Umbrella coverage - how to determine amount?

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JAZZISCOOL
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Umbrella coverage - how to determine amount?

Post by JAZZISCOOL »

Hi BH's:

Is there any rule of thumb regarding umbrella coverage? I have $1 million currently and am reviewing all my policies with my agent. They asked me about bumping to $2 million (would cost an additional $242/year.)

The annual premium increase with the umbrella has been much higher than home or auto for a while now (bundled together). It started to increase at 18% and this year it was a 39% increase YOY. However, I think it is important to keep for sure (minimum $1 mm).

I have creditor protection on my 401k/Roth IRA in my state so I thought $1 million is probably sufficient for the umbrella but wanted to make sure I am thinking about this thoroughly.

Is there anything else to consider with this review? TIA.
Joyful
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Re: Umbrella coverage - how to determine amount?

Post by Joyful »

Hi - that price seems very expensive for a $2M umbrella insurance policy, have you shopped around? Given the inflationary period we are in, it might be worth increasing to $2M, however, I would definitely get estimates from other insurance companies. My $1M umbrella insurance is $114/year. I too am considering increasing to $2M and will be price shopping before my policy renews in the fall. Also when you are getting estimates from insurance agents ask them how to determine the amount that you should have for umbrella insurance. Also, doing a google and YouTube search my be helpful as well to get different perspectives.
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Re: Umbrella coverage - how to determine amount?

Post by JAZZISCOOL »

Joyful wrote: Sat Aug 06, 2022 8:17 pm Hi - that price seems very expensive for a $2M umbrella insurance policy, have you shopped around? Given the inflationary period we are in, it might be worth increasing to $2M, however, I would definitely get estimates from other insurance companies. My $1M umbrella insurance is $114/year. I too am considering increasing to $2M and will be price shopping before my policy renews in the fall.
I have shopped around for the bundled insurance (home/auto/umbrella) in the past couple years. Overall, my current provider was the lowest in total although the YOY increases for the umbrella coverage are higher than I would have liked.

I did find a carrier for umbrella coverage (RLI Corp.) separately. Their rates are cheaper (vs. current umbrella policy on a stand-alone basis) but I wanted to keep my policies bundled for convenience. Auto/home are ok. However, I would consider a stand-alone umbrella policy if it made sense to switch and increase the umbrella amount to $2 mm ($171/year cheaper vs. the new quote for $2 mm).

In terms of getting a separate umbrella policy with a different carrier, I didn't know if there were any concerns with that from a coverage perspective. Of course, it likely boils down to the legal language of each policy.

Thanks.
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Re: Umbrella coverage - how to determine amount?

Post by gips »

my rule of thumb is insurance amount = total assets or $5mm, whatever is less. it used to be total assets but I spoke to my friend who is a lawyer and he’s never heard of a personal liability case greater than $5mm. he said at the point the insurance company may have to pay $5mm, they are going to provide a rigorous defense.
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Re: Umbrella coverage - how to determine amount?

Post by AlohaJoe »

JAZZISCOOL wrote: Sat Aug 06, 2022 5:16 pm Hi BH's:

Is there any rule of thumb regarding umbrella coverage?
No, there is no rule of thumb. You can be sued for more than your net worth. (How would they know your net worth when they sue you?) Being sued for more than your net worth is extremely common, since most people don't have substantial net worth.

They just garnish your wages for the rest of your life, until the debt is paid.

If you are 25 years old, have just $100,000 in savings but a $200,000 salary, do you really think you can't be sued for $1 million in a wrongful death lawsuit?

Your policy should be relative to situations that cause liability. I doubt many Bogleheads are able to actually give you an answer that isn't made up, since it requires knowing a decent bit about your lifestyle.

I expect that $2 million settlements are probably more common than they were a decade ago, though. So that probably argues in favour of a bigger policy.
Last edited by AlohaJoe on Sat Aug 06, 2022 10:30 pm, edited 1 time in total.
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Re: Umbrella coverage - how to determine amount?

Post by AlohaJoe »

gips wrote: Sat Aug 06, 2022 9:19 pm but I spoke to my friend who is a lawyer and he’s never heard of a personal liability case greater than $5mm.
I mean, the Alex Jones case is all over the news. Not sure how he missed it.

And OJ Simpson was sued for $60 million in another famous personal liability case.

It's pretty easy to imagine lots of lawsuits against billionaires for more than $5 million. Aides who were fired, sexual harassment, etc, etc. A cursory Google turns up tons of examples of billionaires being personally sued and settling for undisclosed sums.

This article mentions a $40 million settlement in a personal liability lawsuit:

https://www.freepressjournal.in/world/t ... n-he-slept
Last edited by AlohaJoe on Sat Aug 06, 2022 10:30 pm, edited 3 times in total.
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Re: Umbrella coverage - how to determine amount?

Post by tibbitts »

Joyful wrote: Sat Aug 06, 2022 8:17 pm Hi - that price seems very expensive for a $2M umbrella insurance policy, have you shopped around? Given the inflationary period we are in, it might be worth increasing to $2M, however, I would definitely get estimates from other insurance companies. My $1M umbrella insurance is $114/year. I too am considering increasing to $2M and will be price shopping before my policy renews in the fall. Also when you are getting estimates from insurance agents ask them how to determine the amount that you should have for umbrella insurance. Also, doing a google and YouTube search my be helpful as well to get different perspectives.
My perspective is that your rate is abnormally low, maybe 50-100% below the typical premium. But it's like comparing any kind of insurance: it only matters what policies you can actually buy given where you live, your risk factors, etc.
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Re: Umbrella coverage - how to determine amount?

