Umbrella Liability Policy. Is it worth it?

Investor · Downers Grove, IL · Member since 2015 · 1k+ posts · 955 votes

I'm reading Dave Van Horn's article

Maybe You Shouldn’t Start an Entity. Consider 4 Alternative Asset Protection Strategies Instead.

And it got me curious. Almost everyone suggest getting an umbrella policy since it's relatively inexpensive. I agree. But is it worth it? And will the insurance company defend their clients? (assuming it's out of the client's control)

And I read somewhere that if you have over $1 million policy, your insurance company would have attorney representation on your behalf?

Are we all so brainwashed that in this litigious society, we need to get all sorts of insurance, just for piece of mind?

Do you KNOW of anyone that has been through litigation where they had to rely on the umbrella policy?

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Frank Chin

Investor · Bayside, NY · Member since 2017 · 1k+ posts · 1k+ votes

My insurance agent had my home, auto, and various landlord policies carry a maximum of $500,000 liability, and anything over that is carried in the umbrella.

I originally carried $1,000,000 when I started, and increased it to $3,000,000. Premiums was originally under $1,000, and few million more only ran me another $200 to $300.

Totally worth it. Some scammer had a slip and fall, got a lawyer after me. I told him don't bother me, to go after my insurance. The lawyer dropped the client and case after 6 months because it was too much trouble. The scammer gave up on me after he pleaded with me to give him a few bucks to go away, and I said NO.

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Chris T.
OP
Investor · Downers Grove, IL · Member since 2015 · 1k+ posts · 955 votes
9y
I just found the answers to my own question
How Much Umbrella Insurance Do I Need?
From DAVID JOHN MAROTTA
"With lawsuits costing upwards of $300,000, having an insurance company with an obligation to defend you in court is the primary benefit of umbrella insurance. For those with assets sufficient to make them a target for lawsuits, umbrella insurance is the answer."
"Insurance companies will only write an umbrella policy if they also provide both your home and auto insurance. They don’t trust another insurance company to defend their interests."
"We are not usually fans of insurance. If you can afford to self-insure you probably should since insurance companies, on average, make money. But you don’t want a single accident to wipe out your life savings. Umbrella insurance helps protect you against that possibility."
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Account Closed
Real Estate Agent · Los Angeles, CA · Member since 2017 · 120 posts · 36 votes
9y
We have one and it costs $250 a year. Totally worth it, thankfully have never used it
4 Reply
Jennifer Z.Pro Member
Rental Property Investor · Brookings, OR · Member since 2015 · 68 posts · 28 votes
9y
Totally agree with @Account Closed. Best $180/yr spent on a little piece of mind.
2 Reply
Katherine S.
Investor · Grosse Pointe Shores, MI · Member since 2017 · 160 posts · 74 votes
9y
I was able to add three rental properties to my umbrella for cheap.
0 Reply
Jade S.
Investor · Evans, GA · Member since 2015 · 190 posts · 103 votes
9y
Yup, worth it. The article makes good points about being high net worth, and the higher probability of being the potential target in a liability case. A $2 million liability suit might be a "black swan" event, but think of the financial implications of even merely defending a suit like that. I maintain this on all real estate investments.
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Thomas S.
Member since 2016 · 13k+ posts · 12k+ votes
9y
Well worth every penny and will protect as well at less cost than a LLC. You will still need the insurance with a LLC so really it's better to just go with the insurance and skip the cost of a LLC.
0 Reply
Albert L.
Investor · Temple City, CA · Member since 2016 · 47 posts · 11 votes
9y
Which carriers offer umbrella liability policies?
0 Reply
Frank Chin
Investor · Bayside, NY · Member since 2017 · 1k+ posts · 1k+ votes
9y
My insurance agent had my home, auto, and various landlord policies carry a maximum of $500,000 liability, and anything over that is carried in the umbrella.
I originally carried $1,000,000 when I started, and increased it to $3,000,000. Premiums was originally under $1,000, and few million more only ran me another $200 to $300.
Totally worth it. Some scammer had a slip and fall, got a lawyer after me. I told him don't bother me, to go after my insurance. The lawyer dropped the client and case after 6 months because it was too much trouble. The scammer gave up on me after he pleaded with me to give him a few bucks to go away, and I said NO.
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Will BarnardPro Member
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Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
9y
As everybody has agreed above, these are the insurance policies that are worth the costs. I despise many insurance companies as they look for every loophole to not pay out a claim, but these policies provide younthe peace of mind in the event of a major incident. I highly recommend them.
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Frank Chin
Investor · Bayside, NY · Member since 2017 · 1k+ posts · 1k+ votes
9y
Originally posted by @Account Closed:
@Frank Chin A good lawyer will not drop a slip and fall case. they will sue the insurance carrier. You said scammer and I guess you have proof?
He gave me a chiropractor bill for $6,000 and ask to be paid. I overheard him talking to someone else about other scams he pulled some weeks earlier. He had no idea I heard the conversation. He came back to me, told me his lawyer is not taking his calls, and ask me to call my insurance company because they were giving his lawyer such a hard time.
You sound surprised. I was having a meeting in my lawyers office when he took a phone call, with me sitting in front of him. How rude!! He's explaining to a client he's talking to some other lawyer to handle his client's problem. Thought it was beyond his expertise. But when he hung up, he explained that he sent someone some demand letters to scare the guy to pay up, and they refused. So, he'll have to go to court, in which case it take up too much time and effort. He's trying to find a a lawyer with more time on their hands. I dropped this lawyer after he wrote a will up all wrong, and I told him this is not what we talked about after my wife read the will. The story I got back from him was he gave another will to his secretary to copy, and apparently she copied to wrong one, and he didn't realize it. Can you believe that??
Yes, being in various businesses over the years, I dealt with lawyers of all types.
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Chris T.
OP
Investor · Downers Grove, IL · Member since 2015 · 1k+ posts · 955 votes
9y
Originally posted by @Albert L.:

