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I’ve Got 99 Problems but a *Million Dollar Umbrella Insurance Policy* Ain’t One.

by J. Money on Monday, February 10, 2014

I don’t know why I haven’t blogged about this already (oh wait, yes I do – because it’s B-O-R-I-N-G!), but we’ve had this umbrella policy going on about 8 months now. Ever since moving to VA and having about 10 billion + 1 people at the exact same time kept asking if we had any. That’s when I know it’s time to pay attention to stuff – when the universe keeps pushing it in your face! ;)

I don’t care too much to go into the details of it all since, again, it’s not that sexy, but here’s a nice description of what umbrella insurance is from Daily Finance:

An umbrella policy provides an additional layer of insurance, typically $1 million or $2 million, above your auto insurance and your home insurance liability coverage.

And then they share a rather vivid example of how this may come in handy:

“After attending a Christmas party, my client got involved in a fatal auto accident where the other driver was killed… My client was given a breathalyzer on the scene and exceeded the legal alcohol limit. He was sued for something like $1.25 million by the claimant’s family and was legally liable for the damages, which were paid by the umbrella policy. The client was otherwise an upstanding citizen with no past history of these kinds of events.”

Now, I obviously have no plans on killing anyone in the near future OR drunk driving (IDIOT!!!), but the point here is extremely clear: umbrella insurance covers you from all those nightmare “what if” scenarios. Which are scenarios usually outside your control and/or unfathomable.

The article then continues on and talks about someone falling down your stairs and suing you, or your balcony collapsing at a party, or even someone bringing a lawsuit against you for defaming them on Facebook! Hah! You never really know with people these days…

Now, would I care about this much as a single bachelor on the prowl every Friday and Saturday night? Probably not… (Although my net worth would be a lot higher! Haha…) But seeing how I now have babies to feed and a beautiful wife to support, as well as a house, multiple cars, savings accounts, retirement accounts, web properties, etc etc, you can bet your sweet ass the risks are more worth protecting. You don’t worry about this kinda stuff if you don’t have anything to lose.

As for the costs, well, it’s actually a LOT less than you’d normally guess. At least if you’ve never looked into it before. That same article says the average rate for $1 Million in coverage is about $200. And we got it for exactly $212.91 – of course through my beloved USAA. Which comes out to roughly $17.74/mo. Is that worth the additional peace of mind? For us, yes. For you, perhaps not.

At the end of the day though – just like with everything else in *personal* finance – it really does come down to your own personal decision and situation. I do encourage you to at least think about it for a hot second though before moving on to the next shiny thing on the ‘net. It’s not fun, I’ll give you that, but it is an option to be aware of if you’re looking for additional protection of your ass-ets (ya see what I did there? ;)).

I’ll leave you with one other tidbit from the Daily Finance folks before signing off for the day…  Can you tell I liked their article?

“You may be assuming that if you don’t have $1 million to lose, you don’t need an umbrella policy. Unfortunately, if you are sued by someone who falls down the stairs at your home or whom you injure in a car accident, you can be sued for more than just what you have in the bank. Your retirement funds, investments, savings and even your future earnings are at risk if a judge allows someone to garnish your wages to pay off a settlement. In some states, the equity in your home can be part of the judgment and you would be forced to sell your home to pay someone who sues you.”

Sweet dreams! ;)


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{ 48 comments… read them below or add one }

1 Mark Ross February 10, 2014 at 5:19 am

I think this umbrella policy stuff can be related to one famous phrase which is:

“Expect the unexpected.”

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2 J. Money February 10, 2014 at 7:08 am

I like to think of it as “Do your best to expect the unexpected because there’s always a chance it could happen to you!” ;)

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3 Petra February 10, 2014 at 5:24 am

So this driver was under the influence, killed someone, but luckily his insurance covered it and all is well?

Good story.

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4 J. Money February 10, 2014 at 7:11 am

That’s obviously not the point.

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5 Stefanie @ The Broke and Beautiful Life February 10, 2014 at 6:39 am

Oh man, I am seriously overwhelmed by all the kinds of insurance there already are. I only pay for health, and it’s plenty expensive for me. But the possibility of worst case scenarios is definitely enough to freak me out and consider for the future.

