Help me understand Umbrella insurance

[Deleted]

Or really, the need for it.

I recently upped our auto coverages to the maximums ($250k/$500k) and we have a home owners policy as well. I understand how an umbrella policy works, in that if claim exceeds our limits on the auto or homeowners, that the umbrella would then kick in. But what happens if you don't have an umbrella? Say I cause a huge accident with like 4 other cars and the claims total like $750k. If I don't have umbrella insurance, how would that get paid? Does it default to their un/underinsured coverage? Would I have to pay that out of pocket? Our net worth is zilch, so could something like that potentially bankrupt us? I can't really find an explanation as to why it wouldn't be beneficial if you don't actually have savings.

We're trying to figure out our insurance needs and making sure we are adequately covered and I don't know how to determine if we would need this or not. 

[Cappy]

This is a good overview: www.nerdwallet.com/blog/insurance/umbrella-insurance-complete-guide/

[Susie]

I have a $1m umbrella policy as a backstop for our auto and homeowner's insurance.  The biggest factor for me is that if I got injured in an accident with a car while out riding my bike, my auto policy is what would cover it.  Given the exposure to grievous bodily injury while I am cycling on shoulders of roads with 50 or 55 mph speed limits, I was not comfortable with the limits of my auto policy (even when increased) to cover potential claims.  Then there is also the risk that I could be hit by an uninsured or underinsured motorist.

It was also good piece of mind because, at the time I took out the policy, I was on the board of my tri club.  That was meaningful exposure to potential liability.  The club carried insurance, but still.

[imojoebunny]

If nothing else, Umbrella policies have lawyers to defend you, in the event of a lawsuit for an accident in your home, car, and some other situations specific to your policy, so that alone, is worth their cost. If you truly have no assets, and don't plan to have them in the future, you may not need it, including a job that wages could be garnished from, but if you don't have assets, but plan to in the future, then it is completely worth it.

[SusanBAnthony]

We carry 1 million.

It's probably silly (it's one of the highest margin insurance products) but it gives us a lot of peace of mind for like 200$ a year.

[sillygoosegirl]

Jan 16, 2020 13:02:42 GMT -5 Susie said:

I have a $1m umbrella policy as a backstop for our auto and homeowner's insurance.  The biggest factor for me is that if I got injured in an accident with a car while out riding my bike, my auto policy is what would cover it.  Given the exposure to grievous bodily injury while I am cycling on shoulders of roads with 50 or 55 mph speed limits, I was not comfortable with the limits of my auto policy (even when increased) to cover potential claims.  Then there is also the risk that I could be hit by an uninsured or underinsured motorist.

It was also good piece of mind because, at the time I took out the policy, I was on the board of my tri club.  That was meaningful exposure to potential liability.  The club carried insurance, but still.

Health insurance wouldn't cover being hit by a car while walking or biking?

[Deleted]

Jan 17, 2020 1:45:03 GMT -5 sillygoosegirl said:

Jan 16, 2020 13:02:42 GMT -5 Susie said:

I have a $1m umbrella policy as a backstop for our auto and homeowner's insurance.  The biggest factor for me is that if I got injured in an accident with a car while out riding my bike, my auto policy is what would cover it.  Given the exposure to grievous bodily injury while I am cycling on shoulders of roads with 50 or 55 mph speed limits, I was not comfortable with the limits of my auto policy (even when increased) to cover potential claims.  Then there is also the risk that I could be hit by an uninsured or underinsured motorist.

It was also good piece of mind because, at the time I took out the policy, I was on the board of my tri club.  That was meaningful exposure to potential liability.  The club carried insurance, but still.

Health insurance wouldn't cover being hit by a car while walking or biking?

I don't know if it differs by state, but in PA, if you are involved in any sort of accident with a car/truck, you need to go through auto insurance first. My son was hit by a car walking to school several years back and I was surprised to learn that I had to file a claim through my auto carrier, he wasn't even old enough to drive at the time. 

[scout8]

Yes, if you get sued and the claim for damages is higher than your insurance limits, you would be responsible for any award above your policy limit. If you don't have any assets, I don't think anyone is going to try very hard to go after you. One benefit, though, is that the umbrella policy would pay for your attorney. In a case where the claim exceeds policy limits, you would want to have your own attorney.

Given your situation, I don't think I would get a policy. If your net worth starts to increase, then I'd reconsider it.

[scout8]

Jan 16, 2020 13:02:42 GMT -5 Susie said:

I have a $1m umbrella policy as a backstop for our auto and homeowner's insurance.  The biggest factor for me is that if I got injured in an accident with a car while out riding my bike, my auto policy is what would cover it.  Given the exposure to grievous bodily injury while I am cycling on shoulders of roads with 50 or 55 mph speed limits, I was not comfortable with the limits of my auto policy (even when increased) to cover potential claims.  Then there is also the risk that I could be hit by an uninsured or underinsured motorist.

