I agree with sushipup, it is cheap and most people should have some umbrella coverage for protection from under-employed PI lawyers.

On the other hand, how low the premiums are is an indication of the small amount of claims insurance companies pay on such policies. That, by itself, suggests such coverage may not be necessary.

Take your pick.

Personally, I've had $5 M coverage as an employment perk since forever and have never given it any thought. I couldn't even tell you who the carrier is, but I can find out if it's needed.

The average fatal accident claim (wrongful death) in MD is about $4 million though it will vary between $500,000 and up. One accident can wipe out your family financially. If you are in your 50s that's money you can never get back.

Honestly? I cant wait for driverless cars.

I've had it for over 30 years, mainly over concerns about potential car accident suits, or someone getting injured on my property. At the time I got it, I was carrying the max liability coverage I could get on my car insurance. When I got the umbrella insurance, I was able to lower the coverage amount I was paying for straight auto liability, which lowered that premium somewhat, so the cost of the auto and umbrella premiums together was not a huge increase, especially for the peace of mind. I've never needed to use it and am still happy I have it.

Thanks all. I spoke with my agent again today and she quoted me $220/yr for$ 1M of U insurance. She said that is what the average homeowner gets. In order to get it, we have to raise our auto limit from $100K/$300K to $250K which increases the auto by $150/year as I said before.

I asked her what the cost is for $2M and she said she will have to have that pass by an underwriter. I may ask her what is involved with that so I know what costs difference.

It certainly make sense if you have assets to protect. Some friends of mine were involved in a very tragic auto accident and they were very fortunate to have the extra insurance. As Snidely mentioned, based on the premium most insurance companies don't expect to pay out that often. I might say that this is one of the insurance policy that you will likely never use but will be darned happy to have if you need it.

You might want to talk to your agent about an appropriate level of coverage because I can't imagine going from $1M or $2M or even $5M would greatly increase the premium. Some years back I was required to carry $25M in liability insurance as part of a general commercial package. That was broken up into $15M and $10M of "umbrella". The second $10M cost about 2% of the first $15M.

Your auto liability 300 - 500K?

You're Kidding!

I've carried a million auto liability for I don't know how many years.

On the other hand ... that rail company that last year had an unattended train run a few miles downhill into a village to produce 47 casualties and destroy the centre of a village in Quebec ... had only 25 million, we were told.

They went into bankruptcy.

Should have been legally required to have had much more insurance.

ole joyful

ole joyful-
In my state, like many, the minimum liability insurance is $25/50k and that is what a lot of people get. Either they view it as a burden to have insurance and they want to thus pay as little as possible, or they think they'll never get sued, or maybe they think they have no assets to protect. I agree with your thinking, but a lot of people are short-sighted on this subject.

"You're Kidding!"

"I've carried a million auto liability for I don't know how many years."

And you say that was cheaper than carrying, say, $300/$500 plus $1M Umbrella? (And that Umbrella policy would provide increased coverage for your Homeowners, etc.

I actually assume that you are kidding, "joyfulguy."

I agree with you, Salti. Especially for a multi-car family, it's sure to be a better value to have an umbrella policy rather than buying higher liability levels for each car separately. The coverage of an umbrella policy is of course more comprehensive too.

The key thing to be careful of is to not leave a gap. The liability cover in the auto policy needs to be high enough to meet the floor of the umbrella policy. Many make this mistake, especially if the two policies are purchased from different sources.

My insurer, USAA, won't sell you an Umbrella Policy unless you up your homeowners and auto policy liability coverages to required minimums... no"gap" allowed.

Yeah, that was why I made the "different sources" comment because that happened to me. My liability coverage comes from a group policy and they'd never communicated the lower end of their coverage range. I'd had inadequate auto coverage for over 10 years before I learned about it and upped my levels. However, before then and since, I've never needed to use it. I still have it and hope to never need it.

Sometimes the beauty of an umbrella policy is the legal protection. If you LOOK like you might have assets, even if you are mortgaged to the hilt, you increase the chances of a larger lawsuit. If you are sued for more than your policy limit, you get this wonderful letter from your insurance company suggesting you get your own attorney to manage the difference during trial. Most often, the cost for the umbrella coverage equals an hour or two of your attorney's fees. If they sue you for less than your coverage, your insurance company takes care of the legal fees. It's a question of peace of mind for you. For me, avoiding potential bankruptcy for a couple of hundred dollars a year is an easy choice. No one likes paying for insurance, but they are sure glad they had it when needed!

An article today on my CBS home page.
http://www.cbsnews.com/news/what-you-need-to-know-about-umbrella-insurance/

What would drop the cost and the need for this insurance would be if the US would adopt a rule (common in most other countries) that the losing party in a lawsuit pays legal fees and costs for the winning side. It's unlikely though, lawyers are big political contributors and a lot of them hold elected legislative offices.

As it is now, individuals (and their injury lawyers who sue for a contingent fee) really have nothing to lose. Too many lawyers don't have enough to do, and most will favor taking on cases for which they believe a small investment of time can lead to a settlement. It's a legal means of extortion. Pay us, we'll go away.

