Douglas Johnson wrote:

- quote -

It is indicated that the amount of one's asset has only a limited
effect on the amount one should buy, then in the para. which follows
says that if the asset amount is zero, one should buy zero amount which
exactly follows the rule of thumb.

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Is it that a defentant's asset amount is the maximum limit a jury can
award? What about future income of defendant? He or she must be able to
pay in installments.

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I understand that Bill Gates probably does not need an umbrella
insurance.

honjok[at]gmail.com wrote:

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You don't know what your liability is until the jury comes back. Then it's too
late to buy insurance.

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I've never understood this rule of thumb. Maybe somebody can explain it. All
liability insurance does is put the insurance company in line ahead of you. The
amount of your assets seems to have only a limited affect on the amount you
should buy.

If you have little or no attachable assets, you don't need any insurance. Broke
is broke and a jury award can't make you more broke. If are rich enough that
you will still be comfortable after a large award, you don't need insurance. In
the middle is where the conversation gets interesting. I think you need enough
insurance to protect you against any likely jury award. Not the mega-awards
that make the press.

-- Doug

Chris Cowles wrote:
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I wonder why it matters whether liability claims are where in the list.
Shouldn't one be interested in purchasing an unbrella insurance to
cover total amount of one's liability? Then why is that the rule of
thumb is that one should have insurance coverage equal to one's net
worth?

"Chris Cowles" <spam_magnet[at]remove-me-bellsouth.net> wrote in message
news:SpMbg.49924$Kn4.29141[at]bignews2.bellsouth.net...
- quote -

I was taught that it was in this order, highest priority first:

(1) Uncle sam (taxes and whatnot)
(2) Spousal/child support
(3) Secured creditors
(4) Unsecured creditors
(5) Everyone/everything else.

But, then again, I've never bothered to verify it.

BTW -- a liability claim is *nothing*. It's the settlement or judgement
that counts.

churin wrote:

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There is a little protection of pension funds and tax deferred funds.

I found the following comment on the web:

"Congress designed the Employee Retirement Income Safety Act (ERISA) to
protect pension funds from dissipation due to actions like employer
mismanagement and/or misconduct or even the employee's own error in
financial judgment. ERISA, in trying to achieve the goal of retirement
income security, enacted the anti-alienation provision in section
206(d), which specifically prohibits the invasion of pension accounts
with very few exceptions."

"The Internal Revenue Service also requires a tax-qualified plan to
adhere to the same prohibition. This protection is designed to lead to
an economically stable future for the participant. It has, however,
proved in operation to be broader than is equitable and has collided
with other crucial social and legal policies. In fact, the
anti-alienation provision provides gilded gates behind which deceit and
other forms of abuse can occur. By insisting that pension plans are
sacrosanct in any and all circumstances, the anti-alienation provision
prevents victims of torts and crimes, as well as honest creditors, from
recovering compensation from these pension accounts. Effectively, this
sacrosanct
treatment shifts the economic burden from pensioner, who is protected
behind the ERISA gilded gates, to the innocent victim. ..."

- -
--
Ron

"churin" <khonjo[at]mindspring.com> wrote in message
news:1148134397.542915.266030[at]i39g2000cwa.googlegroups.com...
- quote -

Doesn't declaration of bankruptcy put liability claims at the bottom of the
list of claimants?
--
Chris Cowles
Gainesville, FL

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Could you provide an example?

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Thanks for calling my attention to this.

You received bad advice in the past from your friends. Are they
professional financial advisers with a background in personal
liability? Most of the time our 'friends' are no more educated on the
topic than the person asking.

The insurance is inexpensive relative to what you have at risk. It is
common to take out $1-$2m of coverage. It might be required that you
shift or otherwise modify your primary policies so that you have the
right limits there before the umbrella will offer coverage.

If you need more protection then you should be looking at changing how
you hold the assets.

As noted you want to have the insurance company's money first in line.
They will get their lawyer involved to defend that money. Think of the
annual premium as the retainer for the insurance company's law firm.

John B. Corey Jr.
Chelsea Private Equity, LLC
+1 (503) 906 7840 x1108
+1 (503) 210 0227 (efax)
john.corey[at]ChelseaPrivateEquity.com

Looking for hard money for your latest real estate deal?
Visit www.ChelseaPrivateEquity.com

- quote -

It appears that if the insurance coverage is not enough then the
plaintiff will go after the defendant's asset ,if still not enough then
the defendant's source of income which may be his employer or pension
payer.

If the above is true, then it is only that the greater the insurance
coverage the less chance that one's asset is wiped out. AND if one's
asset and the insurance coverage combined does not cover the award to
the plaintiff then the defendant will have to continue paying bit by
bit to the plaintiff from his or her future income.

churin wrote:
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No, but the plaintiff may have a hard time collecting. I would be a
good idea to have at least a million dollar's worth of coverage since
many accidents can be costly.