It was also good piece of mind because, at the time I took out the policy, I was on the board of my tri club.  That was meaningful exposure to potential liability.  The club carried insurance, but still.

I'm confused. I thought that umbrella policies were liability coverage. I didn't think that they would pay for your own injuries. Maybe this is different in different states??

[Susie]

Jan 17, 2020 1:45:03 GMT -5 sillygoosegirl said:

Jan 16, 2020 13:02:42 GMT -5 Susie said:

I have a $1m umbrella policy as a backstop for our auto and homeowner's insurance.  The biggest factor for me is that if I got injured in an accident with a car while out riding my bike, my auto policy is what would cover it.  Given the exposure to grievous bodily injury while I am cycling on shoulders of roads with 50 or 55 mph speed limits, I was not comfortable with the limits of my auto policy (even when increased) to cover potential claims.  Then there is also the risk that I could be hit by an uninsured or underinsured motorist.

It was also good piece of mind because, at the time I took out the policy, I was on the board of my tri club.  That was meaningful exposure to potential liability.  The club carried insurance, but still.

Health insurance wouldn't cover being hit by a car while walking or biking?

No, generally not.

There is assuredly some variation by state, and my focus was on my own state and biking accidents specifically (since that is where I feel my risk is the highest).  When it's a single vehicle (bicycle) accident, then yes, health insurance will cover.  For example, I had an accident once when my front tire blew out at 35 mph downhill, and I lost control and went over the handlebars.  Health insurance covered that ambulance ride and ER visit.  But as soon as there's another vehicle involved, health insurance will refuse to cover, and will push it off onto the relevant auto policy(ies).  How financial responsibility is apportioned between drivers' auto policies varies (I live in a no-fault state), but "Was the injury the result of a motor vehicle accident?" is one of the very first questions you're asked in the ER.  When that's a yes, right from the jump they look to auto policy(ies) for satisfaction rather than health insurance.  If the other driver has very low liability limits, which is both common (because low premiums) and out of your control, it can get messy very quickly.  When I reviewed the state-mandated minimums I was shocked at how low they are, and how quickly a car-injured cyclist could blow through them.  It creates a nasty gap in coverage that you can fall into.

With how fast medical bills can pile up, I wasn't comfortable with hoping we could work out some pecking order of responsibility after the fact, and hoping my health insurance would pick up a remaining tab after auto policies were exhausted.  I just bought a million in umbrella coverage so I knew I'd have that as a backstop.  For $100-200 a year, it's fantastic peace of mind, and covers me for a lot more "what if" scenarios than just a bike accident.  

[Susie]

Jan 17, 2020 9:39:56 GMT -5 scout8 said:

Jan 16, 2020 13:02:42 GMT -5 Susie said:

I have a $1m umbrella policy as a backstop for our auto and homeowner's insurance.  The biggest factor for me is that if I got injured in an accident with a car while out riding my bike, my auto policy is what would cover it.  Given the exposure to grievous bodily injury while I am cycling on shoulders of roads with 50 or 55 mph speed limits, I was not comfortable with the limits of my auto policy (even when increased) to cover potential claims.  Then there is also the risk that I could be hit by an uninsured or underinsured motorist.

It was also good piece of mind because, at the time I took out the policy, I was on the board of my tri club.  That was meaningful exposure to potential liability.  The club carried insurance, but still.

I'm confused. I thought that umbrella policies were liability coverage. I didn't think that they would pay for your own injuries. Maybe this is different in different states??

Umbrella policies do provide liability coverage, but they also provide additional coverage above and beyond the limits on certain coverages on the underlying home/auto policies.  The big one for me was uninsured/underinsured motorist coverage.

My uninsured/under insured motorist coverage on my auto policy is maxed, and well above the state minimums.  If I were in an accident that resulted in claims that exceeded those benefits, then I would look to my umbrella for further coverage of that specific type.

That's why, when you buy an umbrella policy, your carrier typically requires you to raise your coverage limits on the underlying home/auto policies if they're not already high.  So the umbrella itself is cheap, but you often end up spending a little more than you were before on homeowners/auto because of the increased limits.  My limits were already pretty high so that wasn't a big factor for me.  Hopefully, I never actually have to file a claim against my umbrella policy.

[scout8]

Jan 17, 2020 10:09:51 GMT -5 Susie said:

Jan 17, 2020 9:39:56 GMT -5 scout8 said:

I'm confused. I thought that umbrella policies were liability coverage. I didn't think that they would pay for your own injuries. Maybe this is different in different states??

Umbrella policies do provide liability coverage, but they also provide additional coverage above and beyond the limits on certain coverages on the underlying home/auto policies.  The big one for me was uninsured/underinsured motorist coverage.

