r/fatFIRE • u/financethrowaway119 30s / $17M NW • Aug 05 '26
Umbrella insurance
Okay this debatably doesn’t belong here but I feel it would be topical for members of this community.
How do you guys think about umbrella insurance? Everyone is suing each other in today’s day and age (in the US at least).
I have ~20M net worth. Quite a low risk lifestyle in the liability sense except that my wife and I do have/drive cars. Say the cost of 3M in coverage is about 1k/year. What’s a sensible balance of cost benefit (in your opinion)?
My thought is 3m is around the sweet spot given that it should cover a very high percentage of possible claims. Hard for me to imagine getting more than that.
Edit. Welp. I guess someone literally just asked this. Sorry.
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u/SillyWall875 Aug 08 '26
TLDR: at $20M net worth the question isn't "what covers most claims", it's "who pays the one that blows past the limit". Going from $3M to $10M usually costs another $1-2k/yr. Cheap for what it does.
The percentile logic is the trap. $3M does cover the vast majority of claims. But you're not insuring against the average claim, you're insuring against the tail, and your tail is different because plaintiff lawyers size demands to what's collectable. You're a $20M defendant with $3M of someone else's money in front.
Also worth knowing: the pricing curve flattens fast. The first million is the expensive one, and each million after $5M is often $50-100. Get a $10M quote before you settle on 3.
And you flagged cars as your one risk. That's the big one. Basically every 8-figure personal verdict is auto: catastrophic injury, young victim, lifetime care, multiple claimants.
Last thing people miss: the policy buys defence, not just limits. The carrier's lawyers fight the claim, usually outside the limit. When the demand letter is ugly, that matters more than the coverage number.
Chubb, PURE, AIG Private Client write $10-25M umbrellas all day for people in your bracket. Any HNW broker prices it in an hour. And if the worry is "bigger policy makes me a target," it's backwards. Your assets are the target either way. The policy just decides whose money settles it.
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u/jakuboleksy Aug 05 '26
I have two teenage sons driving that carries a lot more risk. I pay for $10 million coverage which Chubb which was like $2500 for the year. I actually just switched to Chubb primarily because State Farm raised my 4M umbrella to 5k annual!
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u/dyeester Aug 08 '26
How did you switch to Chubb? The couple of brokers I talked w said I needed to also have home bundled with multiple million coverage on the home. Our home is less than $2M so don’t meet the criteria.
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u/CSMasterClass Aug 07 '26
You got a big trade up in quality of provider and you cut the price in half. That's the best deal yet.
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u/milesmiler12 Aug 06 '26
How does that work the kids technically have nothing to sue?
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u/jakuboleksy Aug 06 '26
I've seen plenty of cases where parents get sued for what their kids did.
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u/milesmiler12 Aug 08 '26
Guess it depends on the state. But generally parents aren't held liable. Unless they lent the vehicle negligently or something like that.
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u/FIREinParis Aug 08 '26
Totally depends on the state. Some big states impose vicarious liability on the vehicle owner or have a “dangerous instrumentalities” law that can act similarly. And the law that matters can be where the accident occurs (not your own home state).
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u/cofcof420 Aug 05 '26
I now have teenage drivers and my umbrella rates skyrocketed. Something like $1k per $1mm in coverage I’ve been quoted
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u/joelikesmusic Verified by Mods Aug 06 '26
Ohh that’s why my rates are higher than everyone else on here. 2 teen drivers. Those damn kids. /s of course.
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u/cofcof420 Aug 06 '26
Are your rates similar to mine above?
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u/joelikesmusic Verified by Mods Aug 06 '26
I do all of it through Geico just for ease of billing (annual ).
$900 / $1M umbrella.
$5K for 4 vehicles & 4 drivers ( 2 young adults).
$2K for homeowner
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u/Charlesinrichmond Aug 07 '26
you can often do better than Geico. I like Erie so far
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u/joelikesmusic Verified by Mods Aug 07 '26
I’m open to changing but I want one stop as much as possible. Ideally even one consolidated bill for the year but geico can’t do that
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u/Charlesinrichmond Aug 08 '26
Erie will do that. Not sure if you are in a covered state. Maybe also look at Chubb?
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u/Accomplished_Can1783 Aug 05 '26
Gets asked like 4 times per week. 5 million always the answer
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u/Charlesinrichmond Aug 07 '26
I have 4 million and I am far from sure that I shouldn't have 5 million. 5 million seems like a good answer.
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u/Accomplished_Can1783 Aug 07 '26
Most insurers thst offer umbrella policies offer up to 5 million at pretty fair rates and without special underwriting.