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6 J. Money February 10, 2014 at 7:14 am

I know, there’s always something else we could be doing :( I honestly didn’t think or care about this stuff until recently, mainly because of having kids and realizing that we now *do* have something to lose vs before as a bachelor (with not much money). I’m not sure what the “professionals” recommend in terms of umbrella insurance, but it may be worth a google to see. At the end of the day though, we just gotta do the best we can with what we’ve got.

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7 charles@gettingarichlife February 10, 2014 at 6:51 am

J-
We had $1 million but since we increased our rentals I increased it to 2. The difference was under $100 bucks a month due to insuring all my rentals. Even at work you can get sued which is a double whammy, getting fired from your job and in a lawsuit.
The best thing about umbrella policies is that the insurance company gets sued, not you.

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8 J. Money February 10, 2014 at 7:15 am

Ouch! Getting fired AND in a lawsuit would be no fun at all, you’re right. I bet it feels good having all that protection now, eh?

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9 Wall Street Copywriter February 10, 2014 at 7:25 am

Thank you for opening such a topic on liability insurance. We think only doctors and lawyers need such insurance. Yet, 300 million Americans actually need the insurance. Why? Well, what would it be like paying your mortgage for the next 15 years and someone else lives in it from a lawsuit? Like gold and silver investments, liability insurance is a necessary asset to have in case life takes a turn for the worst. I quote Charles Dickens for some advice:

It was the best of times; it was the worst of time.

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10 J. Money February 10, 2014 at 2:45 pm

“What would it be like paying your mortgage for the next 15 years and someone else lives in it from a lawsuit?” – FREAKY!!!

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11 John S @ Frugal Rules February 10, 2014 at 7:37 am

My wife and I were literally talking about this last night J! I don’t know why on earth we hadn’t thought about USAA, especially since we have a number of things through them, but we’re going to be calling them this week. We’re in the process of getting some liability coverage and were discussing needing an umbrella policy as well. You never know when some crazy person is going to fall down your stairs and decide they want to sue you for it, so better to be prepared than not. :)

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12 Brian February 10, 2014 at 7:37 am

This is part of what is wrong with the US court system. I would love to see some tort reform to prevent someone getting their life ruined because of an accident. I’m not saying that someone should not be “made whole” in the case of negligency, but some of these settlements/rulings are just plain stupid.

In the end I will continue to play the odds that nothing like this is going to happen to me, which is what the insurance company is doing anyways. There is a reason they only charge you $200 a year, because they are not likely to have to pay out. Of course I would probably feel different if I were exposed to rental properties like you are.

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13 J. Money February 10, 2014 at 2:46 pm

Most people play the odds for sure… But at least most people get away with doing so too! Hopefully you’re one of them :)

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14 a terrible husband... February 10, 2014 at 8:12 am

I scored a USAA umbrella policy recently. It made me feel pretty important just getting one. :)

Here’s to hoping I never use it!

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15 Jon @ Money Smart Guides February 10, 2014 at 8:16 am

Umbrella insurance is boring to talk about but if you are in the position where it makes sense, then you are crazy not to have it. I started to rent out my house when I moved in with my wife and I immediately purchased an umbrella policy. It offers us that extra layer of protection should something happen at the rental property or anywhere else for that matter. And you are right, it is cheap as heck. Just a few hundred bucks a year for peace of mind, sign me up!

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16 Izzye G February 10, 2014 at 8:31 am

Thanks J, Umbrella insurance has been on my list on to add for the past year. I have to take action because as some of the above comments we need to expect the unexpected. One thing I once was that not to get an umbrella insurance with your automobile insurance because if you were to make a claim it will increase your premium. It was safer with your homeowners or a stand alone insurance.

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17 J. Money February 10, 2014 at 2:48 pm

Interesting… Though I get my insurance across the board from USAA, so I’m sure they wouldn’t have let me done something to increase premiums without at least telling me first :) I wouldn’t put it past other companies, but USAA is pretty damn good w/ customer service.

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18 Brian@ Debt Discipline February 10, 2014 at 8:48 am

Something we have been considering now that our children are almost of driving age. Also last year my wife was in an auto accident and we really got a good sense for what our policy covered.