Post by RetiredAL »

JAZZISCOOL wrote: Sat Aug 06, 2022 5:16 pm
I have creditor protection on my 401k/Roth IRA in my state so I thought $1 million is probably sufficient for the umbrella but wanted to make sure I am thinking about this thoroughly.

Is there anything else to consider with this review? TIA.
Jazzi --

I upped my umbrella from 2 to 3 million this year due to living in an UH housing cost area + portfolio growth. My state only has mediocre IRA/Roth protections. Cost was an additional $100, $385 in total. I look at it as a .013 % ER.
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Re: Umbrella coverage - how to determine amount?

Post by gips »

AlohaJoe wrote: Sat Aug 06, 2022 9:35 pm
gips wrote: Sat Aug 06, 2022 9:19 pm but I spoke to my friend who is a lawyer and he’s never heard of a personal liability case greater than $5mm.
I mean, the Alex Jones case is all over the news. Not sure how he missed it.

And OJ Simpson was sued for $60 million in another famous personal liability case.

It's pretty easy to imagine lots of lawsuits against billionaires for more than $5 million. Aides who were fired, sexual harassment, etc, etc. A cursory Google turns up tons of examples of billionaires being personally sued and settling for undisclosed sums.

This article mentions a $40 million settlement in a personal liability lawsuit:

https://www.freepressjournal.in/world/t ... n-he-slept
oh, do you think umbrella insurance covered oj and alex jones?
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Re: Umbrella coverage - how to determine amount?

Post by markjk »

There are many articles and calculators out there to help with this decision so you can get quite a bit of information by just typing something like "how much umbrella coverage" in a search engine. The only rule of thumb I've seen is you should have enough to cover your net worth. But even that might not be necessary because accounts like retirement accounts are generally protected from lawsuits. On the other hand it also might not be enough if you are frequently in situations where your risk of liability is on the higher end. There is a lot of "it depends" in this much like anything else.
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Re: Umbrella coverage - how to determine amount?

Post by jebmke »

AlohaJoe wrote: Sat Aug 06, 2022 9:31 pm
JAZZISCOOL wrote: Sat Aug 06, 2022 5:16 pm Hi BH's:

Is there any rule of thumb regarding umbrella coverage?
No, there is no rule of thumb. You can be sued for more than your net worth. (How would they know your net worth when they sue you?) Being sued for more than your net worth is extremely common, since most people don't have substantial net worth.

They just garnish your wages for the rest of your life, until the debt is paid.

If you are 25 years old, have just $100,000 in savings but a $200,000 salary, do you really think you can't be sued for $1 million in a wrongful death lawsuit?

Your policy should be relative to situations that cause liability. I doubt many Bogleheads are able to actually give you an answer that isn't made up, since it requires knowing a decent bit about your lifestyle.

I expect that $2 million settlements are probably more common than they were a decade ago, though. So that probably argues in favour of a bigger policy.
Right, it is liability insurance, not asset insurance.
Don't trust me, look it up. https://www.irs.gov/forms-instructions-and-publications
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Re: Umbrella coverage - how to determine amount?

Post by JAZZISCOOL »

RetiredAL wrote: Sat Aug 06, 2022 11:06 pm
JAZZISCOOL wrote: Sat Aug 06, 2022 5:16 pm
I have creditor protection on my 401k/Roth IRA in my state so I thought $1 million is probably sufficient for the umbrella but wanted to make sure I am thinking about this thoroughly.

Is there anything else to consider with this review? TIA.
Jazzi --

I upped my umbrella from 2 to 3 million this year due to living in an UH housing cost area + portfolio growth. My state only has mediocre IRA/Roth protections. Cost was an additional $100, $385 in total. I look at it as a .013 % ER.
Thanks.
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Re: Umbrella coverage - how to determine amount?

Post by JAZZISCOOL »

gips wrote: Sat Aug 06, 2022 9:19 pm my rule of thumb is insurance amount = total assets or $5mm, whatever is less. it used to be total assets but I spoke to my friend who is a lawyer and he’s never heard of a personal liability case greater than $5mm. he said at the point the insurance company may have to pay $5mm, they are going to provide a rigorous defense.
Thanks.
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Re: Umbrella coverage - how to determine amount?

Post by JAZZISCOOL »

markjk wrote: Sun Aug 07, 2022 5:45 am There are many articles and calculators out there to help with this decision so you can get quite a bit of information by just typing something like "how much umbrella coverage" in a search engine. The only rule of thumb I've seen is you should have enough to cover your net worth. But even that might not be necessary because accounts like retirement accounts are generally protected from lawsuits. On the other hand it also might not be enough if you are frequently in situations where your risk of liability is on the higher end. There is a lot of "it depends" in this much like anything else.
Thanks. I've looked at a few online articles and they are general and not state-specific.
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Re: Umbrella coverage - how to determine amount?