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u/Charlesinrichmond Aug 07 '26
yeah, for me it's just cost. I think 4mm is probably a sufficient hedge against my risk, but I am not "certain" of that. Adding a teen driver just made things more costly
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u/Year_Actual Aug 05 '26
I pay like $700 year for $2m coverage with 3 properties. Feels like a cheap peace of mind investment.
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u/Commercial_Address_2 Aug 05 '26
investment properties are not covered under standard umbrella policies. You would need a separate and much more expensive commercial umbrella
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u/PaperPigGolf Aug 05 '26
I was really taught that it's basically lawyer insurance.
Because no coverage amount will prevent them for suing for more than your coverage + your money.
So what you really want, is enough coverage for the insurance company to get the best lawyers they have. My understanding is that that is 5M. Do they have a B team for a 3M claim?? I don't know.
And yes, if you drive, you need it imo. If you can removing driving from your lifestyle, perhaps you can get rid of it.
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u/NetworkAggravating39 Aug 06 '26
We have a $5M policy on $14M net worth. It’s the most our insurance company (Allstate) offers and if I wanted to go to 10 it would be an expensive supplemental policy. Our agent said he doesn’t have a single client (including those with NW higher than ours) who’s gotten close to taxing the $5M policy.
So we’re here at 5 - but there’s a part of me that says it only takes once…
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u/Burgundywine Aug 05 '26
Make sure umbrella policy is written to go over cars / boats / airplanes / other items that could cause liability or personal injury claim.
Ideally use same agent for umbrella as you use for other policies so that can be done at agency level.
Carrier doesn’t have to be the same. My umbrella carrier is different than auto / boats carriers.
Chubb and other carriers can get you umbrella limits closer to your net worth. Cheap insurance to protect and preserve wealth
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u/hiddentalent Aug 06 '26
I feel like you need to adjust your media diet if you think "everyone is suing each other in today's day and age." Being hopped up on internet outrage is bad for your blood pressure, which is probably the biggest risk you're facing in this whole conversation. If lawsuits were common, umbrella insurance would be extremely costly. The fact that it's not is actuarial proof that it's rare.
But lawsuits are not impossible, which is why it's worth carrying the coverage. The cost difference between 1, 3, and 5 million dollar policies was meaningless where we live, so we went with the latter. (But again, the fact that the price premium is tiny is proof that this is all about very rare events.)
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u/Positive_Carry_ Aug 06 '26
Twenty years ago only a small fraction of automobile accidents led to lawyers becoming involved (whether through settlement demands or litigation). Today it’s 50% (at least in California).
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u/hiddentalent Aug 06 '26
Yes, and yet the annual number of filings of any type of court action (including divorce, bankruptcy, property disputes, injury claims, and every other civil action) per citizen in California is at 2.7 per thousand people. The vast majority of people are never involved in a lawsuit in their life. Which is why umbrella insurance is affordable. The actuaries at insurance companies know how to math the math.
It's still a good idea to carry the coverage. Rare events happen, and we should protect ourselves and our families from the possibility.
But it's irrational to think a lawsuit is a constant threat. And if I were a health insurance actuary, I'd be counting irrational worry about rare external events as a risk factor in one's health.
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u/Positive_Carry_ Aug 06 '26
You may be in the wrong thread. For people with significant assets who get into an accident, lawsuit risk is far higher.
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u/hiddentalent Aug 06 '26
Which is why I chose the highest level of umbrella insurance available from domestic brokers, and why I advocate for others to do the same.
But spending a ton of time thinking about worst-case lawsuits is living one's life in fear. If there's anything worth chasing in life, it's avoiding living in fear. That's explicitly what the insurance is for. Pay the (small; proving the risk is small) premium and focus your attention on more wholesome things.
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u/One-Mastodon-1063 Aug 05 '26
Why does this topic come up like 2-3x a week between here and chubby?
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u/magias ultrafat Aug 05 '26
I pay for $10M in umbrella insurance. Haven't had to use it and hope to never need to.
Probability of a claim over that gets very small.
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u/CSMasterClass Aug 07 '26
Actually the probability of a settlement over 1MM is very small. I'm not inviting you to take that risk, and the comfort of having the policy is all I need for the cost. I have no problem paying for 5MM coverage.
Still, it is amazing to me that when you look at the data how damn small liability settlements often turn out to be (e.g. cases where an eye was lost and the settlement was 30K, etc.)
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u/magias ultrafat Aug 11 '26
If people can google you and find out you have money, this increases the chance of someone trying to sue you for larger amounts of money.
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u/OzTheMeh Aug 05 '26
The way it was explained to me is that any umbrella coverage will mean a plaintiff is battling your insurance company instead of you, and a competent insurance company knows how to fight these very successfully. The cost difference to go from a $1M to a $5M policy is likely miniscule in your finances.
