r/personalfinance • u/dereku1967 ​ • 12h ago

Too much umbrella insurance? Auto

I am not an attorney, but I work with one in a large company. We were talking a few weeks ago about umbrella insurance. She said she only carries $1M, because the first thing the opposing attorney will ask for is for the total insurance amount available. She believes a higher Insurance value makes you more of a target. I’m currently insured for $5M, and if there’s any logic behind this, maybe I should drop mine down to just $1M.

For context, I’m in my mid 50s, but have one son who will be driving on his own in about a month, and a daughter who is still only 15 so I’m just now approaching my nervous years.

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u/W_HoHatHenHereHy ​ 10h ago

Umbrella/insurance use to be to cover your assets. What I have found is that Plaintiff's attorneys are no longer settling just for policy limits. They are looking at insurance policy limits as a part of a defendants total assets for potential recovery. So, if you're worth $1MM and have $1MM in coverage, and the Plaintiff has $2MM in reasonable potential damages, more and more Plaintiffs' attorneys, I have found, are going to push for more than just policy limits.

FWIW - Attorney and carry $5MM in umbrella coverage as that is the worst case scenario I can reasonably come up with for how much damage myself or a person covered by my policy could cause someone else to suffer.

Edit - * for clarification

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u/SpiteFar4935 ​ 9h ago

5M is a healthy amount to carry but you can exceed that in a motor vehicle accident, especially if you live in an area with a lot of high earners. Basically worst (reasonable) case scenario is to be at fault in an accident with a mid-career professional with a family. You really don't want to run over a 40 year making 400K a year. High earners with lots of potential earning years left will mean a LOT of future lost earnings. 

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u/W_HoHatHenHereHy ​ 9h ago

I agree, it's possible for us to injure someone at higher than our current limits. But, in my own cost-benefit analysis, $5MM is where I landed.

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u/SpiteFar4935 ​ 9h ago

Honestly I think that is reasonable and agree. You can't insure everything and 5M will protect you from the vast majority of bad outcomes.