Post by snackdog »

gips wrote: Sat Aug 06, 2022 9:19 pm my rule of thumb is insurance amount = total assets or $5mm, whatever is less. it used to be total assets but I spoke to my friend who is a lawyer and he’s never heard of a personal liability case greater than $5mm. he said at the point the insurance company may have to pay $5mm, they are going to provide a rigorous defense.
Most cases are settled for under $5 million but there are plenty of examples where awards have been higher. You need to insure for the worst case scenario, not the average. Good news is that the insurance is cheap (relative to your net worth) and the more you purchase, the less it costs per dollar of insurance.

https://www.oswaldcompanies.com/wp-cont ... er1015.pdf

You need to assess your own risk - do you have dogs, teens, power toys (e.g. boat), laws in your state, etc. Most awards are for auto accidents and can easily run into the millions.
BH Consumer FAQ: | Car? Used Toyota, Lexus or Miata. | House? 20% down and 3x salary. | Vacation house? No. | Umbrella? $1 million. | Goods? Costco.
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Re: Umbrella coverage - how to determine amount?

Post by NYCaviator »

gips wrote: Sun Aug 07, 2022 2:44 am
AlohaJoe wrote: Sat Aug 06, 2022 9:35 pm
gips wrote: Sat Aug 06, 2022 9:19 pm but I spoke to my friend who is a lawyer and he’s never heard of a personal liability case greater than $5mm.
I mean, the Alex Jones case is all over the news. Not sure how he missed it.

And OJ Simpson was sued for $60 million in another famous personal liability case.

It's pretty easy to imagine lots of lawsuits against billionaires for more than $5 million. Aides who were fired, sexual harassment, etc, etc. A cursory Google turns up tons of examples of billionaires being personally sued and settling for undisclosed sums.

This article mentions a $40 million settlement in a personal liability lawsuit:

https://www.freepressjournal.in/world/t ... n-he-slept
oh, do you think umbrella insurance covered oj and alex jones?
Interestingly it may, depending on what the lawsuit is for. Look at the Bill Cosby lawsuit. They sued him for certain claims (defamation or slander I think?) that would trigger his umbrella policy. I think I read that he had 40m or so through AIG and they were forced to defend the lawsuit.
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Re: Umbrella coverage - how to determine amount?

Post by JAZZISCOOL »

snackdog wrote: Sun Aug 07, 2022 9:17 am
gips wrote: Sat Aug 06, 2022 9:19 pm my rule of thumb is insurance amount = total assets or $5mm, whatever is less. it used to be total assets but I spoke to my friend who is a lawyer and he’s never heard of a personal liability case greater than $5mm. he said at the point the insurance company may have to pay $5mm, they are going to provide a rigorous defense.
Most cases are settled for under $5 million but there are plenty of examples where awards have been higher. You need to insure for the worst case scenario, not the average. Good news is that the insurance is cheap (relative to your net worth) and the more you purchase, the less it costs per dollar of insurance.

https://www.oswaldcompanies.com/wp-cont ... er1015.pdf

You need to assess your own risk - do you have dogs, teens, power toys (e.g. boat), laws in your state, etc. Most awards are for auto accidents and can easily run into the millions.
Thanks.
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Re: Umbrella coverage - how to determine amount?

Post by afan »

gips wrote: Sun Aug 07, 2022 2:44 am
AlohaJoe wrote: Sat Aug 06, 2022 9:35 pm
gips wrote: Sat Aug 06, 2022 9:19 pm but I spoke to my friend who is a lawyer and he’s never heard of a personal liability case greater than $5mm.
I mean, the Alex Jones case is all over the news. Not sure how he missed it.

And OJ Simpson was sued for $60 million in another famous personal liability case.

It's pretty easy to imagine lots of lawsuits against billionaires for more than $5 million. Aides who were fired, sexual harassment, etc, etc. A cursory Google turns up tons of examples of billionaires being personally sued and settling for undisclosed sums.

This article mentions a $40 million settlement in a personal liability lawsuit:

https://www.freepressjournal.in/world/t ... n-he-slept
oh, do you think umbrella insurance covered oj and alex jones?
The question was the size of the judgement or settlement, not how much an umbrella policy paid.
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Re: Umbrella coverage - how to determine amount?

Post by NYCaviator »

JAZZISCOOL wrote: Sat Aug 06, 2022 5:16 pm Is there any rule of thumb regarding umbrella coverage?
This question - quite literally - gets asked weekly on here. The answer is no, there is no rule of thumb. The idea that your umbrella should match your assets is flat out bogus. At the end of the day you want an amount of coverage that someone would settle for if the insurance company offered it to them.

Lawyers are always thinking in terms of what a jury would do. Like it or not, perception plays a huge role in that. If you are someone making minimum wage and driving a 30 year old car, a jury isn't going to think you will have assets. So the lawyers will probably settle for your minimum policy. On the other hand, if the jury hears you crashed into someone in your brand new Range Rover and that you're a software developer for Google, they may think you have the means to satisfy a big judgment and act accordingly. Even if you don't have "assets" you can have earning capacity. Don't risk it. Buy as much insurance as you can.

Medical bills are INSANE these days. Even a relatively minor car crash that requires the other person to have surgery could eat up a $1m umbrella policy in one go. There's no way I would sleep well at night with just $1m in 2022. Buy $5m and call it a day. It's probably the difference of $300-400 a year. That's the most the mainstream insurance companies will sell you, and it is highly unlikely even a severely injured person would turn that down and risk going to court to get more unless you do something egregious like drive drunk.
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Re: Umbrella coverage - how to determine amount?