My uninsured/under insured motorist coverage on my auto policy is maxed, and well above the state minimums.  If I were in an accident that resulted in claims that exceeded those benefits, then I would look to my umbrella for further coverage of that specific type.

That's why, when you buy an umbrella policy, your carrier typically requires you to raise your coverage limits on the underlying home/auto policies if they're not already high.  So the umbrella itself is cheap, but you often end up spending a little more than you were before on homeowners/auto because of the increased limits.  My limits were already pretty high so that wasn't a big factor for me.  Hopefully, I never actually have to file a claim against my umbrella policy.

Got it. The addition coverage for uninsured/underinsured makes sense. Thanks!

[Deleted]

Jan 17, 2020 10:09:51 GMT -5 Susie said:

Jan 17, 2020 9:39:56 GMT -5 scout8 said:

I'm confused. I thought that umbrella policies were liability coverage. I didn't think that they would pay for your own injuries. Maybe this is different in different states??

Umbrella policies do provide liability coverage, but they also provide additional coverage above and beyond the limits on certain coverages on the underlying home/auto policies.  The big one for me was uninsured/underinsured motorist coverage.

My uninsured/under insured motorist coverage on my auto policy is maxed, and well above the state minimums.  If I were in an accident that resulted in claims that exceeded those benefits, then I would look to my umbrella for further coverage of that specific type.

That's why, when you buy an umbrella policy, your carrier typically requires you to raise your coverage limits on the underlying home/auto policies if they're not already high.  So the umbrella itself is cheap, but you often end up spending a little more than you were before on homeowners/auto because of the increased limits.  My limits were already pretty high so that wasn't a big factor for me.  Hopefully, I never actually have to file a claim against my umbrella policy.

This must vary by state. I asked my agent about adding an Umbrella policy and actually gave the road cycling and medical costs as an example as my H is a cyclist. Now granted, I'm in PA, but he told me that an Umbrella policy would only be for 3rd party liabilities. I guess that is why he recommends against the coverage for us because people can sue me if they want, but you can't get blood from a stone LOL I do have the maximum limits for comp and collision though on my auto, so hopefully I never run in to the issue. 

[badgergrl]

We carry $2 million on our umbrella. I worry about causing an accident and having them go after our assets.

[tres3]

Jan 18, 2020 22:52:59 GMT -5 badgergrl said:

We carry $2 million on our umbrella. I worry about causing an accident and having them go after our assets.

We have the same.  It isn't me I worry about and my kids are good kids but they are kids and kids can do stupid things. I had a friend whose brother got into a car accident (his fault)-- the accident broke the hands of a professional/working musician.  No car insurance policy is going to have enough coverage to cover that type of injury. 

My $2m umbrella policy is cheap. I think it is less than $100/yr. 

[sillygoosegirl]

Jan 17, 2020 9:59:50 GMT -5 Susie said:

Jan 17, 2020 1:45:03 GMT -5 sillygoosegirl said:

Health insurance wouldn't cover being hit by a car while walking or biking?

No, generally not.

There is assuredly some variation by state, and my focus was on my own state and biking accidents specifically (since that is where I feel my risk is the highest).  When it's a single vehicle (bicycle) accident, then yes, health insurance will cover.  For example, I had an accident once when my front tire blew out at 35 mph downhill, and I lost control and went over the handlebars.  Health insurance covered that ambulance ride and ER visit.  But as soon as there's another vehicle involved, health insurance will refuse to cover, and will push it off onto the relevant auto policy(ies).  How financial responsibility is apportioned between drivers' auto policies varies (I live in a no-fault state), but "Was the injury the result of a motor vehicle accident?" is one of the very first questions you're asked in the ER.  When that's a yes, right from the jump they look to auto policy(ies) for satisfaction rather than health insurance.  If the other driver has very low liability limits, which is both common (because low premiums) and out of your control, it can get messy very quickly.  When I reviewed the state-mandated minimums I was shocked at how low they are, and how quickly a car-injured cyclist could blow through them.  It creates a nasty gap in coverage that you can fall into.

With how fast medical bills can pile up, I wasn't comfortable with hoping we could work out some pecking order of responsibility after the fact, and hoping my health insurance would pick up a remaining tab after auto policies were exhausted.  I just bought a million in umbrella coverage so I knew I'd have that as a backstop.  For $100-200 a year, it's fantastic peace of mind, and covers me for a lot more "what if" scenarios than just a bike accident.  

That's a scary scenario. I didn't realize that my health insurance could potentially get out of providing care if I was hit by a car. I'm also a cyclist, and have a really expensive chronic health condition, possibly caused by falling off my bike (though possibly just bad luck: autoimmune or cancer, can't be sure). Didn't realize how lucky I was that I was the only vehicle involved. I'll have to look into this.