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Message
re: Personal Umbrella
Posted on 2/19/25 at 4:51 pm to GeauxldMember
Posted on 2/19/25 at 4:51 pm to GeauxldMember
Haha I was wondering when someone would comment on that
0
Posted on 2/19/25 at 8:39 pm to lynxcat
quote:
Related but not the exact OP question. How are you deciding the amount of umbrella coverage?
Feels pretty simple to me - I’m insuring my assets that are uninsured by my current liability policies (home/auto). I don’t mind rounding up so to speak as most policies are sold in $1mm increments in my experience, and I anticipate future earnings to get me into that range soon enough. Other than that there is really no need to be over insured on anything. All of the limits discussed in this thread are relatively cheap for a reason - the likelihood of a payout where umbrella has to step in is so incredibly small for the average person. It’s a peace of mind decision but there is not rational reason to have $5mm in coverage if you have assets worth $500k, for example.
Posted on 2/19/25 at 9:07 pm to notsince98
Absolutely teenage drivers make it go up- paying over 1000 for 1 mil coverage- 2 teenage sons. We really needed 2 mil but that was 1700
Posted on 2/20/25 at 2:50 am to Lsukinesalum2001
quote:
Absolutely teenage drivers make it go up- paying over 1000 for 1 mil coverage- 2 teenage sons. We really needed 2 mil but that was 1700
So you’ve got a need for another million in coverage but balked at $60/month?
Posted on 2/20/25 at 6:59 am to lynxcat
It really just depends on your situation. Umbrella coverage should be calculated based on the amount of a likely loss/liability, not your net worth or the value of your assets.
Insurance coverage generally provides the policyholder with indemnity and defense. One purpose of an umbrella policy is to try to shield your assets against an excess judgment, which is just a judgment in a legal proceeding that exceeds the available insurance coverage. In other words, if you cause a $2m loss but only have $1m in coverage, the person you hurt will likely pursue policy limits then try to obtain an excess judgment by seizing your assets. This is rare and generally plaintiff attorneys aren’t quick to pursue excess judgments against individuals, but it does happen. To that end, you could do some math on your net worth, the likelihood of a loss big enough to create risk of an excess judgment, and do a cost/benefit on the premium.
Another purpose - in my mind, the biggest purpose - of an umbrella is to give a carrier a somewhat vested interest in your financial well-being. You want them to not think twice about defending you to the fullest extent and umbrella premiums are a drop in the bucket compared to legal fees should you ever need them. I have a $3m policy which, in my mind, is enough coverage such that my carrier could afford good attorneys to defend me in the event I needed it. I also have an endorsement in my policy (requested and paid for) that allows me to participate in legal counsel selection. I would have $5m if the premiums weren’t so high in Louisiana.
I would recommend purchasing your umbrella policy from the same carrier that your HOI/auto is with, if possible. With a third party carrier, there is a possibility of contractual problems with a third party carrier vs your HOI/auto carrier which makes your umbrella policy not follow form. I’ve never actually seen that happen but I have read about it and carriers are ALWAYS looking for a way out of paying a claim. I don’t want to give them any help.
In my opinion, for most people, $1m is insufficient.
ETA: here’s a link with a helpful calculator.
LINK
Insurance coverage generally provides the policyholder with indemnity and defense. One purpose of an umbrella policy is to try to shield your assets against an excess judgment, which is just a judgment in a legal proceeding that exceeds the available insurance coverage. In other words, if you cause a $2m loss but only have $1m in coverage, the person you hurt will likely pursue policy limits then try to obtain an excess judgment by seizing your assets. This is rare and generally plaintiff attorneys aren’t quick to pursue excess judgments against individuals, but it does happen. To that end, you could do some math on your net worth, the likelihood of a loss big enough to create risk of an excess judgment, and do a cost/benefit on the premium.
Another purpose - in my mind, the biggest purpose - of an umbrella is to give a carrier a somewhat vested interest in your financial well-being. You want them to not think twice about defending you to the fullest extent and umbrella premiums are a drop in the bucket compared to legal fees should you ever need them. I have a $3m policy which, in my mind, is enough coverage such that my carrier could afford good attorneys to defend me in the event I needed it. I also have an endorsement in my policy (requested and paid for) that allows me to participate in legal counsel selection. I would have $5m if the premiums weren’t so high in Louisiana.
I would recommend purchasing your umbrella policy from the same carrier that your HOI/auto is with, if possible. With a third party carrier, there is a possibility of contractual problems with a third party carrier vs your HOI/auto carrier which makes your umbrella policy not follow form. I’ve never actually seen that happen but I have read about it and carriers are ALWAYS looking for a way out of paying a claim. I don’t want to give them any help.
