Umbrella liability

**Fishindude77** · 08-12-2015, 04:24 AM

Yep, umbrella policy is a good idea and not too expensive. I carry one also. Have heard folks say to have an umbrella policy close to your net worth.

People are lawsuit crazy these days and the ambulance chasing attorneys keep digging until they get to the deepest pocket book.

**Jluke** · 08-12-2015, 05:40 AM

This is an interesting topic.

if possible, can anyone explain this in layman's term and how to know if you have enough coverage?

I don't want to ask my insurance guy this kind of question; he'll probably rip me off.

**Fishindude77** · 08-12-2015, 05:49 AM

The umbrella policy picks up where auto and homeowners policies run out. For example you may have $500,000 liability on homeowners coverage and somebody drowns in your pool. The way people are today, there may be a lawsuit.

You may have a big net worth and may get sued and a judgement against you for $1 mil. If you have an $1 or $2 mil umbrella policy, it should pick up whatever your homeowners won't.

That's the real barnyard simple explanation. An insurance man can provide better detail.

**corn18** · 08-12-2015, 06:00 AM

Originally posted by Jluke View Post

This is an interesting topic.

if possible, can anyone explain this in layman's term and how to know if you have enough coverage?

I don't want to ask my insurance guy this kind of question; he'll probably rip me off.

To be honest, I thought $1M was enough for me because it covered all my assets with room to spare. For example, someone sues me for looking at them funny. They sue for $2M. I only have $750,000 of assets, so my insurance pays them $1M and I keep all my stuff. So I was happy.

But, some states allow plaintiffs to sue for future earnings, which could be a LOT of money. For example, someone sues me for $2M, I have $750,000 in assets. Insurance covers $1M and they get to dock my pay for 100 years to cover the other $1M. Didn't know they could do that. Even if you have no assets, if you have an income stream, they can tap into that in a lawsuit.

That's all I know. Scared me enough to get the extra $1M. Not even sure if that is enough but it will do for now.

Tom

**Drake3287** · 08-12-2015, 11:40 AM

I first purchased my policy when my kids started driving. It just takes one serious or fatal accident to change your financial future for ever. Having 3 kids I didn't want to play the odds. At this point all are out of college and no accidents or tickets thank god. Now if only my car insurance would go down.

**97guns** · 08-12-2015, 01:39 PM

i have an umbrella because of my rentals but i will be looking into forming an LLC and dropping the umbrella

**LivingAlmostLarge** · 08-13-2015, 12:06 AM

We will have no income soon but we are keeping our umbrella liability insurance. Decided that just in case of an accident we didnt want our assets wiped out.

**scfr** · 08-13-2015, 06:49 AM

Originally posted by tomhole View Post

So I added an additional $1M umbrella liability policy to my insurance. Cost me $436 / year. Seems like cheap peace of mind.

Tom

Next year when the policy comes due you may want to shop around. $436 seems pretty high.

**corn18** · 08-13-2015, 06:52 AM

Originally posted by scfr View Post

Next year when the policy comes due you may want to shop around. $436 seems pretty high.

I thought so, too. Will have to shop around and also investigate what drives the rate (# of cars, teenagers, etc...) We don't have any of the high risk items like a trampoline, boat or pitbull. I also wonder if I can get a standalone that works well with my home owners and auto liability coverage. TBD.

**feh** · 08-14-2015, 06:28 AM

We have a $2M umbrella policy, roughly equal to our net worth.

**Weird Tolkienish Figure** · 08-14-2015, 10:53 AM

Tomhole,

As far as I know you can be sued for any amount whatsoever. If you get a judgement against you, the plaintiff then has to collect on it. They can garnish wages, freeze bank accounts, get liens, etc. But they have to go back to court to collect on it. You can fight it various ways in court.

You may be able to get a judgement discharged in bankruptcy if need be.

So I don't think it's the case that "some states allow future earnings to be collected". All do, but they generally follow the procedure above. If you have an outstanding judgement against you they can garnish your wages in most states. I remember hearing that Texas is the only state that doesn't allow wage garnishment.

Good info here:

Can You Collect Your Judgment?

http://www.nolo.com/legal-encyclopedia/can-you-collect-judgment-29546.html

When it comes to collecting the amount owed in a money judgment, you're on your own.

"Most states allow debtors to protect some equity in their car, truck, van, motorcycle, or other vehicle. States also often allow debtors to protect motor vehicles that they use in their business. The equity is the difference between the market value of the car (what it's worth today in it's present condition) and the car loan amount. Unfortunately, many people have high car loans so there is little equity in the car."

Umbrella insurance is probably a good idea if your net worth is over a certain amount, but sounds like that becomes less so if you have less. Obviously, if you have a certain amount, might be worth it to contact a financial professional.

Every time they file in court to collect it costs them money, so getting a wage garnishment order against someone who makes minimum wage isn't at all cost effective, and I believe they have to refile every time you change a job.

Umbrella liability