Buying home insurance - ugh!

[pinkytoe]

We have always maintained the lowest home insurance coverage we could legally get by with ($30K) since it already so darned expensive to live here. Some of the agents I received new quotes from chastise us for not having $1 mil liability coverage plus an umbrella policy. I keep wondering what are the actual statistics for how often a homeowner is sued to that extent but can't find any numbers. I know the possibility is always there but logically it seems very unlikely as we don't have wild parties or even guests often, rotten trees, slippery sidewalks, weird dogs or other obvious things to harm someone. Also, would never hire a contractor that was not fully insured. I get the liability issue should probably be higher for auto but one's home I just don't know. I just know we need to cut costs wherever we can and this seems like one place to do so. Do you have thoughts on this matter?

[iris lilies]

Umbrella liability insurance is cheap.

We have it to protect our assets.

i don't have insurance for nickel and dime stuff but I DO have insurance for the big stuff because I don't want all of my assets to disappear in a judgement. $30,000 is paltry.

[herbgeek]

What Iris says. Someone suing you could attach ANY asset ie if you get into a car accident and they are injured, they could come after your house. The incident doesn't have to happen /at your house/. Where I live, $1 million of umbrella insurance is about $180/yr.

[pinkytoe]

Found these statistics. Looks like liability payouts are pretty low overall:
http://www.iii.org/fact-statistic/homeowners-and-renters-insurance

[sweetana3]

An older friend caused an auto accident that resulted in four injured people. If she had owned anything, they could have attached her assets for anything over the amount of her insurance. Can happen to anyone. Medical bills can easily exceed 1million and this does not cover loss of wages and pain and suffering.

We have an umbrella and figure it may never be used but it only takes once. Averages are meaningless if you are the one.

ps: if you dont have anything and plan on never having anything, minimums are probably ok. But if you have easy to find assets and income, protection can give peace of mind.

[jp1]

We pay $248/year for a $1M umbrella. Had to up the liability limits on the car to a certain level to be able to get the umbrella. Like others have mentioned this is strictly "sleep insurance" to cover you in the event of a major liability catastrophe, or at least a large lawsuit even if it's frivolous. You're not likely to ever need it (after all, think how many policies the insurance company would have to sell in order to cover just one $1M claim that gets paid out. Obviously no one expects it to happen. Assuming a 30% profit/expense margin my insurance company actuaries have estimated that there's roughly a 1 in 5,2241.9 chance that our umbrella policy will have to pay a limits loss.)

An important reason to get it is that if someone, reasonably or not, sues you for more than the limit you have on your auto or homeowners policy the insurance company won't pay for your defense. Your initial defense costs will have to be out of pocket until you can get the demand down below the limit of liability on the policy. Or until the suit gets settled, at which time they will reimburse you, up to the limit of insurance. And $30,000 won't cover very much in the way of legal bills. But if the insurance company also has a $1M umbrella on the line they will defend you as long as the demand doesn't go above the combined total of the underlying homeowners or auto policy limit plus the umbrella limit.

Also, think seriously about your auto insurance limit. I don't know what state you're in, but the state minimums are often absurdly low. In CA they are $25/$50/$10, which translates to $25,000 maximum for one injured person, $50,000 maximum for all injured persons and $10,000 maximum for property damage. One accident where you are deemed at fault could easily go above that amount. Hit a newer car and damage 2 or more body parts and you'll exceed $10,000 in property damage. Or back out of your driveway while a neighbor kid runs behind the car and goes splat. Unlikely, but possible.

We spend $524/year on full auto coverage including collision and comp (so that we don't have to buy rental car insurance when on vacation), $188 for homeowners, and $248 for the umbrella. Even if we both lost our jobs this insurance would be just about the last thing I'd want to cut from our budget.

[TVRodriguez]

I'm another one with an umbrella policy. When clients come to me about asset protection, it's the first thing I mention (I'm not an insurance agent--I'm an attorney). I've seen it used.

DH would like to get rid of the homeowners insurance once the mortgage is gone, and I had to remind him that we need the HOI to keep the umbrella policy.

We did have to increase our auto coverage and add a liability 'patch' onto our homeowners insurance (our existing auto and HOI coverage was insufficient for the umbrella to kick in).

