Do my adult children need umbrella liability insurance?

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FBN2014
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Do my adult children need umbrella liability insurance?

Post by FBN2014 »

My daughter and son in law are 35. Net worth about 1.3 million most of that is home equity. Combined income is 90-100K. Both of them are self employed and drive a lot. Should they get an umbrella liability policy? How much? The businesses are as sole proprietors as they file schedule C forms. Would the umbrella policy cover them if they were sued because of an accident while driving during the workday or is a special endorsement needed for that?
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senex
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Re: Do my adult children need umbrella liability insurance?

Post by senex »

I've long heard that umbrella liability is a no-brainer if you have income & assets. It's usually pretty cheap.

There's no magic formula for policy amount. I often hear mention of $1m or $2m.

For details of coverage, you'll need to discuss with an insurance agent, or read the policy docs.
toddthebod
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Re: Do my adult children need umbrella liability insurance?

Post by toddthebod »

Here's what my umbrella policy says under Exclusions:
Arising out of, during the course of, or in connection with any business or business property of any insured unless covered by underlying insurance described in the Declarations.
They would need to have a specific business liability policy with the same carrier in order for their umbrella policy to apply on top of that.
marcopolo
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Re: Do my adult children need umbrella liability insurance?

Post by marcopolo »

Umbrella policies are dirt cheap.

I advised my grown kids to get them as soon as they were no longer dependents covered under our policy.

They serve two functions, helps protect your assets (including future income) against liability claims, but also provide payment to injured parties when you are at fault.

Unlikely that a standard umbrella policy would cover business related claims. Probably need a rider or separate policy for that.
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KRP
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Re: Do my adult children need umbrella liability insurance?

Post by KRP »

marcopolo wrote: Wed Jun 29, 2022 12:13 pm Umbrella policies are dirt cheap.

I advised my grown kids to get them as soon as they were no longer dependents covered under our policy.

They serve two functions, helps protect your assets (including future income) against liability claims, but also provide payment to injured parties when you are at fault.

Unlikely that a standard umbrella policy would cover business related claims. Probably need a rider or separate policy for that.
When I read through my umbrella policy's rules, there were many places which explicitly did not provide coverage "when you are at fault".

The advice I've heard is "Don't read the actual policy booklet, so you can say 'Hey Judge, it's an umbrella policy...that's supposed to cover everything, isn't it?...why would it only cover things where I'm already not at fault?''"
HIinvestor
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Re: Do my adult children need umbrella liability insurance?

Post by HIinvestor »

Umbrella policies are really quite reasonable for the coverage they provide, including an excellent attorney to represent them in the event they are ever sued for anything that MAY be covered under the umbrella policy. I highly recommend them and have had one myself since I started having any assets back when I was in my early 20s. If you have assets to protect, a GOOD umbrella policy is a good investment. Read the terms of the policy to understand what IS and IS NOT covered.
HIinvestor
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Re: Do my adult children need umbrella liability insurance?

Post by HIinvestor »

duplicate post
HappyPappy
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Re: Do my adult children need umbrella liability insurance?

Post by HappyPappy »

FBN2014 wrote: Mon Jun 27, 2022 9:01 pm My daughter and son in law are 35. Net worth about 1.3 million most of that is home equity. Combined income is 90-100K. Both of them are self employed and drive a lot. Should they get an umbrella liability policy? How much? The businesses are as sole proprietors as they file schedule C forms. Would the umbrella policy cover them if they were sued because of an accident while driving during the workday or is a special endorsement needed for that?
Yes they need umbrella insurance to protect the assets that make up their net worth and to protect their future income in the event they get sued.

We have a sole proprietorship and we also have umbrella insurance, but that explicitly does not cover business activities. So we have additional liability insurance for the business. We have also looked into getting business auto insurance because I’m nearly certain our auto insurance would fight us if we had a big auto claim while driving for business.
JBTX
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Re: Do my adult children need umbrella liability insurance?

Post by JBTX »

FBN2014 wrote: Mon Jun 27, 2022 9:01 pm My daughter and son in law are 35. Net worth about 1.3 million most of that is home equity. Combined income is 90-100K. Both of them are self employed and drive a lot. Should they get an umbrella liability policy? How much? The businesses are as sole proprietors as they file schedule C forms. Would the umbrella policy cover them if they were sued because of an accident while driving during the workday or is a special endorsement needed for that?
Not only is it not likely the umbrella liability will cover a business related accident, in theory a personal auto policy may not either. It’s quite probable that self employed business owners don’t always declare their business miles or activities to the insurance company, but if they don’t that is likely a policy violation.

This is a risk that Uber and other self employed service delivery drivers take. The company will cover when transporting or delivering, but may not cover other business related miles, that also in theory may not be covered by a personal auto policy.
Katietsu
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Re: Do my adult children need umbrella liability insurance?

