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Do you have a catastrophic liability umbrella policy?


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It's not something I thought about before but now that I am working in a law firm that deals with personal injuries and torts, I am 100% positive I am going to add this to our insurance plan. A million dollar umbrella plan for catastrophes that happen with your home, auto or person can be had for $120 or so per year. That seems wise. 

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24 minutes ago, Trilliumlady said:

Call me the dunce of the bunch, but why would this be extra important in addition to current life insurance?

It has nothing to do with life insurance. It’s for claims or lawsuits that exceed your auto or homeowner’s insurance.

https://www.investopedia.com/articles/personal-finance/040115/how-umbrella-insurance-works.asp
 

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6 hours ago, Trilliumlady said:

Call me the dunce of the bunch, but why would this be extra important in addition to current life insurance?

As Frances said, it is totally separate from life insurance. It is to protect your owned assets if you are in a legal battle whose damages value exceeds your insurance limits. 

Don’t feel dumb; I didn’t know about this either. 

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We have friends who were involved in a minor accident. At some point the plaintiff discovered they had an umbrella policy and somehow the amount they were sued for was magically close to the policy limit. It bothered their rule-following hearts, but I guess that is how the system works.

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2 hours ago, SusanC said:

We have friends who were involved in a minor accident. At some point the plaintiff discovered they had an umbrella policy and somehow the amount they were sued for was magically close to the policy limit. It bothered their rule-following hearts, but I guess that is how the system works.

Yes, that may happen but what is worse for us is my dh has a retirement check and good income.  Without this, I could easily see them going after us for future earnings and retirement.

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5 hours ago, SusanC said:

We have friends who were involved in a minor accident. At some point the plaintiff discovered they had an umbrella policy and somehow the amount they were sued for was magically close to the policy limit. It bothered their rule-following hearts, but I guess that is how the system works.

Yes, I can see it happening that way, but better that then the opponents finding out your house is mortgage-free, worth upwards of $700k, and then - poof! Magically increased demand for settlement. At least tapping the umbrella policy makes it make sense. 

Anyway, I am thinking of getting an umbrella for $1-3 million. It would be pretty hard for a lawyer to trump up a claim in the millions. 

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25 minutes ago, Bambam said:

The quotes we've gotten have been much more than $120/year. Much more. 

 

Do you have home an auto bundled under one carrier? Do you have minimal limits on your regular policies? Those are things that I guess could change your quote. Or else if you have considerable exposure that makes you a high liability risk. 

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6 minutes ago, Quill said:

Do you have home an auto bundled under one carrier? Do you have minimal limits on your regular policies? Those are things that I guess could change your quote. Or else if you have considerable exposure that makes you a high liability risk. 

I think state laws can make a difference too. I have heard they do with auto rates.

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1 hour ago, Quill said:

Do you have home an auto bundled under one carrier? Do you have minimal limits on your regular policies? Those are things that I guess could change your quote. Or else if you have considerable exposure that makes you a high liability risk. 

I believe the deductibles you carry and what coverage you have can change the quote. Yes, we do have auto & home with one carrier. 

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6 hours ago, Quill said:

Yes, I can see it happening that way, but better that then the opponents finding out your house is mortgage-free, worth upwards of $700k, and then - poof! Magically increased demand for settlement. At least tapping the umbrella policy makes it make sense. 

Anyway, I am thinking of getting an umbrella for $1-3 million. It would be pretty hard for a lawyer to trump up a claim in the millions

If there's a car wreck resulting in a life-changing injury requiring intensive or long-term medical care, or the death of a breadwinner, it isn't so far out of the realm of possibility to face a million dollar-plus lawsuit, esp. if fault is clear (it happens). In terms of health care costs, a million dollars isn't what it used to be, unfortunately. But I've been told anecdotally that if you have an umbrella policy for $1 million or more, your insurance company is much more likely to have their lawyers fight for your/their side, vs. them just paying out on a regular (small) auto policy and walking away, which leaves you as an individual in a lurch. That makes sense to me. Very smart to have good umbrella coverage if you can swing it at all. Especially if you have a young/inexperienced driver in your family, as we do. (Putting kid on their own policy and/or having their car in kid's name doesn't cut it, at least in my state. They look at who supports the kid and pays their living expenses too, and come after that person as the "responsible" individual.)

Edited by TarynB
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4 hours ago, TarynB said:

If there's a car wreck resulting in a life-changing injury requiring intensive or long-term medical care, or the death of a breadwinner, it isn't so far out of the realm of possibility to face a million dollar-plus lawsuit, esp. if fault is clear (it happens). In terms of health care costs, a million dollars isn't what it used to be, unfortunately. But I've been told anecdotally that if you have an umbrella policy for $1 million or more, your insurance company is much more likely to have their lawyers fight for your/their side, vs. them just paying out on a regular (small) auto policy and walking away, which leaves you as an individual in a lurch. That makes sense to me. Very smart to have good umbrella coverage if you can swing it at all. Especially if you have a young/inexperienced driver in your family, as we do. (Putting kid on their own policy and/or having their car in kid's name doesn't cut it, at least in my state. They look at who supports the kid and pays their living expenses too, and come after that person as the "responsible" individual.)