[ApatheticNoMore]

That's what I was going to ask if you need a home to have an umbrella policy to protect assets (my assets are not in real estate). Oh well guess I'll stop considering the point in having one, as millionaire renters need not apply (fwiw I'm not a millionaire).

[Birdie]

I pay about $250 a year for a 2 million dollar umbrella policy. I have enough to cover all my assets...just in case. As another poster said, it's sleep insurance so I don't have to worry.

[jp1]

You dont need to own your home to get a 'homeowners' policy. Arenters policy will work also for purposes of getting an umbrella. It covers the same stuff as a homeowners policy, just not the building itself. Only contents and liability for bodily injury and property damage to others.

[JaneV2.0]

Am I the only one who finds it ironic that the same insurance agencies who have driven our medical costs sky-high now reap the benefits from homeowners who are terrified that someone will trip over a loose flagstone and sue them for the price of an exorbitant hospitalization? What a racket.

[pinkytoe]

What a racket.
I concur.

[jp1]

The reality is that we live in the most litigious country in the world. I didn't realize how much so until I started to underwrite an assortment of worldwide commercial insurance policies at work. The basic process is that I used the worldwide rater to figure out what the worldwide premium should be, then used the rater that figures out each non-US country's premium, and then deduct those from the worldwide premium to get the US premium for the (US) parent company. Premiums are based off revenue and differ in each country based off of loss experience in those countries. Assuming that our actuaries are correct in their assessments the cost of lawsuits in the US are about 5 times more than most European countries and even more drastically worse compared to most Asian countries.

[TVRodriguez]

It is a racket and it is crazy expensive here. Especially here where I live, in Florida. Our homeowners insurance is actually more than our real estate taxes, and don't think that's true for the rest of the country.

DH is pushing for us to drop the non--liability portion of our HOI coverage and stick with a liability only policy. I'm tempted, because it would be a LOT cheaper, but then I think, "what if there is another Hurricane Andrew/Katrina storm?" What if we can't cover the repair cost? That's what insurance is for, right?

I hate paying insurance premiums--but I do it anyway b/c I think that it'd be more expensive to pay the bill for the actual thing myself if it happened. This includes not only HOI, but also health insurance, dental insurance (which we just got now b/c the yearly cost is less than we pay at the pediatric dentist annually--and I really really like this dentist), disability insurance for DH (he's a surgeon who plays with power tools on his days off--a potential recipe for disaster without this insurance to let me not freak out as he's building a treehouse), life insurance (since we're not FI yet, and we have 3 young kids), and auto insurance. Oh, and umbrella insurance.

I think it's time for me to start shopping around again for lower prices on these policies.

[jp1]

, but then I think, "what if there is another Hurricane Andrew/Katrina storm?"

.

And that, in a nutshell, is why property insurance in Florida is so expensive.

When you shop around ask for the highest deductibles possible. Hopefully that would bring the premium down some.

[TVRodriguez]

And that, in a nutshell, is why property insurance in Florida is so expensive.

When you shop around ask for the highest deductibles possible. Hopefully that would bring the premium down some.

Good point about a higher deductible. I'll have to look again with that in mind. Thanks.

[Radicchio]

I realize this is an older thread, but I just wanted to thank everyone for their input here. When I initially read it, I started investigating umbrella policies and finally decided to investigate it for myself. Today I met with our insurance guy and set up an umbrella policy. It seemed quite reasonable to me. If it weren't for you guys I never would have looked into it.

[jp1]

I realize this is an older thread, but I just wanted to thank everyone for their input here. When I initially read it, I started investigating umbrella policies and finally decided to investigate it for myself. Today I met with our insurance guy and set up an umbrella policy. It seemed quite reasonable to me. If it weren't for you guys I never would have looked into it.

Now lets hope that you don't ever need it.

[Radicchio]

Thanks, jp1--I totally agree. In fact, that's the last thing I said to the insurance guy as I was leaving the office! We also discussed how we would hope that no one found out about the umbrella policy and decided to target us for a lawsuit. He then told me about clients he has had who, when involved in an auto accident, have shown the other party the declaration page from their insurance, stating the limits of their liability for personal injury. I'm sure I don't have to tell you how that went!