Post by Katietsu »

Another data point, my personal auto policy covers business miles in my personal vehicle as long as I am not specifically being paid to transport a person. It does not cover business miles in a rental car.
tashnewbie
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Re: Do my adult children need umbrella liability insurance?

Post by tashnewbie »

Depending on state laws, much of your children's net worth may be protected from creditors, such as the home and retirement accounts (e.g., 401k, IRA). That means there may be very little that would be at risk in a judgment against them. However, as others have mentioned, umbrella insurance is pretty cheap (because claims are relatively rare), so it'd be super easy for them to get it and have some peace of mind. They should review the policy documents carefully to see what would and would not be covered. A standard umbrella policy may not cover certain business related claims, so they'd need to explore other insurance options for that, if it's something they want.

However, they should consult with their auto insurer about the business use of their vehicles. They may need to update their current policy or get some type of business policy.
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HMSVictory
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Re: Do my adult children need umbrella liability insurance?

Post by HMSVictory »

FBN2014 wrote: Mon Jun 27, 2022 9:01 pm My daughter and son in law are 35. Net worth about 1.3 million most of that is home equity. Combined income is 90-100K. Both of them are self employed and drive a lot. Should they get an umbrella liability policy? How much? The businesses are as sole proprietors as they file schedule C forms. Would the umbrella policy cover them if they were sued because of an accident while driving during the workday or is a special endorsement needed for that?
Yes they should have an umbrella liability policy. They have enough of a net worth to make suing them profitable if the worst was to happen.

Car crashes are the #1 trigger for liability claims.

They need (2) - one for personal and one for the company (if its one LLC or Corp). Umbrella policies are pretty cheap - I pay $300 a year for $2M.
Stay the course!
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HMSVictory
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Re: Do my adult children need umbrella liability insurance?

Post by HMSVictory »

tashnewbie wrote: Thu Jun 30, 2022 8:05 am Depending on state laws, much of your children's net worth may be protected from creditors, such as the home and retirement accounts (e.g., 401k, IRA). That means there may be very little that would be at risk in a judgment against them. However, as others have mentioned, umbrella insurance is pretty cheap (because claims are relatively rare), so it'd be super easy for them to get it and have some peace of mind. They should review the policy documents carefully to see what would and would not be covered. A standard umbrella policy may not cover certain business related claims, so they'd need to explore other insurance options for that, if it's something they want.

However, they should consult with their auto insurer about the business use of their vehicles. They may need to update their current policy or get some type of business policy.
The house (depending on the title) and IRA's/401ks may be protected from creditors but their income is totally exposed to a judgement.

Many civil judgements require ongoing payments to satisfy the judgement. Bummer to loose half your income.
Stay the course!
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FBN2014
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Re: Do my adult children need umbrella liability insurance?

Post by FBN2014 »

tashnewbie wrote: Thu Jun 30, 2022 8:05 am Depending on state laws, much of your children's net worth may be protected from creditors, such as the home and retirement accounts (e.g., 401k, IRA). That means there may be very little that would be at risk in a judgment against them. However, as others have mentioned, umbrella insurance is pretty cheap (because claims are relatively rare), so it'd be super easy for them to get it and have some peace of mind. They should review the policy documents carefully to see what would and would not be covered. A standard umbrella policy may not cover certain business related claims, so they'd need to explore other insurance options for that, if it's something they want.

However, they should consult with their auto insurer about the business use of their vehicles. They may need to update their current policy or get some type of business policy.
Are you referring to the homestead exemption in a bankruptcy?
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tashnewbie
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Re: Do my adult children need umbrella liability insurance?

Post by tashnewbie »

FBN2014 wrote: Thu Jun 30, 2022 2:42 pm
tashnewbie wrote: Thu Jun 30, 2022 8:05 am Depending on state laws, much of your children's net worth may be protected from creditors, such as the home and retirement accounts (e.g., 401k, IRA). That means there may be very little that would be at risk in a judgment against them. However, as others have mentioned, umbrella insurance is pretty cheap (because claims are relatively rare), so it'd be super easy for them to get it and have some peace of mind. They should review the policy documents carefully to see what would and would not be covered. A standard umbrella policy may not cover certain business related claims, so they'd need to explore other insurance options for that, if it's something they want.

However, they should consult with their auto insurer about the business use of their vehicles. They may need to update their current policy or get some type of business policy.
Are you referring to the homestead exemption in a bankruptcy?
Not just in bankruptcy. Depends on state law. But as someone mentioned above, your kids' income could be garnished to pay a judgment. Best to cover their bases with umbrella insurance and other appropriate insurance for the business.
miamivice
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Re: Do my adult children need umbrella liability insurance?

