Author Topic: Umbrella insurance  (Read 5447 times)

LongHaul

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Re: Umbrella insurance
« Reply #20 on: July 08, 2017, 10:15:23 AM »
Some things to keep in mind.

1.  If you are paying $250 per year that equals 2.5 bps.  So if the insurance company is paying out half in claim costs then the underlying long run benefit equals about 1.25 bps.  Round down and you get 1 bps risk per year.  That is extremely small 1/10,000.   Of course it can be catastrophic.

2. If you are an average risk insurance is almost always negative expected value. 

This is a friend who is a very capable consultant for oil and gas investing. 

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Spekulatius

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Re: Umbrella insurance
« Reply #21 on: July 08, 2017, 01:29:35 PM »
An insurance agent explained umbrella insurance this way - you want to make sure that the insurance is large enough, such that the insurance company fights tooth and nails legally to prevent an adverse outcome. Beyond that, the total sum does not play such a significant role, since the lawsuit amounts can be totally arbitrary anyways.

In most cases, the counterparty will look for a settlement.
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MikeTheCannon

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Re: Umbrella insurance
« Reply #22 on: July 09, 2017, 05:43:55 PM »
Some things to keep in mind.

2. If you are an average risk insurance is almost always negative expected value.

Ah but don't forget expected value =/= expected utility!

cherzeca

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Re: Umbrella insurance
« Reply #23 on: July 09, 2017, 06:46:36 PM »
utility v value is a good concept to keep in mind re insurance.  if you are newly retired, you spend alot of time thinking about how to grow nest egg but maybe should spend more time how to protect nest egg.  protecting the downside always has high utility.

boilermaker75

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Re: Umbrella insurance
« Reply #24 on: August 30, 2017, 03:04:23 PM »
An insurance agent explained umbrella insurance this way - you want to make sure that the insurance is large enough, such that the insurance company fights tooth and nails legally to prevent an adverse outcome. Beyond that, the total sum does not play such a significant role, since the lawsuit amounts can be totally arbitrary anyways.

In most cases, the counterparty will look for a settlement.

Exactly, having an insurance company to defend you in court is the primary benefit.

You want at least $1 million to cover nuisance lawsuits.

If you have a net worth of $1 million, have a $1 million umbrella and loose a $2 million lawsuit you are wiped out.

So I have a $5 million policy with GEICO, which costs $756 per year. It is unlikely I will ever need this amount of coverage, but the probability is not zero.

DooDiligence

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Re: Umbrella insurance
« Reply #25 on: September 19, 2017, 08:46:05 AM »
An insurance agent explained umbrella insurance this way - you want to make sure that the insurance is large enough, such that the insurance company fights tooth and nails legally to prevent an adverse outcome. Beyond that, the total sum does not play such a significant role, since the lawsuit amounts can be totally arbitrary anyways.

In most cases, the counterparty will look for a settlement.

Exactly, having an insurance company to defend you in court is the primary benefit.

You want at least $1 million to cover nuisance lawsuits.

If you have a net worth of $1 million, have a $1 million umbrella and loose a $2 million lawsuit you are wiped out.

So I have a $5 million policy with GEICO, which costs $756 per year. It is unlikely I will ever need this amount of coverage, but the probability is not zero.

Brilliant, I never thought of it that way!

Thanks in advance...
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mranski

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Re: Umbrella insurance
« Reply #26 on: November 30, 2017, 10:42:32 AM »
In Canada, I haven't been able to convince myself it is worth buying. In BC, you can easily get $5 million limits on auto and home quite inexpensively. All business related activity is excluded to my knowledge. So it doesn't seem worth it to buy it just to increase these limits?