You can be sued and have a judgment awarded against you for whatever the trier of fact (judge or jury) deems you are responsible for. If you don’t currently have enough assets, you can have a judgment recorded and they can get a share of any future assets, including wages, inheritance, etc.
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It’s my understanding that the umbrella policy means you’re protected by the insurance company lawyers rather than having to defend yourself which is a huge plus in addition to the increased coverage.
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if you don’t have more, they can’t sue you for what you don’t have. Hence the point about having enough umbrella insurance to cover the “more”.
If you have assets and lose a lawsuit for more than the amount of your insurance coverage, whether it includes an umbrella policy or not, then the plaintiff can seize your assets to make up the difference. The insurance doesn’t provide absolute protection, it just pays first.
The way I’m reading your response it sounds like you’re saying that if you have $800K in assets and $1 million in insurance then your assets are completely safe. They’re not, and if you lose a $1.5 million judgement they can seize $500K.
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That makes sense to me, when you phrase it like that. Took me a minute to understand what you were saying. I think I have misunderstood umbrella insurance, as I’ve read that you figure out what you have in assets, and get that amount of umbrella insurance, but that doesn’t sound right.
I look at umbrella insurance as providing two benefits. First, with a substantial amount on the line the insurer is motivated to provide a strong defense. Second I hope that it provides enough coverage so that if it’s a slam-dunk case the plaintiff’s lawyer advises them to settle for the policy limits rather than taking the several years to bring the case to court and thru appeal. And plaintiff legal fees are probably a lot less for negotiating a settlement instead of taking the case thru trial, so in the end they may not get much more by going to trail. These days I figure $2-$3 million is in the ballpark.
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Back in the day when I was practicing, the attorneys for umbrella policies were often very top notch attorneys and the insurer pays for them, not the insured. Umbrella policies do indeed offer good defense for their insureds. The “regular” liability policies also have an attorney who provides defense so the insured has two attorneys defending his/her interest.
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Following up on my earlier post about my DD (20 at the time of the accident) being sued after a car accident involving a pedestrian.
As mentioned, we have an umbrella policy through the same company that covers our auto and home insurance. The pedestrian went after MUCH more than our auto policy covers. He even changed the amount he was suing for 3 times! He hired one of those well-known personal injury law firms that runs TV commercials often. Our insurance company told us they deal with this firm on a regular basis because they’re always going after people involved in auto accidents. It seems the firm has a history of raising their asking price substantially when they find out the details of your auto and umbrella policies. (The insurance company is required to hand over that information in a lawsuit.)
Thankfully, we didn’t have to do anything. The insurance company lawyers were fabulous! My DD just had a few phone conversations with them and needed to attend a remote deposition. That was it. The insurance lawyers went back and forth with the pedestrian’s lawyers for 8 months, but we weren’t involved. They took care of everything—including contacting the police officer and a witness. They just called us to provide updates.
Last month they agreed to a settlement that wasn’t even close to what the pedestrian was originally asking. Still, it was a significant amount of money. Other than a few phone calls and a remote deposition, we didn’t have to do anything. That umbrella policy was one of the best decisions we ever made.
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I got an umbrella policy (based in part from convos here on CC). It’s only about $250 a year and I’m very glad I did it. It’s a small price to pay for the peace of mind outlined so well by those above…
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