Post by miamivice »

marcopolo wrote: Wed Jun 29, 2022 12:13 pm They serve two functions, helps protect your assets (including future income) against liability claims, but also provide payment to injured parties when you are at fault.
Curious. Protecting future income is often stated here as justification for a umbrella policy.

However, do people normally have garnishments against future income levied against them by the courts for the type of claim that would be covered by an umbrella insurance policy?

I remember that OJ Simpson had a garnishment levied against him as part of the civil lawsuit, to prevent him from making money from a book deal over the crime that he may or may not have committed. However, an umbrella policy would not have protected him.

In the case of a regular car accident, I would see it as a stretch for a judge to claim not only assets that the at fault party had as of the day of the accident but also claim future income. For example...college student studying engineering causes an at fault accident due to failure to yield the right of way. Would a judge reasonable garnish 30 years of future wages? I think that would be a stretch.

In the case of more intentional or purposeful or highly negligent crimes, perhaps, such as drunk driving. But those are not covered by umbrella policies anyway.
Luke Duke
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Re: Do my adult children need umbrella liability insurance?

Post by Luke Duke »

HMSVictory wrote: Thu Jun 30, 2022 8:19 am Umbrella policies are pretty cheap - I pay $300 a year for $2M.
Don't forget that your insurer will make you have maximum coverage on your car insurance before they will write you an umbrella policy. So that $300/yr may be closer to $800-1000/yr.
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Re: Do my adult children need umbrella liability insurance?

Post by HMSVictory »

Luke Duke wrote: Fri Jul 01, 2022 12:06 pm
HMSVictory wrote: Thu Jun 30, 2022 8:19 am Umbrella policies are pretty cheap - I pay $300 a year for $2M.
Don't forget that your insurer will make you have maximum coverage on your car insurance before they will write you an umbrella policy. So that $300/yr may be closer to $800-1000/yr.
I pay $1250 per year for my entire auto insurance policy for 2 cars.

The higher liability limits are minor costs (like $50 per car) and I would carry the higher limits anyway.
Stay the course!
safari
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Re: Do my adult children need umbrella liability insurance?

Post by safari »

HMSVictory wrote: Thu Jun 30, 2022 8:19 am
FBN2014 wrote: Mon Jun 27, 2022 9:01 pm My daughter and son in law are 35. Net worth about 1.3 million most of that is home equity. Combined income is 90-100K. Both of them are self employed and drive a lot. Should they get an umbrella liability policy? How much? The businesses are as sole proprietors as they file schedule C forms. Would the umbrella policy cover them if they were sued because of an accident while driving during the workday or is a special endorsement needed for that?
Yes they should have an umbrella liability policy. They have enough of a net worth to make suing them profitable if the worst was to happen.

Car crashes are the #1 trigger for liability claims.

They need (2) - one for personal and one for the company (if its one LLC or Corp). Umbrella policies are pretty cheap - I pay $300 a year for $2M.
I was quoted $600 for $1M and $1,000 for $2M. This is in CA. A lot more than I was expecting. Apparently the costs of Umbrella insurance have gone up quite a bit over the last few years. According to my agent, Umbrella policies a now a loss leader for the insurance company because more people are making claims.
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HMSVictory
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Re: Do my adult children need umbrella liability insurance?

Post by HMSVictory »

safari wrote: Fri Jul 01, 2022 4:53 pm
HMSVictory wrote: Thu Jun 30, 2022 8:19 am
FBN2014 wrote: Mon Jun 27, 2022 9:01 pm My daughter and son in law are 35. Net worth about 1.3 million most of that is home equity. Combined income is 90-100K. Both of them are self employed and drive a lot. Should they get an umbrella liability policy? How much? The businesses are as sole proprietors as they file schedule C forms. Would the umbrella policy cover them if they were sued because of an accident while driving during the workday or is a special endorsement needed for that?
Yes they should have an umbrella liability policy. They have enough of a net worth to make suing them profitable if the worst was to happen.

Car crashes are the #1 trigger for liability claims.

They need (2) - one for personal and one for the company (if its one LLC or Corp). Umbrella policies are pretty cheap - I pay $300 a year for $2M.
I was quoted $600 for $1M and $1,000 for $2M. This is in CA. A lot more than I was expecting. Apparently the costs of Umbrella insurance have gone up quite a bit over the last few years. According to my agent, Umbrella policies a now a loss leader for the insurance company because more people are making claims.
What is your net worth / income?

More claims = more reason to have it. Society is becoming more litigious.
Stay the course!
Nowizard
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Re: Do my adult children need umbrella liability insurance?

Post by Nowizard »

Why not do it? The cost can probably be deducted as a business expense, and it is inexpensive. A 1M policy bundled is about $150 annually in our area.

Tim
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