By adding some financial risk should an action be lost, the real speculative suits wouldn't be brought.

I have had it for years, it only cost me $130. a year. If someone sues me a lawyer will step in and represent me with no fee.

Is that a policy that only covers your legal expenses? If so, those lawyers surely will petition to recover legal expenses if they prevail.

Right?

No, the legal representation is in addition to extra liability coverage, usually one or two million. If you are sued for a millon, they step in

If you lose the case, they pay up to your limits.

Er, OK.

I do understand what an Umbrella Policy is.

I was asking "emma" if the policy she was citing at $130 per year was for legal fees? (Read Snidely's post to which emma was replying.)

Yikes. Your post suggests that you didn't realize that this entire thread has been about Umbrella Policies - and Snidely brought up the suggestion that part of the solution to high costs might be a change to require the loser be required to pay the legal fees of both sides.

We just received our statement for another year on $3M 'umbrella' coverage. It's the same cost as last year's policy: $445. It's my understanding that you buy this primarily if you have enough assets to look attractive to a lawyer bringing suit. I get the 'protection' part, and I assume the insurance company would fight a suit at their expense. However, doesn't having a $3M policy make you *more attractive*?

Chisue, they would have to know about the policy. Insurance companies usually don't share the amounts of insurance for just that reason. As long as you are sued for the insured face amount or less, your company will handle the costs of the litigation. If you are sued for more than that amount, they will notify you that you might want to consider getting your own lawyer to work with them to handle the rest.

chisue-

I have had umbrella insurance for years, and I, too, have thought about the "more attractive" issue. I finally concluded that one is attractive if one has any assets, and I'd rather have the coverage, even if it makes me a little more attractive than if I didn't. Most personal injury suits are settled for much less than my umbrella limits, but there are enough that go past my standard auto liability limits that it would make me nervous to not have the extra coverage.

Besides, golfergirl makes the excellent point that the likelihood of someone knowing what insurance coverage you have is small.

Saltidawg, of course it is all paid otherwise what would be the point in having it. Part of the reason mine is so cheap is because there is only one car in the family, no boats, motorcycles, etc.. No one drives my car under the age of 30 something. The lawyers would not try to collect from me, the insurance company pays them.

Hmm...Why is Emma's umbrella policy so cheap ($130) and ours is so much more ($445)? We're insuring one '05 car, some personal articles, our house. How is the umbrella rate determined? Are we penalized for being over 70? Difference due to location?

Chisue, many factors. My guess is that Emma has only $1 million and you have $3 million. If so, your rate is approximately the same as hers per million. Location makes a huge difference. So does what you're putting the umbrella over, your claims history, etc. We pay $175 for $1 million coverage, but we are in a high rated insurance area--outside Washington, D.C. I would never change insurance carriers for the cost of just one policy--look at your total bill for all items insured to compare. some carriers will be higher on one item and lower on another.

Insurance premiums= geography (socio-economics, loss experiences, other local factors), demographics (age, life circumstances, etc), coverage level, experience with that customer, customer's net worth, and probably a few other things.

PS for golfer girl - different insurance coverages are like different items in your grocery basket. Unless you're getting a break on one for having another, what advantage do you see from sticking with the same company if the same policy is materially cheaper from another?

I think our policy is for one mil and $130 a year is the highest it has ever been. When he retired from Boeing we went to all of the retirement seminars, insurance, investments, even about funerals which was very helpful. Most were trying to solicit business, but I learned a great deal about what to expect when he retired. I had never heard of an umbrella policy before. The investment guy worried me a little bit until I had time to think about it. He took a one dollar bill and started tearing it in strips, so much for taxes, so much for groceries and on and on. I was smarter than that. We were saving so much that when he retire we had the same income or more because we quit saving and cancelled all of our life insurance policies.

Snidely, what I learned is that most companies will even out over a 5-year period. You shop one year, and one company is lower, You shop again, and someone else is. That's because they take their increases as their financials dictate. Over the long haul, there often isn't a huge difference among the quality companies. Not the ones who bait you with a low cost to get into a market, and then have a huge increase a few years later. The biggest discount is usually the long term discount. A company would rather give you a good discount than go to the trouble of finding, starting, and keeping a new client. If you choose only based on price rather than the quality of service and value for your dollar, you'll may get a surprise when you have a claim. People shop on price; but when they have a claim, it's all about the quality and service. I could never prove it, but I firmly believe long term clients are treated better in claims. I don't see insurance as a commodity--you're protecting everything you own, everything you earn, and all of your future earnings--through insurance. Just as I would never pick a financial advisor based on price, I wouldn't pick an insurance company solely on price. This discussion is a good example--a good insurance agent would have explained to you what umbrella policies are and what they could do for you. If they haven't, you're not getting the service you deserve.