Post by JAZZISCOOL »

NYCaviator wrote: Sun Aug 07, 2022 5:57 pm
JAZZISCOOL wrote: Sat Aug 06, 2022 5:16 pm Is there any rule of thumb regarding umbrella coverage?
This question - quite literally - gets asked weekly on here. The answer is no, there is no rule of thumb. The idea that your umbrella should match your assets is flat out bogus. At the end of the day you want an amount of coverage that someone would settle for if the insurance company offered it to them.

Lawyers are always thinking in terms of what a jury would do. Like it or not, perception plays a huge role in that. If you are someone making minimum wage and driving a 30 year old car, a jury isn't going to think you will have assets. So the lawyers will probably settle for your minimum policy. On the other hand, if the jury hears you crashed into someone in your brand new Range Rover and that you're a software developer for Google, they may think you have the means to satisfy a big judgment and act accordingly. Even if you don't have "assets" you can have earning capacity. Don't risk it. Buy as much insurance as you can.

Medical bills are INSANE these days. Even a relatively minor car crash that requires the other person to have surgery could eat up a $1m umbrella policy in one go. There's no way I would sleep well at night with just $1m in 2022. Buy $5m and call it a day. It's probably the difference of $300-400 a year. That's the most the mainstream insurance companies will sell you, and it is highly unlikely even a severely injured person would turn that down and risk going to court to get more unless you do something egregious like drive drunk.
Interesting.

I just found this on an older BH thread from an attorney:

"Re: Umbrella insurance questions and help
Post by kenner » Sun Jan 22, 2017 8:04 pm

boglerdude wrote:
kenner wrote:
Having spent a few decades litigating cases involving injury and death
It's been said a few times that lawyers don't go after assets beyond the insurance amount. Why is it that? thx

Generally, that is likely because dollar amounts beyond the insurance coverage limits may be deemed to be legally uncollectible."


Interesting that net worth is not mentioned in this response; only "collectible" assets above the insurance amount.

viewtopic.php?p=3204817#p3204817
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Re: Umbrella coverage - how to determine amount?

Post by snackdog »

JAZZISCOOL wrote: Sun Aug 07, 2022 6:34 pm ...

I just found this on an older BH thread from an attorney:

"Re: Umbrella insurance questions and help
Post by kenner » Sun Jan 22, 2017 8:04 pm

boglerdude wrote:
kenner wrote:
Having spent a few decades litigating cases involving injury and death
It's been said a few times that lawyers don't go after assets beyond the insurance amount. Why is it that? thx

Generally, that is likely because dollar amounts beyond the insurance coverage limits may be deemed to be legally uncollectible."


Interesting that net worth is not mentioned in this response; only "collectible" assets above the insurance amount.

viewtopic.php?p=3204817#p3204817
Interesting but far from true. You can definitely lose any non-401k savings, any second home and any investment property. If you lose a suit, a court can compel you provide a listing of your assets and then seize them. A lien can be placed on your home in many states.
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Re: Umbrella coverage - how to determine amount?

Post by willthrill81 »

snackdog wrote: Sun Aug 07, 2022 9:05 pmYou can definitely lose any non-401k savings, any second home and any investment property.
Some states protect IRAs from civil suits.
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Re: Umbrella coverage - how to determine amount?

Post by tj »

willthrill81 wrote: Sun Aug 07, 2022 9:39 pm
snackdog wrote: Sun Aug 07, 2022 9:05 pmYou can definitely lose any non-401k savings, any second home and any investment property.
Some states protect IRAs from civil suits.
Some? I would say most.

https://www.irafinancialgroup.com/learn ... rotection/
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Re: Umbrella coverage - how to determine amount?

Post by willthrill81 »

tj wrote: Sun Aug 07, 2022 10:21 pm
willthrill81 wrote: Sun Aug 07, 2022 9:39 pm
snackdog wrote: Sun Aug 07, 2022 9:05 pmYou can definitely lose any non-401k savings, any second home and any investment property.
Some states protect IRAs from civil suits.
Some? I would say most.

https://www.irafinancialgroup.com/learn ... rotection/
The number that do is much larger than I thought. Perhaps the number of states protecting IRAs has grown significantly in recent years.
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Re: Umbrella coverage - how to determine amount?

Post by NYCaviator »

JAZZISCOOL wrote: Sun Aug 07, 2022 6:34 pm
NYCaviator wrote: Sun Aug 07, 2022 5:57 pm
JAZZISCOOL wrote: Sat Aug 06, 2022 5:16 pm Is there any rule of thumb regarding umbrella coverage?
This question - quite literally - gets asked weekly on here. The answer is no, there is no rule of thumb. The idea that your umbrella should match your assets is flat out bogus. At the end of the day you want an amount of coverage that someone would settle for if the insurance company offered it to them.

Lawyers are always thinking in terms of what a jury would do. Like it or not, perception plays a huge role in that. If you are someone making minimum wage and driving a 30 year old car, a jury isn't going to think you will have assets. So the lawyers will probably settle for your minimum policy. On the other hand, if the jury hears you crashed into someone in your brand new Range Rover and that you're a software developer for Google, they may think you have the means to satisfy a big judgment and act accordingly. Even if you don't have "assets" you can have earning capacity. Don't risk it. Buy as much insurance as you can.