Which carriers offer umbrella liability policies?
First check with your own insurance agent. Your current insurance company usually will offer umbrella policies, as you need to have a minimum coverage on your current policies to qualify for an umbrella policy.
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Chris T.
OP
Investor · Downers Grove, IL · Member since 2015 · 1k+ posts · 955 votes
9y
Originally posted by @Will Barnard:

As everybody has agreed above, these are the insurance policies that are worth the costs. I despise many insurance companies as they look for every loophole to not pay out a claim, but these policies provide younthe peace of mind in the event of a major incident. I highly recommend them.
Will, you're a very experienced investor. Would you recommend any insurance companies?
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Chris T.
OP
Investor · Downers Grove, IL · Member since 2015 · 1k+ posts · 955 votes
9y
Originally posted by @Frank Chin:

My insurance agent had my home, auto, and various landlord policies carry a maximum of $500,000 liability, and anything over that is carried in the umbrella.
I originally carried $1,000,000 when I started, and increased it to $3,000,000. Premiums was originally under $1,000, and few million more only ran me another $200 to $300.
Totally worth it. Some scammer had a slip and fall, got a lawyer after me. I told him don't bother me, to go after my insurance. The lawyer dropped the client and case after 6 months because it was too much trouble. The scammer gave up on me after he pleaded with me to give him a few bucks to go away, and I said NO.
Frank, when the other party came after your insurance, was the attorney you're using yours? Or was it your insurance's attorney?
Did that attorney bill you or your insurance company?
0 Reply
Chris T.
OP
Investor · Downers Grove, IL · Member since 2015 · 1k+ posts · 955 votes
9y
Originally posted by @Thomas S.:

Well worth every penny and will protect as well at less cost than a LLC. You will still need the insurance with a LLC so really it's better to just go with the insurance and skip the cost of a LLC.
Thomas, it sounds like you don't use llc to hold your properties. But you use insurance policies instead.
If so, do you use the savings to get a higher coverage ?
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Frank Chin
Investor · Bayside, NY · Member since 2017 · 1k+ posts · 1k+ votes
9y
Originally posted by @Chris T.:

Originally posted by @Frank Chin:
My insurance agent had my home, auto, and various landlord policies carry a maximum of $500,000 liability, and anything over that is carried in the umbrella.
I originally carried $1,000,000 when I started, and increased it to $3,000,000. Premiums was originally under $1,000, and few million more only ran me another $200 to $300.
Totally worth it. Some scammer had a slip and fall, got a lawyer after me. I told him don't bother me, to go after my insurance. The lawyer dropped the client and case after 6 months because it was too much trouble. The scammer gave up on me after he pleaded with me to give him a few bucks to go away, and I said NO.
Frank, when the other party came after your insurance, was the attorney you're using yours? Or was it your insurance's attorney?
Did that attorney bill you or your insurance company?
That's the beauty of it, the insurance company attorneys took care of it all at their time and expense. That's one of the benefits that sold me on the umbrella originally. If you don't have a legitimate claim, your trying to play games, the insurance company has the resources to handle that.
When the scammers lawyer gave up, after several months, they notified me they closed the case. Never got a bill.
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Frank Chin
Investor · Bayside, NY · Member since 2017 · 1k+ posts · 1k+ votes
9y
Originally posted by @Account Closed:

@Frank Chin This one might be a scammer and the next one could be a real deal and cost you so don't think you got away Scott free.
That's why the insurance is so useful. They spend their time and money on it whether it's a scam or the real deal. This way, honest folks like us could conserve our time and energy in the pursuit of our businesses.
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Chris T.
OP
Investor · Downers Grove, IL · Member since 2015 · 1k+ posts · 955 votes
9y
@Frank Chin
thank you. THAT is what I was hoping to hear. Do you recommend any certain insurance companies?
We were evicting a professional tenant (my own fault for renting to them) in court but their attorney eventually realized he or she is not going to get paid by their client, so they gave up.
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Frank Chin
Investor · Bayside, NY · Member since 2017 · 1k+ posts · 1k+ votes
9y
Originally posted by @Chris T.:

@Frank Chin
thank you. THAT is what I was hoping to hear. Do you recommend any certain insurance companies?
We were evicting a professional tenant (my own fault for renting to them) in court but their attorney eventually realized he or she is not going to get paid by their client, so they gave up.
Insurance companies are state specific, governed by insurance laws of the states. Plans that they offer somewhere does not cross state lines.
I owned rentals and some years back some businesses, and you should find an experienced business insurance agent near you. I had an insurance agent that I used for 40 years, my dad used them, but unfortunately got a little lazy and didn't keep up with the times. So two years ago, my wife looked around, the AAA (Auto club) sell complete lines of insurance, got quotes from them, and used them instead. So I got my homeowner, auto, landlord, and umbrella insurance through the AAA.
After my wife got the quotes, I called and asked the AAA licensed insurance agent to make sure he knows what he's talking about. The event that finally caused us to switch was when my daughter got her license, to add her on, it'll cost me $250.00/month more. The AAA quoted me a package, including my daughter, where the total came up even less than what I was paying before.
My old agent asked me the names of the insurance companies the AAA used. I named them, and my old agent said, we could've gotten quotes from them too. So there's this old saying "could've would've". I didn't say it, but instead of asking me to pay $250.00/month more, without my asking, why don't you shop around and see where I can do better.
Anyway, the insurance companies the AAA used are Utica National (for landlord insurance) and Mapfre for the rest. I never heard of them before and my old agent used Travelers. But that doesn't mean they operate where you are or offer the same plans in your state.
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Lovely T.
Keaau, HI · Member since 2017 · 15 posts · 6 votes
9y
great information! "you learn something new everyday". and here i thought an LLC could protect you from these incidents! So is it wrong to have an LLC AND an umbrella insurance? or is it totally worthless to even think of having an LLC?
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Frank Chin
Investor · Bayside, NY · Member since 2017 · 1k+ posts · 1k+ votes
9y
Originally posted by @Lovely T.:

great information! "you learn something new everyday". and here i thought an LLC could protect you from these incidents! So is it wrong to have an LLC AND an umbrella insurance? or is it totally worthless to even think of having an LLC?
I always carried good adequate insurance. I have LLC's, S Corp, C Corp management company, set up for tax reasons, but have not placed any of my rentals into an LLC for liability purposes.
A good lawyer will not only pierce the corporate veil, but if you are personally involved in any way managing the property, you will be personally sued for negligence with along your LLC. Only if you use a PM, and he or she is involved in all decisions, and carry liability insurance, that a lawyer cannot get after you personally. Then, he'll find ways to pierce the corporate veil.
For instance, if it's a one person entity, it's simply a pass through, a sham entity. If it's two or more persons, do you have annual meetings and minutes to prove it?
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Metra UlloaPro Member
Rental Property Investor · N. CA · Member since 2015 · 32 posts · 23 votes
9y
We have one and I agree with what most people have said, it provides peace of mind. We chose to go with a carrier (Nationwide) that will cover our auto, home, rentals and the umbrella. I did do price comparison between about 5 carriers and they were the best for coverage and cost. To me it just makes life a little easier to deal with one provider. Another consideration for us is in CA an LLC is a min. of $800 a year to the state let alone the additional fees for tax prep. We figured why not just have the policy (which would provide legal representation) at half the cost. Even if we did decide to go the LLC route we would carry it.
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Lovely T.
Keaau, HI · Member since 2017 · 15 posts · 6 votes
9y
@Account Closed thank you for those info
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Chris T.
OP
Investor · Downers Grove, IL · Member since 2015 · 1k+ posts · 955 votes
9y
@Frank Chin
Another reason to use a PM, is to add another layer of protection. (assuming they carry liability insurance)
How about setting up a trust ? specifically a delaware statutory trust.
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Joel OwensBusiness Member
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Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
9y
6,000 for a chiropractor? That sounds nuts. I go once to twice a month for an adjustment.
If I go by myself it is 40 bucks and if the wife gets an adjustment also it is only 10 bucks more for 50 bucks total.
My chiropractor has been in the business almost 30 years so is very experienced.
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Frank Chin
Investor · Bayside, NY · Member since 2017 · 1k+ posts · 1k+ votes
9y
Originally posted by @Joel Owens:

6,000 for a chiropractor? That sounds nuts. I go once to twice a month for an adjustment.
If I go by myself it is 40 bucks and if the wife gets an adjustment also it is only 10 bucks more for 50 bucks total.
My chiropractor has been in the business almost 30 years so is very experienced.
As I mentioned previously, I overheard the guy talking about pulling off scams on other people before he pulled it on me.
I myself had a back problem, went to one for a while, and my chiropractor was somewhat crooked as well. I found out he was trying to find out from my medical plan what types of coverage I got, for instance, acupuncture. I walked in on him when he was inquiring, not knowing it was my insurance plan, Then, on my next visit, he had his resident acupuncturist offering me his services. I refused.
From my experience, it's not hard to find a crooked chiropractor.
When the scammer presented me the bill. with him visiting the chiropractor 3 times a week, I knew it was something fishy. Then I saw on TV a show around that time where investigators videotaped doctors preparing phony bills for patients for phony visits, I was convinced.
But the proof for me was when he claimed the slip and fall, I offered him $300.00 no questions asked to cover a doctor visit to see what's wrong, and expected a bill in a week. It was 2 months later that he presented the $6,000.00 bill.
When he said he's getting an attorney, I thought it was too small an amount for a legit injury attorney to make money on, unless to collect on a scam, with a few threatening demand letters. When the insurance company stood firm, and his attorney dropped him, I thought that was it.
Then the wise guy asked me if my offer of $300.00 is still good, and if OK with it, he'll drop the rest. Then I asked "what does the chiropractor have to say"? His answer "I take care of that". I told him the $300.00 is off the table, maybe he should get a better attorney.
I still laughing as to how stupid that scammer was to think other people can be that stupid.
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