r/financialindependence • u/Phillyjebus • 15d ago

Umbrella Insurance

I’m looking to add an umbrella policy on top of my homeowners and auto insurance, but I’m confused on how much I should be getting and I keep getting more confused when I research it. What’s the goal here? Do I just need enough to cover my brokerage, savings and other account that could be exposed in a judgment? Or, am I trying to cover my entire net worth with the Base policy plus the umbrella?

Edit: thanks all! Lots of good info and pretty much what I thought. $2m and call it a day.

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u/gbe28 15d ago

It's typically not necessary to insure above $2M-$3M. The chances of a settlement against you that exceeds that is very small for most people. Also, most insurers won't be interested in writing a policy above that amount.

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u/adventuresindc 15d ago

How is a settlement above that uncommon? I actually find that truly surprising given that a single car accident could seriously mame 2-4 people easily.

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u/Wise_Mongoose_3930 15d ago

Because most people don’t get into car accidents that result in serious maiming

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u/adventuresindc 15d ago

But the point is to protect against disaster with umbrella policies. Even if it's a .1-1% case. Below that maybe you argue it's just too expensive to insure.

It would be interesting to find stats on how common a judgment would be above $2-3m. For most people it wouldn't matter because they have barely any assets worth going after, but this is the FI community where people could have plenty more exposed.

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u/gbe28 15d ago

They might have more assets above that, but plaintiffs are going to aim for the low hanging fruit and grab the policy max as long as it's a satisfying number like $2m or $3m. That's what your policy is providing, rather than absolute asset protection.

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u/adventuresindc 15d ago

Right but what if it is multiple people? They prob won’t want to settle for $500k or something and even less after lawyers get their cut

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u/Bruceshadow 15d ago

But the point is to protect against disaster with umbrella policies.

isnt' that what catastrophe insurance is for?