Medical bills are INSANE these days. Even a relatively minor car crash that requires the other person to have surgery could eat up a $1m umbrella policy in one go. There's no way I would sleep well at night with just $1m in 2022. Buy $5m and call it a day. It's probably the difference of $300-400 a year. That's the most the mainstream insurance companies will sell you, and it is highly unlikely even a severely injured person would turn that down and risk going to court to get more unless you do something egregious like drive drunk.
Interesting.

I just found this on an older BH thread from an attorney:

"Re: Umbrella insurance questions and help
Post by kenner » Sun Jan 22, 2017 8:04 pm

boglerdude wrote:
kenner wrote:
Having spent a few decades litigating cases involving injury and death
It's been said a few times that lawyers don't go after assets beyond the insurance amount. Why is it that? thx

Generally, that is likely because dollar amounts beyond the insurance coverage limits may be deemed to be legally uncollectible."


Interesting that net worth is not mentioned in this response; only "collectible" assets above the insurance amount.

viewtopic.php?p=3204817#p3204817
That's probably true, but it goes back to the amount of insurance coverage. If a prominent surgeon seriously injured or killed someone in a car crash and only has a $100,000 policy or even a $1m umbrella, I highly doubt a lawyer and their client would take that and walk away.

The flip side is not only thinking about protecting your assets, but also being able to make someone whole. Most people don't intentionally cause a car crash, but if you do, and someone is seriously injured, you want to make sure you can make them whole.

If you are on this forum, chances are an extra $300-500 a year isn't going to break the bank. I'd say get $5m and sleep well at night.
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Re: Umbrella coverage - how to determine amount?

Post by zlandar »

Like someone else said you want enough coverage where the insurance company is going to fight tooth and nail over a claim. Enough where the plaintiff is satisfied with the amount and won't pursue your personal assets.

That's $1-2m in my book.
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Re: Umbrella coverage - how to determine amount?

Post by ncbill »

zlandar wrote: Mon Aug 08, 2022 8:44 am Like someone else said you want enough coverage where the insurance company is going to fight tooth and nail over a claim. Enough where the plaintiff is satisfied with the amount and won't pursue your personal assets.

That's $1-2m in my book.
The insurance company isn't going to fight tooth & nail...their attorney is just as eager as the plaintiff's attorney to settle ASAP.

Or to pay out their insurance limit and abandon you to any excess judgment over that limit...saw that happen at a business where I worked.

Business ended up firing the insurance company lawyer, hiring their own, going to court, winning, and billing the insurance company for the legal costs (less the deductible)...saved the insurance company six figures (compared to paying out the limit) but still got canceled. :)
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Re: Umbrella coverage - how to determine amount?

Post by IowaFarmBoy »

JAZZISCOOL wrote: Sat Aug 06, 2022 5:16 pm The annual premium increase with the umbrella has been much higher than home or auto for a while now (bundled together). It started to increase at 18% and this year it was a 39% increase YOY. However, I think it is important to keep for sure (minimum $1 mm).
One thing to keep in mind when comparing rates with other Bogleheads is that umbrellas in some states can include uninsured/underinsured coverage so that could make quite a difference on two different $1M policies.
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Re: Umbrella coverage - how to determine amount?

Post by JAZZISCOOL »

IowaFarmBoy wrote: Mon Aug 08, 2022 1:05 pm
JAZZISCOOL wrote: Sat Aug 06, 2022 5:16 pm The annual premium increase with the umbrella has been much higher than home or auto for a while now (bundled together). It started to increase at 18% and this year it was a 39% increase YOY. However, I think it is important to keep for sure (minimum $1 mm).
One thing to keep in mind when comparing rates with other Bogleheads is that umbrellas in some states can include uninsured/underinsured coverage so that could make quite a difference on two different $1M policies.
Yes, it may not be apples vs. apples. In my state, my auto policy covers that. Also, I get a discount on my auto/home policies by including the umbrella so it's even more difficult to compare the cost of the umbrella policy on a standalone basis.
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Re: Umbrella coverage - how to determine amount?

Post by zlandar »

ncbill wrote: Mon Aug 08, 2022 12:57 pm
zlandar wrote: Mon Aug 08, 2022 8:44 am Like someone else said you want enough coverage where the insurance company is going to fight tooth and nail over a claim. Enough where the plaintiff is satisfied with the amount and won't pursue your personal assets.

That's $1-2m in my book.
The insurance company isn't going to fight tooth & nail...their attorney is just as eager as the plaintiff's attorney to settle ASAP.

Or to pay out their insurance limit and abandon you to any excess judgment over that limit...saw that happen at a business where I worked.

Business ended up firing the insurance company lawyer, hiring their own, going to court, winning, and billing the insurance company for the legal costs (less the deductible)...saved the insurance company six figures (compared to paying out the limit) but still got canceled. :)
That's why you need a high enough limit where the insurance company isn't just signing a check and saying "good luck".

If you are a driver and only have the minimum coverage ($25k in my state, complete joke) the insurance company doesn't care. It's going to cost them more to hire the lawyer then to pay $25k no questions asked.

