re: How much liability insurance?

Post by megabad »

goshenBogle wrote: Mon Aug 05, 2019 4:09 pm So my question is: If we are sued for liability, can the other party go after our assets if they are in a trust?
The answer is yes in my state.

If you drive a nice car and have a nice condo, I would likely up the umbrella a little. If you are puttering around in a 1995 honda accord and own a $45k condo, you are probably ok though as long as you are a very private person and have no public assets. If you are in the penthouse of the nicest condo tower in town, on the beach, and drive a brand new BMW/Mercedes/Audi, you probably need $5 million or more.
Bobby206
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Re: How much liability insurance?

Post by Bobby206 »

$1m is way under insured in my opinion and it has nothing to do with your assets. It has to do with yours, and most anybody else's, liability exposure. ONE bizarre lawsuit and you could be sued for millions. $2m or $3m or more umbrella policy costs a few hundred bucks a year. It should be automatic for everybody.
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willthrill81
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Re: How much liability insurance?

Post by willthrill81 »

megabad wrote: Mon Aug 05, 2019 4:54 pm
goshenBogle wrote: Mon Aug 05, 2019 4:09 pm So my question is: If we are sued for liability, can the other party go after our assets if they are in a trust?
The answer is yes in my state.
I don't believe that assets in a revocable trust are protected from creditors in any state.
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megabad
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Re: How much liability insurance?

Post by megabad »

willthrill81 wrote: Mon Aug 05, 2019 5:06 pm I don't believe that assets in a revocable trust are protected from creditors in any state.
I suspect this is true, but just wasn't sure about other states. This would make sense since it creates a purpose for asset protection trusts (which are irrevocable). That said, I have no experience in marital laws in other states and I thought this might have a slight potential of affecting the total liability for a married couple but didn't know.
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