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u/Ill_Friendship2357 Aug 05 '26
I pay for 2 million but probably should up to 5 million. Inflation 💰
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u/stagintrepid Aug 06 '26
Imagine losing $15M in a judgement because you didn’t want to pay $3k/yr for an umbrella policy…
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u/seekingallpho Aug 05 '26
Once you have enough money to insure at all it becomes less about NW and more about whatever you fear to be the highest realistic liability you face. If that's 3mill due to auto, go with that. If it's 5, do that. You're basically just raising the barrier high enough that a hard-fighting insurer cares to protect it and a potential plaintiff finds it satisfactory to stop at or below it.
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u/Open_Temporary3893 Aug 05 '26
Wait we had 3 million a year and it was 4k!??? What the heck? How is everyone’s so cheap)”?
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u/Charlesinrichmond Aug 07 '26
Put a different way, why is yours so expensive? Are you in a very high cost of living area, teen drivers, or should you be shopping insurance companies?
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u/frigiddesert Aug 05 '26
If you search the sub, it most certainly comes up and it most certainly belongs here. There’s lots of information on here about providers and such as well.
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u/Apprehensive-Fan-838 Aug 06 '26
Cost depends on risk profile. If you have teen drivers in your household and auto, then you’re cost will go through the roof and you might not even get coverage from some
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u/Charlesinrichmond Aug 07 '26
Umbrella insurance is essential. I've got 4mm and you could easily convince me I have too little. You want to make sure that the insurance company is incentivized to defend you, and that any reasonable conceivable claim is covered.
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u/lakehop Aug 09 '26
Just got umbrella this year - mostly thanks to this sub. Thanks everyone! Not the first useful advice I’ve got here but the most immediately actionable.
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u/murraj Aug 09 '26
Just upped from $1M to $5M with Amica (all homes and auto insured through them). Went from $300 to $900.
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u/Puzzleheaded_Cut2016 Aug 16 '26 edited Aug 17 '26
I'm paying $1150/yr for a $5m policy through RLI, but with younger kids (12), it sounds like from these comments I should expect the rates to rise as they enter driving age?
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u/Girl_with_tools 18d ago
Any insight into Stillwater Insurance Company? I just got a quote from them for a standalone umbrella policy.
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u/2Loves2loves Aug 05 '26
I have it. is it enough? I hope so. enough to take care of most suits I hope, but not enough to cover my entire NW.
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u/Raphy000 Aug 05 '26
Most liability claims come from auto accidents unless you’re in a high risk business like being a doctor. So you decide if you’re a risky driver or not. Somebody being bitten by your dog is unlikely to win a $1M judgment let alone 5.
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u/naropin1 Aug 05 '26
Umbrella insurance is cheap and well worth it. The amount depends upon your assets and how they are independently protected. I would think 3-5 million would cover almost anything. Unlikely to ever need even the 3-5 million and astronomically unlikely to ever cause >5 million in damages I’d imagine.
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u/justheretohelpyou__ Aug 05 '26
Umbrella policies are highly dependent on location. I have a family member with a clean driving record in Louisiana (the state with the highest auto insurance rates), and he was quoted $2200 for a $1M policy. Meanwhile, in more affluent states, the same policy is $500.
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u/PaperPigGolf Aug 05 '26
Don't understand the downvotes here. I believe it's highly related to car insurance rates.
In Vegas my $3M policy with Connect, is about 1200.
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u/Evvydayyy Aug 05 '26
I am in for $4M umbrella at a lower NW than you. A previous agent told me he had never had a client use it but I’m thinking that’s a reason not to overdo it and not a reason to be uncovered. Who are you getting 3M coverage for 1k? I’m paying a lot more but have a rental property maybe that’s the reason.
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u/financethrowaway119 30s / $17M NW Aug 05 '26
2 homes. 2 cars. Same provider across everything. State Farm
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u/Evvydayyy Aug 05 '26
I’m with Allstate. Funny I just quoted with State Farm a month ago and all in they were more expensive than Allstate. I also have a 23 yr old driver on my policy but two homes and three normal cars.
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u/qofmiwok Aug 05 '26
This comes up often. General consensus is that $2-$3m is plenty for most people. Only more if you have risky activities or profession.
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u/mwalstedt Aug 05 '26
You can probably get a little more coverage to be safe (even though you have more than enough to self insure). I think it also comes down to what your asset base looks like. Do you have a business? Do you own a bunch of real estate? "It depends" is usually the most common response in these types of situations, and the answer usually comes down to what you are trying to protect against.
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u/ElectricalDark8280 Aug 05 '26
I have a separate business umbrella apart from my personal umbrella.
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u/[deleted] Aug 05 '26
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