In my opinion, for most people, $1m is insufficient.
ETA: here’s a link with a helpful calculator.
LINK
This post was edited on 2/20/25 at 11:35 am
Posted on 2/20/25 at 7:50 am to bluemoons
quote:
Umbrella coverage should be calculated based on the amount of a likely loss/liability, not your net worth or the value of your assets.
I’m not sure how any individual would be able to even do this. If you’re more prone to a likely loss, it will generally be incorporated in your premiums, and vice versa if you’re not.
Your assets have to be the driving factor IMO.
Posted on 2/20/25 at 7:56 am to slackster
It’s not really that difficult, though it’s not necessarily formulaic. If you are a parent with 3 teenage drivers and one of them isn’t capable of competently operating a golf cart, your risk of loss is on one end of the spectrum. If you’re a work from home couple who never really leaves their house and doesn’t ever have people over, you’re at the other end of the spectrum.
I’ve never heard a reasonable argument for a connection between asset value and umbrella coverage, though many people seem to connect the two. I’m not saying it’s wrong to use that as a rule of thumb - I’m just saying it doesn’t really make sense from a legal risk/coverage standpoint.
I’ve never heard a reasonable argument for a connection between asset value and umbrella coverage, though many people seem to connect the two. I’m not saying it’s wrong to use that as a rule of thumb - I’m just saying it doesn’t really make sense from a legal risk/coverage standpoint.
Posted on 2/20/25 at 11:05 am to bluemoons
Bluemoons is correct.
Picking your liability protection based on your assets presumes that you can dictate to the plaintiff how much his lawyers should sue you for.
Lawsuits don't work that way.
Is basing coverage off of assets a shortcut to determining a figure? Sure.
But it is not based in any reality (unless the defendant gets a say in how much they can be sued for)
Picking your liability protection based on your assets presumes that you can dictate to the plaintiff how much his lawyers should sue you for.
Lawsuits don't work that way.
Is basing coverage off of assets a shortcut to determining a figure? Sure.
But it is not based in any reality (unless the defendant gets a say in how much they can be sued for)
Posted on 2/20/25 at 11:16 am to meansonny
Retired trial lawyer here. A part of the reason I’m retired is due to umbrella “coverage”.
You taylor your coverage to your risk/exposure. Anybody that has excess coverage “just in case” isn’t doing it right. Lots of ways to protect assets, businesses etc without an “umbrella” and it reduces, isolates your exposure.
OP: find a reputable business attorney and buy an hour of his time.
You taylor your coverage to your risk/exposure. Anybody that has excess coverage “just in case” isn’t doing it right. Lots of ways to protect assets, businesses etc without an “umbrella” and it reduces, isolates your exposure.
OP: find a reputable business attorney and buy an hour of his time.
Posted on 2/20/25 at 11:33 am to Lakeboy7
quote:
You taylor your coverage to your risk/exposure. Anybody that has excess coverage “just in case” isn’t doing it right. Lots of ways to protect assets, businesses etc without an “umbrella” and it reduces, isolates your exposure.
Agreed here as well. I'm an attorney as well and for the last 5 years, I've been the GC for a network of businesses. Part of that is managing a pretty complicated insurance/risk map. Prior life involved a lot of business litigation, along with some plaintiff and defense work.
There are several ways to skin a cat, but IMO the most important thing to consider when evaluating any type of insurance coverage is trying to pin down your exposure with a reasonable degree of certainty. Once you figure that out, look into ways to silo or isolate segments of the exposure. Once you've got that done, insure all of it.
Posted on 2/20/25 at 4:03 pm to bluemoons
I've seen folks with $1M umbrella sued for almost $3M.
The jury/judge doesn't know what the defendent's limits are.
If you have any expertise to share, then please offer it.
The jury/judge doesn't know what the defendent's limits are.
If you have any expertise to share, then please offer it.
Posted on 2/20/25 at 7:48 pm to mule74
quote:Governor Landry is gonna get right on that.
I assume that you area in Louisiana, which is a judicial hell hole.
Posted on 2/20/25 at 7:54 pm to bluemoons
How can you begin to “pin down your exposure” on an unknown risk?
I have no probabilities to assign on size of unknown lawsuit to protect against.
I also don’t see why the value of my assets equates to the value of the umbrella policy.
I’ve got $500K CSL for auto and $1M umbrella currently. What’s the basis for whether that is enough or not? If my assets exceed $1.5M then go get more coverage? I don’t follow that logic.
I have no probabilities to assign on size of unknown lawsuit to protect against.
I also don’t see why the value of my assets equates to the value of the umbrella policy.
