I’ve heard of these, off and on. They provide much higher liability than a typical homeowner’s or auto policy would: those typically cap out at a few hundred thousand, while an umbrella policy would be a million or two or more.
We met with a financial planner the other day and along with the preliminary stuff, she suggested we consider such a policy (especially since Dweezil will soon be getting his driver’s license). We have sufficient assets (nothing extraordinary, just the kids’ college funds and the home equity) to protect that it might be worthwhile.
Anyone out there have one? Why did you get it? What’s the cost like? Have you ever had to invoke it and if so, how did that go?
I have one. I don’t remember the cost, but it is not too bad. It is really to protect you in case of an utter disaster where you would get sued for a lot. We’ve never had to use it, I’m happy to say.
Our agent told us that the first rule of umbrella policies is to not tell anyone you have an umbrella policy - to avoid anyone seeing you as having deep pockets.
it’s very inexpensive for a lot of coverage. Especially important to get an umbrella that has UM/UIM coverage, as getting creamed by an uninsured driver is a terrible thing.
ETA: Not all carriers offer this. Ask around and find one that does.
It is relatively cheap if memory serves. You usually only have to use it if the amount exceeds your normal policy limits. If you break someone’s foot with your car - regular insurance takes care of it up until its limit - the umbrella only kicks in over that amount - or for other things.
Clinton had one (or two) that paid for at least some of the whole Paula Jones thing. OJ had one that paid for much of his criminal trial.
The recommendation is usually to get enough to cover your assets. This never made sense to me. You get a legal judgement against you for $2 million - you only have 500k in assets - there will still be a judgement of $1.5 million outstanding. I think the difference in cost between 1/2/5 million was minimal. Good piece of mind.
We got it because adult kid has gone back to school with one of our cars and is living in our rental home. If anyone sues her, they will find her penniless and come after our assets - which are now protected.
Check with a local attorney to back this up (you might live in a weird place): If your kid is 18+ the only way to get sucked into an action against her is under a negligent entrustment alegation. Those almost never stick.
ALSO: read your policy and check with your agent to make sure a non-resident relative meets the definition of an “insured” under your PLUP policy. If she does not meet that definition, YOU will have coverage for the negligent entrustment (which is usually a paper tiger) and SHE will have no coverage for the actual tort that is getting her sued. Your rental dwelling does not count as YOUR residence, especially if she pays you rent to live there. Seriously, explore the hell out of this or you might get an unpleasant surprise. Rather than assume this won’t be a hurdle I would highly recommend one of the following: Either add her as a NAMED insured on the PLUP, or get her her own PLUP.
Word. Not available in all states. I chose that option when I got mine but it’s not available on new business anymore–I’m grandfathered.
COST: I pay $28/month. For just the liability coverage it would be about half that. When my kids start driving I expect it to about double (and the car insurance to go up $70-$100/month).
WHY: I handle car insurance claims for a living. Maybe 75% of cases are easily paid with state minimum limits. But every now and then (maybe 3% of cases) someone really screws up and kills/mostly kills someone and the exposure is well-beyond $250,000.
Now, in reality, in the last 10 or so years I have never paid my policy limits without getting a release for my insured. Which means if all we had was a $25,000 policy to cover a fatality my customers have never had to come out of pocket or sell their home to scrounge up the balance of a monster claim. There are two reasons for this. First, people with tiny policies generally don’t have a lot of assets, so there’s no point in suing them because you want more than their policy can cover. Yeah, you can sue them, and you can be awarded that massive judgement, and you’ll never see a dime of it because you can’t get blood from a rock. Second, people who develop substantial assets tend to be financially savvy enough to understand the importance of protecting them with adequate insurance.
That meshes with the attitude that some have that they will get just the legally-mandated minimum insurance coverage in their state, because they own nothing and so they’re really untouchable. Nothing to lose, therefore nothing to protect.
Still, a lawsuit for a higher amount could make life pretty unpleasant for a while, not to mention: they might get a raise / come into money next year while that judgement is outstanding…
Not to mention with an umbrella policy you are buying a better lawyer.
Let’s say you have state min insurance, you run a red light and hit a school bus full of kids, who are all injured/ killed.
You get served with 20 lawsuits. Your insurance company will write a check for policy limits so fast your head will spin.
You still have a shitload of lawsuits and no defense lawyer.
If on the other hand the company is on the hook for 5 million they will get a serious lawyer for you.
I looked into it, but didn’t do it. I’m a single person in a rented apartment, whose primary assets are in tax-deferred retirement accounts. My agent said I’d have to increase my automotive liability to 250K/500K and the umbrella policy would cost about $300 on top of what I’m already paying for auto and renters insurance. So I didn’t buy the umbrella policy, but it might make sense for a small businessperson, homeowner or parent.
As an aside: I’d been thinking something like that as well (though as noted, we do have some other savings plus the house).
Until a few years ago, IRAs were considered fair game for lawsuits / bankruptcy, while 401(k)s were not; as a result, rolling over a 401(k) into an IRA could turn into a Very Bad Decision.
I gather there’s somewhat greater protection now, though some of those assets could still be at risk (e.g. they’d leave you enough to not live on the streets but they might take some). At least so I understand from consulting with G. O. Oogle, Esq., Attorney At Law ;).
This was particularly interesting to me, as we’re in the process of doing a rollover (former company is dissolving and staff is being asked to roll their money out of the plan). That’s what prompted the financial planner visit that raised the umbrella insurance question.