Some assets may be protected from some type of awards. (e.g. retirement
accounts and homes).

--
Ron

Mechanics of Money Financial BBS wrote:
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Does this mean that plaintif never be awarded more than defendant's net
asset value?

spoca2005[at]yahoo.com wrote:
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Ask around among your friends and aquaintances and find someone who is
an attorney who works in personal injury law, either plaintiff or
defense, who has been in the business for over 10 years. Ask that
attorney if they have ever been involved in a case where someone lost
any of their own assets as a result of a personal injury claim where
the damages went over automobile insurance coverage with around your
limits. Also have that attorney ask around among her attorney friends
in the business. If you can dredge up one 2nd hand story of someone
losing their house because they didn't buy an umbrella policy then do
go ahead and buy it, and please post here and tell us about it. I have
a friend who has been in the PI business for 15 years, and he has never
heard of such a thing, but maybe its happened somewhere.

Andy

<spoca2005[at]yahoo.com> wrote in message
news:1147906262.135479.30250[at]j33g2000cwa.googlegroups.com...
- quote -

With kids, you also have to consider any damage they might cause to others'
property. A few years ago my 8yo son took our van out of gear and it rolled
backwards. Luckily the driver door hit a tree (ours) and slowed it down
long enough for me to jump in and hit the brake. But if it had continued
to roll backwards, it would have run right into the front of a neighbor's
house causing damage to the property and also possible injuries to the
occupants.

Get the insurance.

Leigh in raLeigh

spoca2005[at]yahoo.com wrote:

- quote -

I pay $534 a year for a $2 million umbrella policy for my wife and me. I
consider it a bargain. One of the advantages is that the insurance company will
defend any lawsuit under the policy. With $2 million at risk, they will defend
it pretty vigorously. I would probably still want my own attorney involved, but
it would reduce much of the cost, win or lose. As to the total amount, $2
million is more than all but a small percentage of awards.

-- Doug

The short answer is: buy the insurnace.

Have you shopped a quote for umbrella insurance? It is really really
cheap -- as far as insurance goes. It is sold in $1 million
increments. A $1 million dollar policy might very well cost you less
than $500 per year. That is nothing compared to the amount of coverage
that is provided. The cost is even less if your insurance company will
allow you to reduce the insurance coverage amounts for your car, house,
etc. -- thereby reducting the cost of those coverages (which are a lot
more expensive).

Moreover, no one will know that you have an umbrella policy until after
you are sued (it comes out in the discovery process -- the discovery
process only begins after a law suit is filed). So there is no
attractive nusiance issue.

The rule of thumb (which is always a dangerous thing) is that you
should have insurance coverage (via an umbrella policy) equal to your
net worth.



Gary Brolis
http://www.MechanicsofMoney.com
http://www.MechanicsofMoney.com/blog.php

About 5 years ago, I checked into buying personal liability / umbrella
insurance, and received mixed advice from a couple of friends.
Basically, some say it is a good piece of mind, while others say it is
an attractive nuisance, and carrying a 250/500 liability on auto
policies is fine.

During the past five years, my personal situation has changed
(improved). Basically, the change is as follows:

1. Both my wife and I have aged We are now 39 and 33.
2. Two children, 4.5 and 1.5 year old.
3. Increase in assets, from less than 250K to more than 1M.

Current rough summary is:
Vested portion of 401(k)s: 300K; IRA: 50K
Nonretirement: Mutual funds: 250K; DRIPs: 100K
Vested Employer Stock/option: 200K in the money (pre-tax)
Savings/Emergency Fund/Money Market: 50K
Home Equity: 400K (value: 650K; mortgage: 220K)
No debts other than the mortgage.

Our lifestyle is pretty conservative, no tobacco, no drugs, hardly any
alcohol. My job requires no commute (work is 1 mile from home. Wife's
job requires about 100 miles/week; she is going to quit job by the end
of the year to be with children. We presently carry 250K/500K liability
on our cars, and 300K liability on the home insurance (both with
Mercury Insurance). We also have adequate life and health insurance,
although that is not germane to this question.

We are in Northern California, but I do not think this area is more or
less litigious than the rest of the urban/suburban US. I would like
pros and cons about buying an Umbrella policy, and the suggested limits
for the umbrella policies. Is there some rule of thumb about Umbrella
policy limits? (Cf. it is suggested that mid-age people have life
insurance equal to between 5 and 9 times annual salary; Is there a
similar asset vs. umbrella limit rule of thumb?

Spoca