Too much umbrella insurance?

[u/dereku1967]

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.

[u/IKnowAllSeven]

I thought you wanted the total of your auto pilicy and umbrella to be the same or more Than your assets, and assets include 401k and primary residence. Is that not right?

[u/Ineedanro → u/IKnowAllSeven]

No. They stack, meaning the umbrella policy has a floor. It does not start at 0; you need it to start at the top of your "underlying" insurance. Your liability coverage on your automobile and home policies should match that floor, so you don't have a gap, but not be higher than that floor, so you don't waste money. If a 1M umbrella policy starts at, say, 500k, then your umbrella policy is providing only the 2nd 500k of coverage, which is why it is so cheap, and you have to carry 500k liability on your auto insurance. Most claims won't go over 500k, so if it is an auto accident the umbrella policy does not come into play.

This is also why you need to inform your agent promptly when your circumstances change, especially if you add a person to your household or add a driver, because your policy may need to be rewritten.