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19 Kim@Eyesonthedollar February 10, 2014 at 9:30 am

People sue over just about any sort of car accident. Insurance companies almost always settle whether the person suing is really injured and suffering or not, so it’s an easy way to make money if you don’t mind suing someone. We’ve had an umbrella policy for years. I hope I don’t get sued, but you just never know.

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20 Kathy February 10, 2014 at 9:48 am

We’ve had a $2 million umbrella policy for a number of years. And while we have no intention of getting into an accident, people in this country are so sue crazy that they’ll sue you for looking cross eyed at them. This policy give great peace of mind and you’re right, it is very inexpensive for the protection you get.

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21 J. Money February 10, 2014 at 2:49 pm

“They’ll sue you for looking cross eyed at them” – Haha… so so TRUE.

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22 Brad @ RichmondSavers.com February 10, 2014 at 10:02 am

It’s amazing how inexpensive these Umbrella Insurance policies are! We’ve had a $1 million one for a few years now and I think it might even be less than $200/year.

We’re thinking about doubling it just because it is so inexpensive. Chances are we’ll never use it, but it provides an amazing amount of protection for the cost of what we’d otherwise spend per month on one pizza dinner…

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23 J. Money February 10, 2014 at 2:56 pm

Nice job breaking it down monthly like that :) The other plus is that it doesn’t help add to your belly too! Haha…

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24 Rebecca @ Stapler Confessions February 10, 2014 at 10:04 am

And there’s one more reason why being a renter is nice!

Although, in my state you can declare a homestead and have it protected from creditors, and retirement funds are off-limits too.

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25 Matt Becker February 10, 2014 at 10:10 am

Oh man, such an important topic! I actually just wrote about this (well liability insurance in general), and yes it’s boring but it’s so cheap to get the coverage and it’s well worth the protection it gives you. We have a $2 million policy cuz that’s how we roll.

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26 renae February 10, 2014 at 10:36 am

I have suggested buying an umbrella policy to my husband, but he was not in favor of it. I had something happen a few months ago that took away the “this will never happen to me” idea. I was driving to work, turning a corner downtown, while sneezing. I looked up to see a wide-eyed guy in a crosswalk, running to keep me from hitting him. It took awhile for my heart rate to return to normal. I’m going to email our agent today to find out the cost of a policy. Maybe the low cost will change my husband’s mind. Thanks for bringing this up!

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27 J. Money February 10, 2014 at 2:54 pm

Good luck!! I agree it’s not fun to think about, but it can help in crazy times!

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28 FI Fighter February 10, 2014 at 11:21 am

Yup, the more assets you own, the more afraid you should be about losing them! Especially over something really stupid. You can’t put a price on peace of mind, especially if you have a family to support as well.

This is a reason why so many open up LLC’s. I like to work with rentals, and LLC’s are a pain to get loans under for residential properties. In other words, lenders don’t like loaning to LLC’s… So, the umbrella insurance really is the best way to go! I can’t imagine those landlords who own 100+ units and don’t buy liability insurance… What are the odds of something bad happening…

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29 J. Money February 10, 2014 at 2:55 pm

Oh man, you’re not kidding!

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30 theFIREstarter February 10, 2014 at 12:19 pm

Cripes man! Lucky I don’t live in a country where stuff like this is all that likely! I guess if I had any rental properties I’d get some sort of cover though.

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31 Brooklyn Money February 10, 2014 at 1:16 pm

One thing to note, for those of us city dwellers with no car insurance, it’s expensive to get an umbrella policy because you have to buy non-owner auto insurance first. It would cost me about $1K a year to get an umbrella policy and non-owner auto insurance even though I have no regular access to a car and only drive 1-2x a year.

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32 J. Money February 10, 2014 at 2:57 pm

Good to know!

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33 tnspr569 February 10, 2014 at 1:58 pm

$1 million is the bare minimum – often times it pays to increase your coverage (especially if you rent out your home, have a high-paying career, teenaged drivers in the house, etc.). The additional millions are much less expensive than the first million. I’d recommend $2-5 million, depending on your circumstances.

