Is umbrella policy needed?

Dakota731

DIS Veteran
Joined
Apr 8, 2014
I called my insurance company to make a vehicle change and was told by the agent that we really need an umbrella policy. We have $300,000 auto coverage but she said nowadays lawyers sue for $1 million or more and we could lose our 401K or our home in we were in an accident. Is she just trying to scare me or is this necessary? It would cost another $400 a year on top of our policy!
 
My agent has never suggested this. They can sue for whatever they want, doesn't mean they are going to get it.
 
We have one because we have teen drivers. My agent suggested it to me because their DS was involved in a accident where they were sued, so that was why we bought it. Once the kids are out of the house, we will drop it since DH and I will both be seniors and retired and hopefully driving less.
 
My stepmom, who is VERY financially conservative, suggested we get one once DS became a teenage driver. It really is not that much more a year, and buys you piece of mind. She and my DF have one because they have a farm that has since been surrounded by subdivisions, and they're afraid of a kid coming onto their property to pet a horse and getting hurt. So there are definitely circumstances where it's a good idea to consider one.

Terri
 


After researching a little, I've found that they can't get your 401k and usually not your home depending upon state so I feel a little better. I'm sure it was a scare tactic to get me to buy another policy but in this litigious society, it's a frightening thought to lose all you have from an accident!
 
It all depends on your net worth. If you have lots of assets that need to be protected, then you should probably have an umbrella policy. I spoke to my agent about this just last month, and a $1MM policy would only add $132/year to my current premiums.
 
Your 401K and home may not be as safe as you think. You should not rely on what you see on the Internet for this info. I found information that says the opposite. We bought an umbrella because it gives us peace of mind for a very reasonable cost. You might want to discuss with a financial advisor. Your state may also have an office that can help you with this.
 


I think it would depend on how many assets you have. Is your home your only one (like in FL with the homestead exemption stuff)? Lawyers can sue for whatever they want but it's based upon what the true injuries/damage costs not some inflated number they come up with. We recently had an accident with a young kid on a moped, 17 years old, who my mom (she lives with us and is on our car's policy) couldn't see behind a truck. She swiped him, he fell off the moped (no damage to our car at all, his moped had minor issues) and refused an ambulance even after his parents came and requested one. The ambulance even came and his mom had to sign a release form stating they were refusing treatment and transport to the hospital.

Even after all that they still sued the insurance company for a ridiculous amount of money that was above our coverage amounts. I actually just got a letter a week ago from geico saying the injury lawyer agreed to settle for $500, when they initially sued for well over $75k! The kid wasn't injured, the moped was repaired, and there was no other damage. So, yes, lawyers can sue for whatever they want. Doesn't mean they're going to get it.
 
As PP stated, if you have assets that need protecting, then yes, you need one. We had a huge eye opener a couple of years ago. A guy on a motorcycle hit my 16 year old DS's car. Ruled motorcyclist's fault at the scene, but he was really hurt and rushed to the ER where he stayed for a couple of weeks. Motorcyclist hires high powered attorney and fought for over a year to have the fault for the accident switched to my DS so that he could sue us. We had a $500,000 liability limit on his auto policy, but that was not enough to cover the motorcyclist's hospital bills.

We found out that since we do have assets, we would be responsible for any damages over the $500,000 that State Farm would cover. We now have $1,000,000 in coverage for every driver in our family. In the end, the motorcyclist did not succeed in flipping liability, but it was a very stressful time for our family - the not knowing is the worst.

You think it could never happen to you, but in a blink of an eye you could be on the hook for hundreds of thousands of dollars of medical bills for someone else :( We will never skimp on insurance again.
 
Umbrella coverage is dirt cheap so I have it. I also have several million in coverage for professional liability.
 
:thumbsup2
As PP stated, if you have assets that need protecting, then yes, you need one. We had a huge eye opener a couple of years ago. A guy on a motorcycle hit my 16 year old DS's car. Ruled motorcyclist's fault at the scene, but he was really hurt and rushed to the ER where he stayed for a couple of weeks. Motorcyclist hires high powered attorney and fought for over a year to have the fault for the accident switched to my DS so that he could sue us. We had a $500,000 liability limit on his auto policy, but that was not enough to cover the motorcyclist's hospital bills.

We found out that since we do have assets, we would be responsible for any damages over the $500,000 that State Farm would cover. We now have $1,000,000 in coverage for every driver in our family. In the end, the motorcyclist did not succeed in flipping liability, but it was a very stressful time for our family - the not knowing is the worst.

You think it could never happen to you, but in a blink of an eye you could be on the hook for hundreds of thousands of dollars of medical bills for someone else :( We will never skimp on insurance again.


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How very sad and true. One of many reasons why medical and car insurance is so outrageous. We need tort reform so badly here in this country.
 
We have had one for a couple decades, even before our kids were driving. If you have assets that can be taken, this is your way to protect them. Only takes a split second to lose everything you have. They are not expensive and totally worth it should the need arise.
 
I called my insurance company to make a vehicle change and was told by the agent that we really need an umbrella policy. We have $300,000 auto coverage but she said nowadays lawyers sue for $1 million or more and we could lose our 401K or our home in we were in an accident. Is she just trying to scare me or is this necessary? It would cost another $400 a year on top of our policy!

I wouldn't NOT have an umbrella policy. Ours costs about $200 a year and to me, it's worth every pennny for the peace of mind. If you are in a car accident and hit a car that has 4 or 5 people in it and you have a couple people in your car, $300K in coverage could be very insufficient for medical bills.
 
:thumbsup2


:thumbsup2
How very sad and true. One of many reasons why medical and car insurance is so outrageous. We need tort reform so badly here in this country.

Good luck on that. Understand vast majority in congress are lawyers

I like britain's system. You sue and lose and you pay the defendent's legal bills.
 
Your 401K and home may not be as safe as you think.
Yes, they are. Let's say someone sues you for a million dollars and wins. Unless you have enough insurance or assets to cover the judgement, you're most likely going to file for bankruptcy. They'll get as much as they can from your unprotected assets, but you'll keep your home and retirement accounts. If you have a lot of unprotected assets, you should get an umbrella to protect them.
 
Losing a home pretty much depends on the area you live.

In states where it is possible, an unsecured creditor cannot take your house without a lien. A lien requires the creditor to obtain a judgment against you by suing you and winning. Using the judgment a lien is filed against your property.

The lien creates a restriction on your title. This title restriction prevents you from refinancing your home before you pay off the judgment. Although it is possible to transfer ownership of your home to another individual without first paying your creditor, if the new owner plans to finance the property, it must have a clear title. So, the judgment lien forces you to pay off your debt if you want to sell your home.

Any unpaid lien holder has the legal right to foreclose on your home.

So, the answer is it depends. You can spend a $100 or so and ask a local lawyer, which is the only way to get a definitive answer about your questions, or you can get an umbrella policy, or both...my CPA told me to get one years ago. We did.

And, in this case, since it is such an important issue, I will say the advice you are getting here, including mine, is worth just what you paid for it...:jumping1:
 
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We have an umbrella liability policy that provides excess insurance over both our automobile and homeowners policies. I wouldn't even think of not having the coverage. Our umbrella policy is for $3M since we have an inground pool and entertain frequently. We also bought my brother an SUV which we insure and he drives that the policy covers as well. The policy gives us peace of mind that if we were ever sued we wouldn't have to worry about losing everything we have worked so hard for.

Worth every penny as far as I'm concerned.
 
We have a $2 mil policy for $239 annually. $400 for 1 mil seems excessive. And if you have significant assets, it is definitely a necessity.

That's with Travelers by the way.
 
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