Get An Umbrella Insurance Policy – Your Teenager Is Going To Bankrupt You
I was driving downtown to drop my wife off at the museum when a car started drifting dangerously into my lane. I beeped the horn to alert the driver and when I drove by, the teenage kid in the back seat flicked me off! I didn’t have a long annoying horn, nor a machine gun type rat-ta-tat-tat beep. All I did was beep once so we wouldn’t collide. The father was reading a map and driving at the same time.
I have to admit that my blood started to boil and I was tempted to blast him a new one when their car stopped next to me in front of the light. Instead, I buzzed down my window, stared intently, and told the kid, “Don’t embarrass your parents. I beeped at you guys because you were halfway in my lane and didn’t even know it.”
The dad was still clueless as to why I was talking to his punk kid and he also rolled down his window to ask, “What’s up?”
“You’re kid gave me the finger, that’s what’s up. You’ve got yourself a live one,” I said. The mom in the front passenger seat started questioning her son and then started screaming at him. She apologized on his behalf and said in an exasperated voice, “Teenagers!”
In my earlier days, I may have got out of the car and lost it. Maybe we’d have a rumble in the middle of the street, I don’t know. What I do know is that teenagers create a ton of trouble and are one big fat liability for parents. I should know, because I remember almost burning down our apartment when I tried to set my bed on fire! If your teenager gets into a car accident and injures someone, the parents are the ones liable for all the damages!
UMBRELLA INSURANCE POLICY (AKA EXCESS LIABILITY INSURANCE)
MSN Money
An umbrella policy is simply an added insurance policy that kicks in after your auto and home-owner’s insurance runs out. Some people make the mistake of getting an umbrella policy that matches your assets and no more. But what if you have $500,000 in assets, and someone sues you for $1 million for slipping on your front steps? It’s better to get an umbrella policy with coverage at least 50% more than your total assets.
You spend your entire life building your assets, you owe it to yourself to protect your financial health with an umbrella policy. We’re in lawsuit happy land, so better safe than sorry, especially if you’ve got a teenager! If you entertain a lot, have a home business with clients coming and going, or drive constantly for work, these are other reasons why you should consider an umbrella policy.
FALL OPEN ENROLLMENT
In a good way, it’s nice having very little to your name as an adult. If you’re found liable of something bad and lose in court, what are they going to go after, your underwear?
Now is open enrollment season to make insurance choices for next year. Study your employee benefits carefully, and do your best to forecast your anticipated healthcare and insurance needs. Are you getting Lasik corrective eye surgery? Max out your Flex Spending Account (FSA), which is a pre-tax expense. Anticipating visiting the doctor next year to check out a chronic knee injury? Perhaps go from a high deductible medical plan to a low deductible plan since you may need surgery. Make sure you have long term disability in case you get injured and can’t work for months. Furthermore, get as much supplemental life insurance as possible if you have dependents. Lack of insurance is one of the leading causes for financial ruin, so make sure you have at least the minimum coverage to protect yourself if disaster strikes!
Be well! Do you know where your teenager is?
Keigu,
Financial Samurai – “Slicing Through Money’s Mysteries”
Follow me on Twitter @FinancialSamurai and subscribe to our RSS!
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What a great idea. These things are not too popular over here in England (certainly I’ve never heard of them before), but I wonder if they provide the same kind of coverage as our general catch-all “public liability insurance”? I don’t have any personally as I’m covered by work for most things I am likely to get sued for.
By the same token, suing people just isn’t as popular over here. You have to have a good case, fund it up front, and if you lose, foot the bill for the lot. I think our legal system discourages it, which isn’t a bad thing. If you have a genuine case then bring it on. But if I slip over on your path in the middle of winter, it’ll teach me to a) stop stalking you and b) be more careful next winter.
Suing you would not even enter my mind.
And yes, teenagers should be outlawed.
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admin Reply:
October 20th, 2009 at 4:21 am
Lee – Haha, good one! It’s 4:20am in the morning here and I’m awake b/c our pet rabbit woke me up :) Good to hear from you now since it’s only the afternoon there.
The really good thing about having not positive assets to your name is that even if you are deemed liable, they aren’t going to get anything from you because you have nothing! That said, the really killer is making a claim on your FUTURE INCOME STREAM. You still might get sued for $1 million bucks if you don’t have it. You just need to spend the next 40 years of your life paying it back.
It’s pretty scary here in America. The more you have, the more you have to lose.