$1-2m umbrella policy on top of your auto? They won't be so eager to settle. Maybe it was your fault and the insurance company pays out. The plaintiff just got $1-2m. They are less likely to come after collecting on that seven figure sum.
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Re: Umbrella coverage - how to determine amount?

Post by cubs1999 »

JAZZISCOOL wrote: Mon Aug 08, 2022 2:29 pm
IowaFarmBoy wrote: Mon Aug 08, 2022 1:05 pm
JAZZISCOOL wrote: Sat Aug 06, 2022 5:16 pm The annual premium increase with the umbrella has been much higher than home or auto for a while now (bundled together). It started to increase at 18% and this year it was a 39% increase YOY. However, I think it is important to keep for sure (minimum $1 mm).
One thing to keep in mind when comparing rates with other Bogleheads is that umbrellas in some states can include uninsured/underinsured coverage so that could make quite a difference on two different $1M policies.
Yes, it may not be apples vs. apples. In my state, my auto policy covers that. Also, I get a discount on my auto/home policies by including the umbrella so it's even more difficult to compare the cost of the umbrella policy on a standalone basis.
Yeah I have $250k/500k uninsured/underinsured motorist but I wanted the extra 1 million Um/uim from stand alone RLI policy.
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Re: Umbrella coverage - how to determine amount?

Post by JAZZISCOOL »

cubs1999 wrote: Mon Aug 08, 2022 8:33 pm
JAZZISCOOL wrote: Mon Aug 08, 2022 2:29 pm
IowaFarmBoy wrote: Mon Aug 08, 2022 1:05 pm
JAZZISCOOL wrote: Sat Aug 06, 2022 5:16 pm The annual premium increase with the umbrella has been much higher than home or auto for a while now (bundled together). It started to increase at 18% and this year it was a 39% increase YOY. However, I think it is important to keep for sure (minimum $1 mm).
One thing to keep in mind when comparing rates with other Bogleheads is that umbrellas in some states can include uninsured/underinsured coverage so that could make quite a difference on two different $1M policies.
Yes, it may not be apples vs. apples. In my state, my auto policy covers that. Also, I get a discount on my auto/home policies by including the umbrella so it's even more difficult to compare the cost of the umbrella policy on a standalone basis.
Yeah I have $250k/500k uninsured/underinsured motorist but I wanted the extra 1 million Um/uim from stand alone RLI policy.
Thanks. RLI is one company on my radar for umbrella coverage.
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Re: Umbrella coverage - how to determine amount?

Post by wingman4uz »

I struggled with this too at first. The “rules of thumb” that are out there relate to your net worth which I could never understand. I’m happy to see some others on here agree that that is largely bunk. I looked at worst case for me - an accident at my home or in a vehicle where someone is badly injured/paralyzed and needs a lot of medical care. I also saw some stats on the average settlement awards. I carry $2m right now but this thread has helped remind me that it might be time to up it to $3m.
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Re: Umbrella coverage - how to determine amount?

Post by JAZZISCOOL »

wingman4uz wrote: Tue Aug 09, 2022 4:49 pm I struggled with this too at first. The “rules of thumb” that are out there relate to your net worth which I could never understand. I’m happy to see some others on here agree that that is largely bunk. I looked at worst case for me - an accident at my home or in a vehicle where someone is badly injured/paralyzed and needs a lot of medical care. I also saw some stats on the average settlement awards. I carry $2m right now but this thread has helped remind me that it might be time to up it to $3m.
Thanks. I'd love to see the stats if you come across them. I've also asked my agent to see if they have any data pertaining to this. I saw some old data (before 2009) on my carrier's website but I have to think they may be biased. It would be nice to see some unbiased figures but I'm not sure I can find any.

The good news it that umbrella coverage is pretty reasonable overall despite the increase in premiums in my case.
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Re: Umbrella coverage - how to determine amount?

Post by wingman4uz »

A neighbor on my street had a spinal injury in a car accident so I used his condition as a bench mark. Kinda grim reading…. Here’s hoping for all our sakes this is never needed.

https://lawstreetcapital.com/2017/11/th ... driplegia/
Last edited by wingman4uz on Tue Aug 09, 2022 8:44 pm, edited 1 time in total.
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Re: Umbrella coverage - how to determine amount?

Post by wingman4uz »

Somebody else touched on this but it’s worth repeating, retirement plans are exempt in liability cases as is the equity in one’s personal home. This may vary by state but at least where I am, those are off limits.
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Re: Umbrella coverage - how to determine amount?

Post by AerialWombat »

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This post is a work of fiction. Any similarity to real financial advice is purely coincidental.
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Re: Umbrella coverage - how to determine amount?

Post by h82goslw »

My umbrella policy has almost doubled in the last few years….but my home owners and auto have been pretty level. I bundle the three policies through GEICO and I haven’t found anyone who can eat the bundle price.

I’d love to get a cheaper umbrella but I’ve always been under the impression that you want the same company for auto and umbrella. That way auto and umbrella companies can’t shift the blame to each other and leave the policy holder stuck in the middle if there is an accident/lawsuit. Am I mistaken?


Apologies to OP….not trying to hijack your thread.
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Re: Umbrella coverage - how to determine amount?

