How much umbrella insurance do you carry?

[Slav4ikMD]

I've had my policy for 1 mil for a few years, but sometimes wonder if it's worth revisiting that.  On the one hand one does not want to have too high of an amount to not be viewed as too deep of a pocket, but on the other hand maybe a mil is no longer what it used to be, and multi-million verdicts for all sorts of nonsense seem to be more common these days.  Thoughts?  Is there any magic formula for this (sort of like 10x annual salary for term life)?

[Edit: Poll Added by moderator WCI.]

[poll id = "68"]

[G]

$1M.  Cheapest insurance product I have.  I've heard it's like medmal--the more you have, the more they sue you for.  But look forward to hearing what Larry et al suggest.

[Slav4ikMD]

Found this:  https://www.whitecoatinvestor.com/umbrella-insurance/  Nice summary, but still the question of whether >1 mil is necessary remains.

Intuitively, to me it feels that 1 mil should be enough for most situations and when it is not enough then 2 mil won't help either as it would be some sort of a multi-million dollar freak disaster.  Or maybe I am wrong.

(As I am sure personal situation matters, my quick summary:  late 30's, married, 2 kids, high-ish income, positive but not huge net worth (def under a mil for now), no high risk activities, have a pool (which to me intuitively feels like a potential liability)... otherwise I think we are pretty "average.")

[Slav4ikMD]

We are paying around $350/year for 1 mil, I think 2 mil would be around 500-550, so obviously not a big difference at all, just unsure whether we need it and whether it may in fact backfire in some situations).

[DMFA]

I understood the amount for which to insure should basically equal your net worth, which for me, would be about $20,000.  Hey, I'm really proud of that.

I applied with my company I use for all my other insurances and I wasn't able to complete the simplified online application because I have a dog.  It's too bad, because his net worth was higher than mine a few months ago.  Maybe he could have co-signed for me.

[Slav4ikMD]

I don't understand the logic behind the correlation of umbrella and net worth.  Say my net worth is a mil.  So then I have an umbrella for a mil.  Then say there is a judgment of 2 mil against me - so an umbrella would cover a mil and I'll lose the mil that I have.  What am I missing in that logic?  In other words to me this correlation only makes sense if you have a negative or very low net worth, but once you have a bunch saved up, the math just doesn't seem to pan out that way.

Anyway, does anyone know what actually realistically usually happens in these situations?  God forbid a neighbor's kid drowns in the pool or you seriously injure a pedestrian and they sue for who knows 100 mil... does it end up making a difference whether one has 1 or 2 or 5 mil umbrella?  Maybe it's a stupid question, but curious how these scenarios play out in real life.

[Docbeans]

Slav4ikMD wrote:

I don’t understand the logic behind the correlation of umbrella and net worth.  Say my net worth is a mil.  So then I have an umbrella for a mil.  Then say there is a judgment of 2 mil against me – so an umbrella would cover a mil and I’ll lose the mil that I have.  What am I missing in that logic?

Click to expand...

Same here... I dont get it either.

[Zaphod]

5 million. Premium is 576/yr, its dirt cheap. I have a pool, and a rental (and plan to have more) and honestly its just so cheap why not? I dont get the argument that they will come after you because you have a large policy, no one knows this until after a claim has been made. Having a large policy wont make their claim any stronger or weaker, they may try to pursue it but it will still be merit based. In case it is on you, I'd rather be protected for the very small amount of money it is.

I dont get the new worth idea, it should be risk exposure based vs. cost. Cost is very cheap, so then you have to assess your risks and then make a compelling reason not to consider the larger amount given the low cost.

[Slav4ikMD]

"so then you have to assess your risks" - and how does one do that?  Is there any data on most common situations where an umbrella policy comes handy?  What about data on typical amounts paid out?  I am trying to think of my (and I am sure most others') more likely liabilities:  car accidents, slip and falls of guest at home, pool... What else?

Essentially I wonder what % of judgements fall into the that 1-5 mil range, ie exceed a mil but are not in the "astronomic" 20+ mil range.

[Zaphod]

Having a rental home and being a land lord with tenants, contractors, etc...increases your risks greatly. Lawsuits are apparently pretty common in the rental business. As far as amount, 5 million is probably the last one you can just buy without having a more thorough investigation and underwriting process to determine real needs, and its so cheap there is really no reason to consider otherwise. I would imagine its more than enough until you have a much larger asset base at risk.

Im not looking for perfect protection but just like everything else the sweet spot between probability and the cost to insure that. I think the cost is basically free, and 5 mil should more than cover the likely probable events (which even the cost tells you arent very likely). If I get hit with something more someone cant say I was underinsured or acting recklessly and there would have to be some kind of crazy event that wouldnt even look like a great trade off to me at this time. Basically, im not worried about hitting the bad lotto any more than the regular one, but insure whats reasonable in between.

[Antares]

2 million. I can't defend it. It's just what I have. No rental properties.

[VagabondMD]

I have $5M (premium is $860 per year). Megaverdicts can happen when you refuse (or cannot afford) to settle a claim, and I do not want to worry about losing everything over a freak accident. A good friend was killed when her neighbor's dead tree fell on her during a storm. Crazy, unimaginable stuff happens, and I want to reduce the risk of compounding emotional devastation with financial devastation.

[Hatton]

I have either 2 or 3 million.  Chances are even with a crazy verdict the plaintiff will be happy with your insurance and not pursue your house. You increase your umbrella along with your net worth.

[sealsmith217]

I opted for 2M to cover our overall net worth. I completely agree with hatton1 above.

[AlexxT]

5 mill, was $806/year, just went up to $1,080  ( across the board increase, they told me ).

I'd have more if they would sell it to me.   You can get a 5 mill judgement just for one car vs pedestrian or car vs bicycle encounter.