Timing of Umbrella Insurance

[HILA88]

Hi everyone,

I recently graduated from residency and just started my new job as an attending. As a new attending I don't have much in asset: No debts/loans, about 20K in cash, 12k in roth ira, and some money in 401b (but I believe this is protected from law suits). At this point should I already purchase an umbrella insurance? I read one should purchase equivalent to your asset but I really don't have much. If yes, how much should I get? If not now, when should I get it?

I did hear they can come after your future earnings so I assume I should get it now? Thank you for your help!

[jhwkr542]

Yeah, get it, it's cheap. I have net worth around 0 and have $1MM.

[G]

HILA88 wrote:

No debts/loans, about 20K in cash, 12k in roth ira, and some money in 401b

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phenomenal start!!!

I'm also a fan of umbrella early.  get a quote from your auto/renter's/homeowner's and see if it fits your budget for the peace of mind.

[Anne]

Yes, get it now.

1.  It's cheap.

2.  Life gets busy and 5 years will fly by and you may suddenly realize your assets have grown faster than you thought they would.  You don't want to be constantly wondering when is the right time to buy it.  The right time is before you need it.

[VagabondMD]

Yesterday

[CFEonline]

Do personal liability awards follow the trend of malpractice ones, where they tend to not exceed the policy limit or are adjusted to the policy limit on appeal?

[White.Beard.Doc]

I would recommend you stay 5 to 10 years ahead of yourself with the coverage limit on your umbrella policy.  Meaning a new doc with minimal assets should have 1M in coverage.  By the time your net worth gets to 1M you should have already upped your umbrella coverage to 2-3M.

[HILA88]

Thank you all for your input, I will get on it!

[MSooner]

We got it when we bought a house. We've already been through one situation that proves that people can and will sue for anything.

[HILA88]

scary what people would do for money.... Though I do not own a home yet (maybe in 2-3 years), it sounds prudent to just purchase the policy now according to others.

[orthodds]

How much umbrella should one have? 2M seems like a good number if all the other insurance needs are met, but I’m not sure what I’m basing that on. Does it need to be proportional to one’s assets? We do live in a litigious world. It’s also cheap. Anyone have more than 3M?

[CFEonline]

Why do people tie their need for umbrella to their current net worth? It seems if damages are awarded they are going to be in whatever amount they will be, and not simply less because you have a negative net worth or only 1 mm in coverage. Garnish future wages.

[gasdoc86]

CFEonline wrote:

Why do people tie their need for umbrella to their current net worth? It seems if damages are awarded they are going to be in whatever amount they will be, and not simply less because you have a negative net worth or only 1 mm in coverage. Garnish future wages.

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I've wondered this as well. I am also in the process of getting an umbrella policy and I'm trying to stay ahead of my NW as others have already suggested in order to avoid any garnishment of future wages in the event of a lawsuit. I'm getting a 2MM policy when my NW is not anywhere near that right now.

[Tim]

“ It seems if damages are awarded they are going to be in whatever amount they will be, and not simply less because you have a negative net worth or only 1 mm in coverage. Garnish future wages.”

Unfortunately the legal process is not that “cut and dried”. Attorneys fees, obtaining a judgement, collecting, and each parties financial exposure come into play. Your insurance company and the “defense attorney “ are motivated to “settle” based on their financial interests, not the defendant’s. Make no mistake, once it’s over the limit, the insurance company is motivated to “settle the claim” and move on and limit any legal fees. The defense “team” now is split with different motives. You may have no ability to “participate” in a binding arbitration agreement. Done, settled, you are stuck, on your own.
Limits matter, make no mistake.

[wonka31]

Get it now, 1M would probably be sufficient at this time. You will likely want to add more as time passes, life circumstances change (spouse, kids driving, etc). I think I have a $4M policy currently.