Post by NYCaviator »

h82goslw wrote: Wed Aug 10, 2022 6:09 am My umbrella policy has almost doubled in the last few years….but my home owners and auto have been pretty level. I bundle the three policies through GEICO and I haven’t found anyone who can eat the bundle price.

I’d love to get a cheaper umbrella but I’ve always been under the impression that you want the same company for auto and umbrella. That way auto and umbrella companies can’t shift the blame to each other and leave the policy holder stuck in the middle if there is an accident/lawsuit. Am I mistaken?


Apologies to OP….not trying to hijack your thread.
While it's not always possible, I'd keep them together. Here's why... multiple insurers could create a problem with providing notice of a claim or fighting over settlement amounts. If you have a separate umbrella policy, chances are your auto insurer isn't going to provide notice to them of a claim that could create exposure. That would be on you. If you don't provide proper notice (i.e. in the right form or in a timely manner), I bet the umbrella carrier could deny coverage. So if you get in a fender bender you don't think is bad, but you later find out the person had some surgery, what happens if you didn't put your umbrella carrier on notice soon enough?

Also think about insurers fighting about settlement. If you cause a bad crash and Geico says "ok we're offering our $250,000 to settle" but your third party umbrella carrier says "no I think $250,000 is plenty for those injuries we're not paying anything else from the umbrella policy," you may get sued.

At the end of the day, insurance companies are awful and their goal is to pay as few claims as possible. I'd rather just deal with one insurance company than two when there's some major claim. I don't want to depend on them to interface with each other and work together.
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Re: Umbrella coverage - how to determine amount?

Post by Joyful »

h82goslw wrote: Wed Aug 10, 2022 6:09 am
At the end of the day, insurance companies are awful and their goal is to pay as few claims as possible. I'd rather just deal with one insurance company than two when there's some major claim. I don't want to depend on them to interface with each other and work together.
I totally agree.
Also, this topic lead me to increase my umbrella from $1m to $2M which cost <$100 per year.
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Re: Umbrella coverage - how to determine amount?

Post by JAZZISCOOL »

wingman4uz wrote: Tue Aug 09, 2022 8:38 pm A neighbor on my street had a spinal injury in a car accident so I used his condition as a bench mark. Kinda grim reading…. Here’s hoping for all our sakes this is never needed.

https://lawstreetcapital.com/2017/11/th ... driplegia/
Thanks.
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Re: Umbrella coverage - how to determine amount?

Post by JAZZISCOOL »

wingman4uz wrote: Tue Aug 09, 2022 8:40 pm Somebody else touched on this but it’s worth repeating, retirement plans are exempt in liability cases as is the equity in one’s personal home. This may vary by state but at least where I am, those are off limits.

In my state, only a certain $ of your house is covered from what I read. Not 100% of your equity but at least it's something. IRA's are also covered in my state. 401k's are covered via ERISA.
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Re: Umbrella coverage - how to determine amount?

Post by JAZZISCOOL »

h82goslw wrote: Wed Aug 10, 2022 6:09 am My umbrella policy has almost doubled in the last few years….but my home owners and auto have been pretty level. I bundle the three policies through GEICO and I haven’t found anyone who can eat the bundle price.

I’d love to get a cheaper umbrella but I’ve always been under the impression that you want the same company for auto and umbrella. That way auto and umbrella companies can’t shift the blame to each other and leave the policy holder stuck in the middle if there is an accident/lawsuit. Am I mistaken?


Apologies to OP….not trying to hijack your thread.
I would like to know the answer to this as well. I know RLI is one company that offers a standalone umbrella. Someone upthread mentioned they have RLI I believe.

I don't know how an attorney or the insurance company would approach this.
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Re: Umbrella coverage - how to determine amount?

Post by snackdog »

JAZZISCOOL wrote: Wed Aug 10, 2022 5:04 pm
h82goslw wrote: Wed Aug 10, 2022 6:09 am My umbrella policy has almost doubled in the last few years….but my home owners and auto have been pretty level. I bundle the three policies through GEICO and I haven’t found anyone who can eat the bundle price.

I’d love to get a cheaper umbrella but I’ve always been under the impression that you want the same company for auto and umbrella. That way auto and umbrella companies can’t shift the blame to each other and leave the policy holder stuck in the middle if there is an accident/lawsuit. Am I mistaken?


Apologies to OP….not trying to hijack your thread.
I would like to know the answer to this as well. I know RLI is one company that offers a standalone umbrella. Someone upthread mentioned they have RLI I believe.

I don't know how an attorney or the insurance company would approach this.
Not sure how that scenario would work. If the umbrella holder, say RLI, thinks they may be on the hook for part of the judgement they will get involved. If not, the auto insurer handles it. If the umbrella lawyers don't get involved and the jury awards $2 million, they will get involved to appeal or they will pay.
BH Consumer FAQ: | Car? Used Toyota, Lexus or Miata. | House? 20% down and 3x salary. | Vacation house? No. | Umbrella? $1 million. | Goods? Costco.
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Re: Umbrella coverage - how to determine amount?

