HartleyHare

Hi all,

I would appreciate some advice or opinions on the above. We are currently getting some quotes for car insurance and I read that umbrella insurance is often taken out alongside this, primarily to protect any assets. My question is, we are here on an L1 and do not have any assets in the US. I can't seem to find any information as to whether umbrella insurance is necessary if a) you are not a LPR and b) you do not have assets in the US. I'm not even sure if we would qualify for it anyway. I could probably call some companies, but I know there must be others in our situation. Any advice/opinions or just point me in the right direction for further research.

Many thanks.

Michael

Most insurance companies can quote you cost of normal insurance but normally can't quote the cost of umbrella insurance since the umbrella insurance is normally underwritten by outside underwriters. Therefore they normally have to get quotes from the underwriters before they can tell you the price.

Although it may be more difficult to attach foreign assets and the plaintiff may have to file claims in foreign jurisdictions, liability claims has no boundaries.

kodokan

We didn't get offered it as an adjunct to car insurance only; the broker instead asked us to think about how much net worth we had and how much our future earnings were - basically, how good a target are you for a bumper claim - then set the liability limits accordingly.

When we bought a house, she explained we could now get umbrella insurance. I don't know if that's because you have to have both car and homeowners to qualify for an umbrella policy, or whether it's because it makes financially more sense to have a blanket liability policy to protect a large amount than it would do to pay to protect that amount once for a car incident, once for a house incident, etc.

We had liability limits of $500k pre-umbrella for the cars, but have now dropped them to... um... $1-250k for the various categories, something like that, whatever the state minimums were, with the umbrella now picking up the slack and covering us up to a million. The price for the car policies dropped by a hundred or so each, so the umbrella only cost us an extra couple of hundred a year in net terms. Seemed a sensible decision at that price - there's no point making great strides in wealth accumulation, worrying about the best possible return, etc, then failing to protect it from unscrupulous claims.

HartleyHare

Thank you both for your replies.

We were thinking of doing what Kodokan has done - having a lower liability with umbrella picking up the excess, although it sounds as if Kodokan's house/assets are all US based. I was just hoping that our UK assets would be "off limits" for any potential claims. I will talk to the insurance broker tomorrow, but it would have been handy to know how others in the same situation have handled it.

kodokan

Yes, we've got Green Cards now and bought a house, so are gradually onshoring everything as we are planning a life here for the foreseeable future (kids have got 10 years to get them both through high school). Definitely be out of range of 8938 forms after 2013, and hopefully FBARing too!

I would imagine your assets are 'accessible' everywhere, if it's a high enough value claim to make it worth bringing in lawyers that can take it to that level..? Otherwise companies/ divorcing spouses/ etc wouldn't bother actually hiding funds, they'd just say 'tough, it's overseas, you can't have it'. Wouldn't you just get a judgement against you, based on your overseas assets (which I guess you can't hide as they can presumably get a court order to pull up your tax records), then be imprisoned if you refused to pay?

(Am entirely basing this theory on the plot of real and imagined TV shows.)

I'm also vaguely thinking there are exemptions/ protections for your 401(k) fund, and some or all of your house equity, under homestead rules.

HartleyHare

Hi,

Thanks for replying. We don't want to hide anything! Our house and pensions will be declared on our US tax return anyway. I'm just really interested in what others in our situation have done. We can't be the only people on the US forums over here for a couple of years, with a UK home/pension and I guess I was hoping someone else had looked into the situation and could advise. Our house is the biggest asset, which we want to protect and I was just trying to ascertain if insurance was necessary or if there was a specal rule for UK homes. You have touched on the "homestead" rule and this is where I'm not clear. It seems to refer to "home" as in a US based home. In our state homes are not protected under this rule, but are under Federal Law (whatever that entails!)

In terms of 401(k), our pensions are UK based and I didn't realise that they could form part of a claim - just assuming that there would be some sort of protection under UK law. As we have only just arrived, OH has only just started paying into US version, so not much in there at the moment

Ok, so this is a little more complicated than I thought and I think our best course of action is to speak to the insurance broker and make sure that we can get our UK assets covered (although they may not be able to advise on the UK pensions aspect of it).

kodokan

Not sure on the 'what if it's foreign assets' stuff (and I bet your broker stares at you blankly when you ask this ). Pensions are probably ok; they're tightly locked down for UK law purposes, and I don't know of any provision where you can get the money out prior to retirement age short of dying (or having a short-term, terminal illness, I think).

As far as covering assets... they're not strictly 'covered' as such. Say, for example, you have $500k of assets, and a high future income stream, so you decide to take out liability protection coverage of $1mill. If you cause an accident where the damages are assessed as worth $1.5mill, the policy will pay the first $1mill, but then you're on the hook for the remaining $500k, ie, all your assets.

So you're not 100% protecting them. You're just pushing them above the level where they're likely to be unaffected by 99.9% of claims against you. Apparently in reality, the other side's legal team looks at your coverage and decides that $1mill is a good number to shoot for, because it's a simple slam-dunk and they want an easy fee...

Been thinking more about the umbrella and dredging my memory, and I'm fairly sure you DO need to have car and house policies first. The umbrella is called that because it you shelter your car and house insurance liabilities under it, and it forms an additional 'roof' of protection.

Let us know what your broker says - all good board research material!

HartleyHare

He he he! Nothing's ever simple is it? We are renting over here so were taking out car & renters insurance, then I read about the umbrella insurance and it got me thinking about our UK house & pensions. I don't even really know what would happen as the UK house is owned jointly anyway. I can't even drive so am unlikely to cause a car accident anyway (notice however, that I'm the one researching this!) I am fully expecting a blank look from the broker re UK assets, but if we are eligible for this insurance we'll get it anyway. Will come back and let you know how I got on. Who knows, there may be members out there now thinking, blimey have I got this covered

Michael

Your primary residence is homesteaded so the state law governing homestead doesn't allow that portion to be touched. Florida has unlimited homestead so if you get sued and are about to lose the lawsuit, move to Florida and put your assets into a home like OJ Simpson did. Then you take out a HELOC and draw on that. In fact Florida law doesn't allow any money in your account that is destined for a primary residence to be touched. So you can even sell your home and purchase another and while the money is sitting in the bank, it can't be touched.

Normally retirement assets can't be touched.

Sally Redux

Sounds a bit over the top for your situation, although I'm no expert.

HartleyHare

Yes, just trying to cover all bases! It's like with the healthcare, I'm always looking for the worse case scenario