@Izzye G – The umbrella insurance is a separate policy with underlying requirements for auto and home – increased coverage may be required for those other policies. Making a claim under the umbrella policy won’t necessarily increase your auto rates, and even if it does, an independent umbrella policy would cost more. I myself don’t own a car, but have a non-owner auto policy for additional liability protection while using car-sharing services. This also allows me to obtain affordable umbrella coverage; a completely independent umbrella policy would cost so much more that the auto coverage practically pays for itself.

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34 Rick February 10, 2014 at 2:43 pm

Here in VA you can do this w/auto insurance. I have $100K liability auto and someone hits me that only has $25K liability. Total damages are $100K thus the one that hit me covers the first $25K and my insurance “stacks” to cover the remaining $75K.

I’ve wonderd if you can stack an unbrella policy to cover damages covered by another insurance?

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35 Broke Millennial February 10, 2014 at 2:43 pm

This reminds me, I need to sign up for renter’s insurance (also from my beloved USAA). I don’t really see an umbrella policy being a fit for me right now as I am car-less, not a home owner and you know — that bachelorette on the prowl. If only I could tone down my snark to avoid being sued for libel over an FB comment!

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36 J. Money February 10, 2014 at 3:00 pm

Yeah, you better watch yourself lady :)

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37 eemusings February 10, 2014 at 3:20 pm

I am thankful I live in NZ when I read about stories like that. Yikes.

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38 Christine @ ThePursuitofGreen February 10, 2014 at 3:53 pm

I keep learning about all these different insurance types and it’s mind boggling to know how many there are! This might be a good talk to have with my husband soon. Living in a big city is too unpredictable and even if I’m the safest driver in the world these streets aren’t always safe.

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39 Naomi February 10, 2014 at 4:41 pm

We bought a policy the day after one of our street trees exploded and collapsed into the street. According to our neighbors, only minutes before this happened there was a toddler sleeping in his car seat in a car parked right where the tree fell.

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40 J. Money February 12, 2014 at 8:33 am

ACK!!! Freaky!

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41 Franklin B February 10, 2014 at 4:52 pm

The umbrella insurance rates rise significantly when you have teenage drivers in the house. Before the kids were driving, my $1M policy was $211. Once the kids got their licenses, the rate is now $750.00 annually even though they are away at school and only home 3 months out of the year. All I can say at this this is that I am so glad I have this policy and learning it’s true value. Legal fees alone would have swamped the budget and the $750 premium is chump change. If you’ve got assets, you need this layer of protection.

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42 J. Money February 12, 2014 at 8:34 am

Damn, good to know – thanks.

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43 Sue D February 10, 2014 at 6:26 pm

I took a personal finance course a hundred years ago and the teacher told us about umbrella policy’s saying most agents would not tell you about them. His example of a catastrophe was hitting a bus! My late husband and I had an umbrella right after taking that class.

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44 Heather February 10, 2014 at 7:15 pm

Good info! I actually just switched back to USAA and am very happy about it. They’ve always been good to me!

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45 BJ February 10, 2014 at 7:42 pm

I have had an umbrella policy for the better part of 6 or 7 years now and I never regret having it. It costs $128/yr for 1MM in coverage in our case. For people trying to cut back every expense this is one area where you shouldn’t. I can find other ways to save that money and not be exposed to unwanted liability. People are quick to sue, and lawyers like large settlements!

One thing to remember at least for our policy anyways is that you need to up your auto coverage from 100/300k to 300/500k to qualify for the umbrella. But again it really is money well spent in my opinion.

Smart post J-money!

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46 J. Money February 12, 2014 at 8:36 am

Oh yeah – I remember having to up my auto insurance stuff too, but I can’t remember if it was because I moved into VA and it was a VA thing, or an umbrella policy thing (I did both at the same time). Either way, I know my car insurance didn’t rise at all… it went down! (But prob cuz I moved from one state to another ;))

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47 Boomerang Girl February 10, 2014 at 8:32 pm

This is such great information – definitely worth the cost. We are researching life insurance now, but an umbrella policy is next on the list. Thanks, J$!

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48 J. Money February 12, 2014 at 8:37 am

Both are annoying, but equally smart!

Actually, I don’t know which one is smarter to have… probably life insurance I’d reckon. There’s no avoiding that kicking in one day :(

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