Best, FS
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Although I don’t have any kids yet… this is also important if you have any pets that could potentially bite someone. Thanks for explaining how the umbrella policy works… I never actually knew specifics on them until today.
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@Gen Y Investor
Cool, no problem. Yeah, good point on the pets. I think there is a serious misconception that 1) An umbrella is only for the rich (it rains on the poor too), and 2) It’s expensive. Untrue on both counts.
We’re talking $100-300 a YEAR for a $1million umbrella. You don’t want to get sued for $1 million, even if you only have 5 dollars to your name, b/c your aggressor may garnish your future wages for life. It’s scary stuff.
FS
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It’s a definite thing to have. Don’t be foolish without one.
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FS you say “If you’ve spent your entire life building your retirement fund, you owe it to yourself to protect all your assets with an umbrella policy.” I’m not an expert in this but, aren’t retirement funds (401k, 403b and IRA) protected from getting sued and bankruptcy? It’s the non retirement assets you should be worried about no?
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admin Reply:
October 20th, 2009 at 8:58 am
Larry – Good observation and question! I’m not sure, so let me know what you find out. Instead of “retirement fund”, I should have written “assets”. It’s just a catch all phrase for all the things you have that will provide for you. You bring up a very intersting point, so if you find out before me, do let us know! Thnx
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After a year of studying torts and reading cases where things unexpectedly and utterly go wrong for people my advise to my friends is: “(1) if anything can go wrong then it will go wrong, (2) you will be sued and (3) there will be a judgment + legal fees in the millions.” Excess Liability Insurance is a very good idea especially for those with risky “assets” like teenagers!
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@admin
Scary business. At least your hamster isn’t likely to get you in trouble, Samurai. :) Courts here are unlikely to award a payout on the basis of what you may earn in the future. You equally may not earn such sums, so it doesn’t enter into it.
Sensible!
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@admin
Some of it may depend upon the state you live in also. I have this book:
http://www.amazon.com/Wealth-Secrets-Affluent-Building-Protection/dp/047013979X/ref=sr_1_1?ie=UTF8&s=books&qid=1256056072&sr=8-1
Which I know touched on it.
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Ok here is an excerpt from the book.
“The two signifcant asset classes that the federal law protects are qualified retirement plans (QRPs) and IRAs. … including profit shared plans, money purchase plans, 401(k)s, or 403(b)s. … federal protection only applies if you are in a bankruptcy situation. If you were simply sued and a creditor was trying to take the funds in your pension or IRA, bankruptcy protection would not apply. You would have to ak the step of filing for bankruptcy to shield the asset.”
This makes sense when you hear people in the news losing a civil suit and then declaring bankruptcy, now you know why.
The book then goes on to discuss state exempt assets, which of course depends on your state.
they are:
”
1. Qualified retirement plans and individual retirement accounts.
2. Primary residence (or homestead).
3. Life insurance.
4. Annuities.
“
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admin Reply:
October 20th, 2009 at 7:50 pm
Hey Larry – Thanks a lot for providing this info. VERY useful! Hence, the lesson is, file for bankruptcy protection if you want to protect your retirement plans from getting pilfered from some sue happy person who might or might not have a right.
Very useful. BTW, I’ll be highlighting your post manana! Best, FS
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Great reminder…. I have my oldest turning 13 this month. We’ve talked about an umbrella in the past. Now I think we need to do something about it!
btw… if it is my kid that flips you off, you have my permission to kick his…
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admin Reply:
October 20th, 2009 at 7:48 pm
Nice Greg! Ok, I will kick his A&&! :) Seriously, for $100-300/yr, you can get a $1-2 million umbrella policy. Seems like a no brainer to me!
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very good to know!! Thanks for explaining this. I don’t have any kids now but my sympathies go out to those with teens. I can’t imagine how stressful that must be. It’s nice people don’t sue as much in England as the US. It’s too easy for people to sue in the US and protection is key.
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@admin
The book also states that while this option is available, it’s not the only way but it’s the simplest to do but obviously would have massive repercussions.
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We got our million dollar umbrella a month or so ago. The peace of mind is great.
It really doesn’t take much to rack up a half million or so in liability. You’ve seen the semis loaded with new cars heading down the highway? Imagine running one of them off the road … A momentary distraction, a patch of ice, or even just a blind spot.
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admin Reply:
October 22nd, 2009 at 7:48 pm
Hey Kosmo – Sounds good. More people need to get umbrellas. I just don’t think enough people understand what it is, so they don’t bother. Umbrella and long term liability are two must haves for everybody! Thnx for your thoughts. FS
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