Umbrella policies are cheap, so there is no reason not to.

In fact, what I have done is reduce the liability on the autos and the home as much as the insurance company will let me (which still ends up as $500K on the autos and $250K on the home), and pick up the slack with the Umbrella policy.  The liability coverage under the Umbrella policy is cheaper than it would be under the home insurance and auto insurance, and you can get more coverage with an Umbrella policy.

 $5 Million coverage with an Umbrella policy is what, $700 per year or something?  Might as well do it.

 

 

Umbrella insurance is just one more "layer" of protection.  Some take additional steps to protect their assets by setting up family partnerships (LP). If set up and utilized correctly, assets contributed to these vehicles are often untouchable by creditors.

And of course some people open offshore accounts to protect cash, although thats an iffy proposition.

But like duanej mentioned, I've never understood how an umbrella really protects you from a major lawsuit since the policy is capped out (at $1M or $5M or whatever).  A plaintiff could always try to sue for more.

-Joe

I have it via  AAA.   $1 MM in coverage, if I recall.   The premium is about $100 per annum.   Less than most people spend for gasoline in a single month.

If you have assets, don't know why you wouldn't have umbrella coverage.

There are a couple of reasons a plantiff might not sue for more.  One, depending on the state, Tort reform may limit the amount that the plantiff can claim depending on the circumstance.  Second, as Duane mentioned, the more insurance you have, the more the insurance company will be willing to fight for you which means high priced lawyers. Thus, you have a better chance of winning or reducing the settlement. 

 

 

Thank you everyone. Seems like the "correct" amount is a function of how much of your assets can you afford to put at risk balanced against the cost of insurance. Some people may elect to insure 100% of their assets (especially as you approach retirement) while others may insure less.

Insuring up to your asset level is a common misperception.  You can be sued for more than the amount of the coverage, which then exposes your assets.

Umbrella insurance has two advantages: financial protection and legal coverage, both provided by the insurance company. Personal (non-business) coverage should be sufficient to deal with the typical or average lawsuit in your region. I suggest to my family members to start at $1M and then move up to $5M once their children move out.

Things that make an umbrella more expensive - certain breeds of dog, driving age children living at home, trampolines, swimming pools.  If you have none of these, umbrella is quite affordable.

 

Michael