Emma, good for you that you did your homework. And congrats for saving enough to be comfortable in retirement. I hope before you cancelled those life insurance policies you figured out how to handle the estate taxes when the second spouse dies--ASSUMING that inheritance is an issue for you. We don't have children, so it's not a concern for us.

golfer girl, insurance IS a commodity. That's why there are brokers in the business that handle multiple lines. Not that an individual needs to see one, they tend to be more expensive for personal insurance.

Service experience information can be obtained from sources like Consumers Reports (although its reader surveys tend to be heavily slewed by people complaining). It's true some are really poor, but most of the others are fine.

As far as preferential treatment for long-term customers - I think that's wishful thinking. Insurance companies are highly regulated, just like banks, and I think their desire is that on average customers are treated respectfully and efficiently but always consistently pursuant to their prescribed rules. If there were a choice between giving a customer excellent service while bending the rules a bit from prescribed conduct, or giving a customer only adequate service while staying within the rules, most insurance company managers (as with banking industry managers) would all choose the second.

Snidely, we obviously will continue to have different opinions, which are fine. I try to use these forums to share concrete suggestions, rather than ideology. I was in the insurance business for 20 years, and I can assure you that we went the extra mile for long-term customers whenever we legally could. And there were many opportunities in service. I agree that not all companies are that way. I was fortunate to be with one that was.

As far as service experience information, the industry pays attention to J.D. Powers reports. Those would be the reports I would direct consumers to. Personally, I believe the quality of your personal agent makes a lot of difference. So I would ask friends who their agent is and would they recommend them.

Golfer girl, There was no issue with his kids. He died first so all was mine, if I died first all would have eventually gone to his kids. At first he wanted to leave a piece of property to them to divide, but in later years he put my name on everything.

My father died in a car accident in 1960 and I started thinking what if that happened to me. I started planning my life instead of letting it lead me around. As morbid as this sounds I have planned my death. I learned a lot watching Mother cope with a minor daughter and no income. I talked to people like we talk in here. I learned things, confirmed the ones I like and took it from there. I was married twice and we had everything set ummm, I have forgotten the term for it, but if my husband died I got everything, if I died he got everything. When my second husband died it was all mine. No taxes to pay at all, my financial life did not change at all except for loosing a bit of income. My soc sec went up to what he was drawing.

Golfer girl, I wanted to add there are no inheritance taxes, I have forgotten the amount you can have before you have to pay taxes. If you inherit investments that have the taxes deferred you have to pay those.

Emma, great planning and wisdom on your part. My dad died when I was 18 and my mom was left with 2 children at home and a restaurant with debt that she couldn't run. The worse part was that he had cancelled the life insurance a few months early because he thought we couldn't afford it. My mother had to struggle for years because of that one decision. That's one of the cases where life insurance made sense. I don't consider your planning morbid, Emma; I think it was very smart!

Thank you golfer girl for understanding.

"That's one of the cases where life insurance made sense...."

Life insurance always makes sense if one dies... hindsight is great.

I'm 73. Sure glad I didn't buy that 50 year term policy when I was 21. :-)

Life insurance makes sense if someone is dependent on your income. DH's parents bought it on his life when he was a child; we borrowed against it for part of the payment on our first home -- cheap money. Much later, we cashed it in and invested the money -- in CD's if I remember correctly. Remember when a CD paid double digits? DH had ample life insurance through his work, should he have died before we were able to self-insure.

May I join the 'impoverished child circle' here? My father left my DM and me; started another family; never paid his alimony. My DM struggled to support herself, me and her widowed mother. She'd been sole support of both her parents during the Depression. I grew up knowing the value of a dollar -- heck, of a dime!

Lets make it very clear, I am not rich, but I have more money than I will probably spend.......maybe. I am working on that. LOL If we had needed those policies we would have kept them. As it turns out we would have paid out a lot of money on them and not needed it. We talked it over and agreed we didn't need them. I think you need policies more when people are young and have small children, of course that is usually the time they are living payday to payday and can't afford insurance. When my Dad died my Mom lucked out if you can call it that in such a sad situation, she received a very large settlement from the driver's insurance. She also got a replacement car which was new, life insurance from Dads company, and soc sec on her and my sister. She put the money away and never touched a dime of except to pay the difference in her home and another home.

My view on life insurance:

Income replacement for death of a family breadwinner (male or female) - yes

To provide funds to an estate (to pay tax and avoid assets sales) in the case of a taxable estate that's long on non-liquid assets or with assets intended to be retained by heirs - yes

Otherwise - it's by personal preference but strictly speaking, not necessary.

As mentioned earlier, some people assume when you have assets, you have insurance for them to use to fund their retirement plan (or high lifestyle). Discussing umbrella insurance on this forum is great, but I'd not discuss it in public with casual friends. There is never a reason to disclose your liability limits unless confirmation is required for business reasons. Right now I'm involved in a simple slip and fall at an apartment building I owned, the claimants attorney asked our limits, of course that will not be disclosed, it is not required information, but just owning the building makes me a target. Fortunately, my insurance is with a company who never settles to save time, they will fight to the end. I had another slip and fall claim several years ago at different building, same insurance company, they continued fighting, saying my stairs were in good working order and won the case.