The importance of enough, and of a good Umbrella Policy

**Greebo** · 12-29-2009, 12:54 PM

The following is an excerpt from a post on a different forum:

A short history: in 2004 my 17 year old son bought a Chevy Blazer. Our insurance agent encouraged me to register it under my name so it could be added to our existing insurance policy. He said if it was registered in my underage son's name he would have to get his own (more expensive) policy. So we did. Minimum coverage - only $50k bodily injury coverage.

About nine months later, two months after my son turned 18, he got into a minor accident. He rear-ended a Volkwagon Beetle in heavy traffic. The damage to Beetle was a cracked bumper, and no damage to his truck.

Two years later, we're sued by the passenger in the Beetle. She claims she had shoulder damage in the accident. Our insurance company handles everything and it eventually goes to binding arbitration. All the while the lawyer for our insurance company tells us there is nothing to worry about. I just found out that she was awarded about $172,000. Of course, our insurance will only pay $50k.

The lawyer says the insurance company is going to pay for him to keep working with us, even though after they write the $50k check they're legally finished.

He says the plaintiff is now suing her friend's insurance company for $112,000 to be paid under her under-insured motorist coverage. He said there is a chance that the other insurance company may come after us for that money.

While $50,000 in personal liability coverage isn't enough - what I really want to talk about in regards to this tragic abuse of the law is the cost effectiveness of an Umbrella Policy.

What is an Umbrella Policy?
An Umbrella policy is a policy which kicks in after your primary insurance is exhausted. It can be applied to any other policy provided by your carrier.

In our case, for example, we have, all with the same carrier:
Homeowners Insurance
Auto Insurance on 2 cars
Landlord Insurance

Now each of those policies has certain limits. So if someone slips and falls on our sidewalk in front of our rental and sues us for half a million dollars, our landlord policy will only cover $300,000 (if they win). Now since the insurance company will only pay $300,000, that leaves US on the hook for $200,000. We have paid for cars, money in the bank, and at least ONE property with some equity. Such a judgment would cost us all of that.

This is where the Umbrella comes in. Our policy covers us for $1,000,000 in liability on all of our policies. (I don't remember if that makes it $1.3 M or just $1.M total). So in the same case, now instead of us being on the hook for $200,000, the insurance company has the problem. Further, the Ins. company is going to fight TOOTH AND NAIL to avoid paying out $1,000,000 - so they'll be the ones footing the legal fees and everything else, on our behalf.

Who should get it?
Anyone with a net worth > $0.00. If you are worth *anything*, you run the risk of losing it all if you are ever sued, whether the suit is legit or otherwise.

I can't afford it!
Listen, this stuff is DIRT CHEAP! If you have any assets you want to protect, you can't do BETTER than pay this pittance! Seriously!!! $1,000,000 coverage costs us $256.88 for a full year. That is 1 penny for every $3,892 of coverage. You can't get cheaper protection!

**mauimagic** · 12-29-2009, 01:02 PM

Mahalo for sharing this Greebo. We bought our million dollar umbrella policy 18 years ago when I started teaching - don't remember why that was the catalyst - but at least we did it. Best money invested for peace of mind. We've never needed it, but I am sure am glad it's there.

**pollypurebred39** · 12-29-2009, 01:13 PM

Thanks Greebo, I've often wondered what we'd do if we were sued beyond what our insurance pays out. Indulge me for a minute and explain just how I get this coverage, please.

**Greebo** · 12-29-2009, 01:34 PM

Originally Posted by pollypurebred39

Thanks Greebo, I've often wondered what we'd do if we were sued beyond what our insurance pays out. Indulge me for a minute and explain just how I get this coverage, please.

You call up your existing insurance broker and tell them you'd like to get an insurance policy. All of the major carriers carry them.

It's in your best financial interest usually to go with a single carrier anyway - you get discounts for having home and car under the same roof, so to speak - and then you only need one umbrella policy for all of the other policies.

**pollypurebred39** · 12-29-2009, 01:45 PM

Our house is bundled with our mortgage. Our car is with an agent and our personal is with our accountant. So our accountant?

**Greebo** · 12-29-2009, 01:49 PM

Originally Posted by pollypurebred39

Our house is bundled with our mortgage. Our car is with an agent and our personal is with our accountant. So our accountant?

Your house is "bundled" with your mortgage?

You mean you pay your homeowners policy via your mortgage, right? That doesn't matter - you can change policy holders.

The law is that the lenders can only Require you to HAVE insurance, not to have THEIR insurance.

And what is your "personal" insurance?

**pollypurebred39** · 12-29-2009, 01:58 PM

Yes, it's part of the mortgage payment.

Personal? Hmmm...I'll have to check on that, drawing a blank. Must be my sometimers.

**Greebo** · 12-29-2009, 02:01 PM

Originally Posted by pollypurebred39

Yes, it's part of the mortgage payment.

Yeah then you can change it anytime you want.

Personal? Hmmm...I'll have to check on that, drawing a blank. Must be my sometimers.

Huh?

**pollypurebred39** · 12-29-2009, 02:04 PM

Drawing a blank on who is our carrier for personal. Brain like a sieve. Got to check records in garage, too cold out there now though.

**mama2James** · 12-29-2009, 02:13 PM

Thanks for this! I will have to ask USAA about it. We have our auto insurance and homeowners through them.

**NcsstyBrdsIngnty** · 12-29-2009, 02:18 PM

Greebo thank you for sharing! I'm lost on insurance stuff - and our agent was pushing an umbrella plan when we bought the house, I didn't think much of it then but am now.

Yet another thing I need to get on my list for the New Year!

**itlw8** · 12-29-2009, 02:27 PM

thanks for the reminder ds has his own ins but I don't think he ever went and took his dad off the title I think they need to make a date and go do that. then dh can head over and take care of the umbrella AND check the rate for car ins while he is at it.

**sabrelvssammy** · 12-29-2009, 03:23 PM

our umbrella policy for 1 million in coverage is only $134 a year...so it can vary greatly ....(although there have been many many cases awarded in excess of 1 million).....

another food for thought...'IF' you were found at fault for an 'incident' you 'could' possibly be sued not only for everything you have now...BUT possibly future earnings....(for the rest of your life)....and people....those that love to sue are out there...and until there are limits put on this craziness anything can and does happen....

**lisaflex** · 12-29-2009, 05:05 PM

cant image not having one! makes you sleep better at night.....you never know when you may need it. it is cheap also! we think of it as a necessity

**frugalfranny** · 12-29-2009, 05:17 PM

Thanks for the reminder to check this stuff out.......

I shopped for car ins. last fall and have been shopping for H.O. most recently - policy due end of Jan. I will be changing and saved myself over $70....and that was on homeowners only.

Side note - only the second time is many, many years of insuring that it has benefited me to carry car and house with same carrier. Usually has been that one will be offset to cover the discount on the other........never has it been both cheaper.