That’s not what I’m saying. I was responding to someone who said a “minor accident” suddenly turned into one that magically tapped the umbrella limits. So, it was trumped up. 

Of course a catastrophic accident can result in a million-dollar claim; that’s why I put up this post in the first place. I now see what happens when someone with policy minimums is catastrophically affected. I didn’t know about that previously. 

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13 hours ago, Quill said:

Yes, I can see it happening that way, but better that then the opponents finding out your house is mortgage-free, worth upwards of $700k, and then - poof! Magically increased demand for settlement. At least tapping the umbrella policy makes it make sense. 

Anyway, I am thinking of getting an umbrella for $1-3 million. It would be pretty hard for a lawyer to trump up a claim in the millions. 

Yes, this was the decision we made too.

And yes, the accident sounded very, very minor. Fender bump at elementary school parking lot speed.

7 hours ago, TarynB said:

Especially if you have a young/inexperienced driver in your family, as we do.

We are bracing for 2 young drivers in the next 12 months. I hadn't thought about this aspect yet.

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10 hours ago, TarynB said:

If there's a car wreck resulting in a life-changing injury requiring intensive or long-term medical care, or the death of a breadwinner, it isn't so far out of the realm of possibility to face a million dollar-plus lawsuit, esp. if fault is clear (it happens). In terms of health care costs, a million dollars isn't what it used to be, unfortunately. But I've been told anecdotally that if you have an umbrella policy for $1 million or more, your insurance company is much more likely to have their lawyers fight for your/their side, vs. them just paying out on a regular (small) auto policy and walking away, which leaves you as an individual in a lurch. That makes sense to me. Very smart to have good umbrella coverage if you can swing it at all. Especially if you have a young/inexperienced driver in your family, as we do. (Putting kid on their own policy and/or having their car in kid's name doesn't cut it, at least in my state. They look at who supports the kid and pays their living expenses too, and come after that person as the "responsible" individual.)

I had to negotiate a lawsuit for a family member who was at fault in an auto accident resulting in permanent disability for the other party. “Our” insurance company did go big guns to limit the suit to the maximum amount of liability coverage carried on the auto policy. One action I had to be responsible for was consenting to affidavits specifying the family member had no other insurance policies through which compensation could be sought. 
 

From this I learned a few things - insurance companies will fight to protect their own interests (not necessarily their own clients, iykwim). A plaintiff’s attorney will sue for the maximum policy coverages, plus track down all other possible venues through which to find compensation. I am certain that had this family members owned any assets of value, those would have been pursued as well. 

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3 hours ago, SusanC said:

Yes, this was the decision we made too.

And yes, the accident sounded very, very minor. Fender bump at elementary school parking lot speed.

We are bracing for 2 young drivers in the next 12 months. I hadn't thought about this aspect yet.

Adding young drivers will almost certainly add to it.  

As for premiums in general, that varies so much due to so many factors, I would never assume that what someone else is paying has anything to do with what I might pay. 

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8 hours ago, Quill said:

That’s not what I’m saying. I was responding to someone who said a “minor accident” suddenly turned into one that magically tapped the umbrella limits. So, it was trumped up. 

Of course a catastrophic accident can result in a million-dollar claim; that’s why I put up this post in the first place. I now see what happens when someone with policy minimums is catastrophically affected. I didn’t know about that previously. 

I understand your point. 

But whether the suit is trumped up or not doesn't really matter. What matters is who wins in court.

ETA: And I totally agree with you about the importance of umbrella policies. That's why I added some add'l points for others to consider. Not enough folks take advantage of them. 😊

Edited by TarynB
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3 minutes ago, Melissa in Australia said:

Our house insurance has it automatically. Not as an extra. 

Here in Australia traffic injury insurance is paid by every car owner as part of car registration. And covers all medical for anyone hurt by a car, motorbike, truck etc. 

Your country is probably not as litigious as ours.  Umbrella insurance is top off insurance.  With my umbrella insurance, I already have to have a certain fairly high traffic policy.  It isn't necessarily even for real damages.  People hear have been sued for completely minor things for very high sums.  It is meant to protect your assets and future earnings because people do get 1 million dollar judgements and more against private parties.  It is to help protect against that kind of horror.

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10 hours ago, SusanC said:

Premiums will go up for sure, but no affect to the umbrella policy, right? Or are you saying that i should increase that at the same time?

Adding new drivers adds additional liability, so sure, premiums may go up. Your insurance agent can tell you if you have enough coverage or not. 

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