Post by mmse »

NYCaviator wrote: Wed Aug 10, 2022 6:52 am Also think about insurers fighting about settlement. If you cause a bad crash and Geico says "ok we're offering our $250,000 to settle" but your third party umbrella carrier says "no I think $250,000 is plenty for those injuries we're not paying anything else from the umbrella policy," you may get sued.
In this case, should not the umbrella insurer take $250k from Geico and litigate (Geico is off the hook)? The only issue is for the umbrella insurer to be properly notified and involved. Are there any practical nuances?
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Re: Umbrella coverage - how to determine amount?

Post by ncbill »

zlandar wrote: Mon Aug 08, 2022 8:07 pm
ncbill wrote: Mon Aug 08, 2022 12:57 pm
zlandar wrote: Mon Aug 08, 2022 8:44 am Like someone else said you want enough coverage where the insurance company is going to fight tooth and nail over a claim. Enough where the plaintiff is satisfied with the amount and won't pursue your personal assets.

That's $1-2m in my book.
The insurance company isn't going to fight tooth & nail...their attorney is just as eager as the plaintiff's attorney to settle ASAP.

Or to pay out their insurance limit and abandon you to any excess judgment over that limit...saw that happen at a business where I worked.

Business ended up firing the insurance company lawyer, hiring their own, going to court, winning, and billing the insurance company for the legal costs (less the deductible)...saved the insurance company six figures (compared to paying out the limit) but still got canceled. :)
That's why you need a high enough limit where the insurance company isn't just signing a check and saying "good luck".

If you are a driver and only have the minimum coverage ($25k in my state, complete joke) the insurance company doesn't care. It's going to cost them more to hire the lawyer then to pay $25k no questions asked.

$1-2m umbrella policy on top of your auto? They won't be so eager to settle. Maybe it was your fault and the insurance company pays out. The plaintiff just got $1-2m. They are less likely to come after collecting on that seven figure sum.
The insurance company has to have your agreement for any settlement...they can't just decide on their own to write a check for the coverage limit and walk away.

Similarly, if the plaintiff agrees to settle for the limit of insurance coverage the plaintiff cannot come after you personally afterwards...they've waived that right by signing a document releasing you from any liability which the insurance company requires for them to receive the settlement.
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Re: Umbrella coverage - how to determine amount?

Post by MrCheapo »

JAZZISCOOL wrote: Sat Aug 06, 2022 5:16 pm Hi BH's:

Is there any rule of thumb regarding umbrella coverage? I have $1 million currently and am reviewing all my policies with my agent. They asked me about bumping to $2 million (would cost an additional $242/year.)

The annual premium increase with the umbrella has been much higher than home or auto for a while now (bundled together). It started to increase at 18% and this year it was a 39% increase YOY. However, I think it is important to keep for sure (minimum $1 mm).

I have creditor protection on my 401k/Roth IRA in my state so I thought $1 million is probably sufficient for the umbrella but wanted to make sure I am thinking about this thoroughly.

Is there anything else to consider with this review? TIA.
I'm asking the same question and I've come to the conclusion there are two underlying questions which if answered will address the question in your title:

a) What are the extreme claim amounts for incidents COVERED by your umbrella policy?
b) What are the extreme claim amounts for incidents NOT covered.

If I know a) and its less than $1M then I'd stick with a $1M policy. And I have to be comfortable paying the answer to b.
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Re: Umbrella coverage - how to determine amount?

Post by NYCaviator »

ncbill wrote: Sat Aug 13, 2022 8:01 am
The insurance company has to have your agreement for any settlement...they can't just decide on their own to write a check for the coverage limit and walk away.
I think this is completely wrong. The insurance company can absolutely settle a claim and write a check without your agreement. They can also offer the limits of your policy without your agreement. If they do that, and the other side doesn't accept, they probably still have to provide a lawyer to defend you, but they wouldn't be required to get your permission to settle if its within the limits of your policy. It's pretty clearly spelled out in your policy.
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Re: Umbrella coverage - how to determine amount?

Post by Big Dog »

gips wrote: Sun Aug 07, 2022 2:44 am
AlohaJoe wrote: Sat Aug 06, 2022 9:35 pm
gips wrote: Sat Aug 06, 2022 9:19 pm but I spoke to my friend who is a lawyer and he’s never heard of a personal liability case greater than $5mm.
I mean, the Alex Jones case is all over the news. Not sure how he missed it.

And OJ Simpson was sued for $60 million in another famous personal liability case.

It's pretty easy to imagine lots of lawsuits against billionaires for more than $5 million. Aides who were fired, sexual harassment, etc, etc. A cursory Google turns up tons of examples of billionaires being personally sued and settling for undisclosed sums.

This article mentions a $40 million settlement in a personal liability lawsuit:

https://www.freepressjournal.in/world/t ... n-he-slept
oh, do you think umbrella insurance covered oj and alex jones?
oj, likely no, as they usually have exclusions for felonies. OTOH, likely yes for Jones.
texas lawdog
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Re: Umbrella coverage - how to determine amount?

Post by texas lawdog »

I struggled also to determine how much umbrella insurance to obtain until browsing the top verdicts in my state for the year and noticing that anything above $1M would have made the top 20 for the year in a big state (TX). Do a search for top verdicts in your state and you should be able to find a similar list (mine was located at https://topverdict.com/lists/2020/texas/top-50-verdicts).

There's always the unfortunate chance that you would make such a list, but the odds of that happening are so small that the cost of the additional insurance coverage outweighs the potential benefit.

Best of luck.
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