Timing of Umbrella Insurance

[treesrock]

I always figured you wanted enough umbrella insurance to make it “worth it” for the insurance company to fight on your behalf. I agree on just getting 1M now, it’s super cheap so just do it.

[HumbleInvestor]

Didnt know about having to follow their legal strategy. Interesting. Thanks.

[Tim]

HumbleInvestor wrote:

Once the amount is over the limit the ins company

Click to expand...

Until it is resolved, the "defense of the policy holder" is provided by the insurance company. Fiduciary duties on the insurance company, attorney and the policy holder.

Claim $10mm, Policy limit $1mm, Settlement offer for $5mm

A vigorous defense might still result in zero.

HumbleInvestor wrote:

Wouldn’t it be clients responsibility to fight the claim to lower the award or to ensure it does not go over the limit?

Click to expand...

Typically, there is one defense regardless of amount or limits. You would be fighting your own legal team and not cooperating from the start. You are correct, the motivations shift "after the fact". If you hire your own attorney the insurance company may come back and refuse to cover the $1mm due to lack of using their preferred legal strategy. Not a pleasant situation. That is why typically the Umbrella is written on top of a home owner's or auto liability policy. It prevents a separate legal defense. You would be responsible after the fact for additional expenses.

[HumbleInvestor]

@Tim Once the amount is over the limit the ins company wants to settle to limit their legal fees but if they are paying to the limit why would the ins company fight any more on behalf of the client? Wouldn't it be clients responsibility to fight the claim to lower the award or to ensure it does not go over the limit?

[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.

[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.

[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.

Click to expand...

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.

[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.

[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?

[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.

[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]

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

[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.

[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?

[VagabondMD]

Yesterday