I’ve searched this sub to try and understand the real world implications of having umbrella coverage but am still struggling to understand how it works in practice.
Let’s say I have $1m in assets (not home or 401k) and I get $1m in umbrella coverage. If there was a $2m judgment against me, wouldn’t I lose my $1m in assets anyway? (The payout being the umbrella coverage plus my assets). I’ve ignored any auto/home liability coverage for simplicity of the argument.
Is the nature of the umbrella protection just that a $1m judgment is more likely than higher amounts so you are increasing your chances of protecting your assets, just not a true guarantee.
Or in the real world is it more likely that someone would settle for the $1m umbrella coverage versus the trial to see if they can get $2m? But again, that would simply mean you are increasing the odds of protecting your assets, no?
Does umbrella coverage truly protect your assets or just reduce the risk of losing them?
byu/wwork2021 inInsurance
Posted by wwork2021
1 Comment
TLDR: Your bottom line is pretty much correct. You are always reducing and never eliminate risk by buying insurance.
The types of these claims that jump over a million dollars are RARE despite media hype (source me, who works for a large organization with lots and lots of claims that involve significant injuries and doesn’t see much go over $1M). Claims that result in judgments and settlements of that amount are severe in terms of injury/damage to the claiming party and usually involve elements of significant negligence or misconduct. What I mean is that you really have to try – and I mean by being a grade A dumbass to have a judgment of that size against you. So your number 1 risk avoidance strategy is to not be that dumbass. Someone randomly slipping and falling in your home is not going to get that claim. Assaulting someone and pushing them off your 10 foot high deck onto a pile of sharp rocks is.
In the real world, settlement will go ahead as long as its a reasonable amount. Sometimes it takes awhile because a plaintiff will find a second lawyer to take a go at it and needs time to come to terms that they don’t have a “hot coffee” claim.
For personal liability, a $1M umbrella still goes a long way to assuring (and insuring) (but not ENSURING) that you have substantial protection in the event of a claim. It should be more than sufficient 999 times out of a 1000.