Does Umbrella Insurance require max coverage on car insurance?

Question

Hi BP! This question is for landlords who chose Umbrella Insurance instead of putting their properties in LLCs. Seems like the UI only comes into play after all other insurance limits are reached. We're having trouble getting cheaper car insurance because the UI we have for our property (which is under our name) requires the max limits for our car insurance. Hope I'm explaining this correctly. Is this the norm?

John Mocker · Answer

Josephine,

An umbrella policy, Personal or Commercial, will have requirements for the coverage on the underlying policies.  The reason for this is to keep the umbrella for the the larger losses.  That makes the Umbrella policies have less claims so the cost can be cheaper.

On a personal auto policy there are two ways the Liability can be written:

1. separate limit for Bodily Injury and for Property Damage

2. one limit for the combined Bodily Injury and property damage

The lowest required limit for your auto policy is likely to be, for a personal umbrella is $100,000 per person/$300,000 per accident for Bodily Injury and $100,000 for property damage.  For Combined Single limit policies the lowest is likely to be $300,000.  Many Umbrellas will require higher limits than those I mentioned.  If your company requires more than the $100,000/$300,000/$100,000 or $300,000 combined, you could shop around and see if there is a less expensive alternative for all of your coverage.  There are some stand alone umbrella policies out there that would not require you to move any of the other policies but they tend to be more expensive.

John Mocker · Answer

Josephine,

The rate for your auto seems high.  I would seek out a couple of Independent Agents (they represent multiple Insurance Carriers) and request quotes on all the policies (Home, Auto, & Umbrella).

On your second question, If the Home moves to an LLC, you would still need to have the $500k Liability.  Umbrella policies start to pay once the underlying policy's liability limits are exhausted.  The umbrella has requirements for the limits of the underlying policies (home, auto, rental dwelling, boat, etc).  You would not need to have a sepparate umbrella but you might have to switch to an umbrella that will cover both the LLC and yourself

Josephine Breign · Answer

Hi John,

Thanks for your reply. I'm working with an insurance agent on getting the best policies and so far she hasn't been able to find anything better. Now our auto policy is up for renewal and it's $2200 for 6 months. Am I crazy or is this just a ridiculously high amount to pay for auto insurance? Our car is not even worth that much (seriously).

I need some help to see if structuring things differently would make a difference. We have Homeowner's with personal liability on our 4plex in NJ. Max on personal liability is 500k. I was told by my CPA that I should have at least 2M liability on it. So I purchased the Umbrella. The house is in our name, and so is the car. The Umbrella covers everything that is in our name. If I put the house in an LLC, I would still only have 500k liability and would have to carry extra Umbrella. Can I put the car in a separate LLC?