I’ve got $500K CSL for auto and $1M umbrella currently. What’s the basis for whether that is enough or not? If my assets exceed $1.5M then go get more coverage? I don’t follow that logic.
Posted on 2/20/25 at 10:42 pm to lynxcat
quote:
How can you begin to “pin down your exposure” on an unknown risk?
Exactly. The insurance company does that for you plus their profit margin. If you’re high risk you’ll pay appropriate premiums. If you’re low risk it will follow accordingly.
If we’re going to get into the actual math of the whole thing we’re always going to end up deciding to not buy insurance at all.
Posted on 2/20/25 at 10:45 pm to lynxcat
quote:
How can you begin to “pin down your exposure” on an unknown risk?
quote:
What’s the basis for whether that is enough or not?
I'm not really sure what you're asking here. The point that I've tried to make with my posts in this thread is that you cannot equate the value of an umbrella policy to the value of your assets. The two are unrelated. The appropriate amount of umbrella coverage relates to whatever personal exposure you've got, which is a question that only you can answer.
Posted on 2/20/25 at 10:47 pm to meansonny
quote:
I've seen folks with $1M umbrella sued for almost $3M.
The jury/judge doesn't know what the defendent's limits are.
If you have any expertise to share, then please offer it.
Also not sure what you're asking for here. A jury in a jury trial is not bound to render a decision based on a defendant's insurance coverage limits, regardless of whether they're aware of same.
Posted on 2/20/25 at 10:51 pm to slackster
quote:
Exactly. The insurance company does that for you plus their profit margin. If you’re high risk you’ll pay appropriate premiums. If you’re low risk it will follow accordingly.
If we’re going to get into the actual math of the whole thing we’re always going to end up deciding to not buy insurance at all.
You guys are missing the point, and maybe that's because I'm not adequately explaining it. There is absolutely zero correlation between the value of your assets or your net worth and the amount of excess insurance coverage you should purchase. The value of your insurance coverage should directly correlate to your exposure, which is something that only you can put a value on. There is no reasonable logic whatsoever that supports the position that "I've got $1.5m in assets, and therefore I should have $2m in insurance coverage." Your asset value is irrelevant because your exposure controls the day.
Risk is ALWAYS unknown, to a certain extent. You do the best you can with the information you've got to make an educated decision.
Posted on 2/20/25 at 11:22 pm to bluemoons
quote:
Your asset value is irrelevant because your exposure controls the day.
I don’t think I could disagree with this more on essentially any insurance outside of maybe health insurance.
I understand your point about liability being the concern, not necessarily asset protection, but the two go hand in hand. If you don’t own shite, being sued for $100k or $10mm probably doesn’t change your life much. If you’re worth $100mm you can reasonably argue you don’t need any umbrella insurance.
I’m not suggesting you just buy umbrella coverage to match your net worth or something that simple, but it’s still the biggest factor in the decision IMO. If you’re worth a decent amount of money, you’re in no man’s land where you can’t self insure your liability risk but you’ve got too much money to just file bankruptcy and start over either (I’m simplifying here).
Your individual risk factors that you discuss are going to be baked into your premium, especially on anything north of $2mm in coverage.
Posted on 2/21/25 at 7:17 am to slackster
Assume you’re hit with a $5m judgment.
Your net worth is $1m. Whether you have $2m in coverage, or $4m in coverage, you’re losing everything you own and filing for bankruptcy.
Your net worth is $2m. Whether you have $2m in coverage or $3m in coverage, you’re losing everything you own filing for bankruptcy.
The exercise can be run 100 different ways. The end result is that you have lost everything you own and filed for bankruptcy because you have miscalculated your exposure. Calculating your coverage based on the value of your assets (really should be saying net worth to support the point you’re trying to make) means nothing when your exposure exceeds your coverage. You’re losing everything you own anyway. The question you should be asking yourself is “how much of my net worth is exposed to creditors in the event of a judgment?” Once you start thinking that way, you are beginning to calculate exposure.
Your net worth is $1m. Whether you have $2m in coverage, or $4m in coverage, you’re losing everything you own and filing for bankruptcy.
Your net worth is $2m. Whether you have $2m in coverage or $3m in coverage, you’re losing everything you own filing for bankruptcy.
The exercise can be run 100 different ways. The end result is that you have lost everything you own and filed for bankruptcy because you have miscalculated your exposure. Calculating your coverage based on the value of your assets (really should be saying net worth to support the point you’re trying to make) means nothing when your exposure exceeds your coverage. You’re losing everything you own anyway. The question you should be asking yourself is “how much of my net worth is exposed to creditors in the event of a judgment?” Once you start thinking that way, you are beginning to calculate exposure.
Posted on 2/21/25 at 9:37 pm to bluemoons
That is my point.
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