Is it ever OK to drop umbrella insurance?

[Anonymous]

Umbrella insurance is generally available for purchase at coverage levels of $1 million and above.

A relative in her late 70s has a net worth about one-fifth of that, and lives on a fixed income (small pensions plus Social Security, supplemented by RMDs from retirement accounts). The relative is still driving and has appropriate auto insurance coverage for that. (I mention that because the classic case for umbrella insurance is you're at fault in a car acccident that injures someone, who sues you for lost wages, etc. in amounts that exceed your auto insurance coverage limits, and the plaintiffs go after your assets.)

My relative is pinching pennies and debating whether to drop the umbrella insurance, premiums of which run about $250 per year.

Thoughts on whether someone in this situation could safely drop the extra coverage?

TIA

[Anonymous]

If she has $200k in assets, I can't imagine why she needs umbrella liability protection.

[Anonymous]

Since this relative is still driving, I would still keep the umbrella insurance. Is it needed? No - lots of people don't have umbrella coverage. But one car accident could wipe them out.

Why don't you offer to pay for the umbrella insurance? Or find some other way to gift them the $250.

[Anonymous]

Anonymous wrote:Since this relative is still driving, I would still keep the umbrella insurance. Is it needed? No - lots of people don't have umbrella coverage. But one car accident could wipe them out.

Why don't you offer to pay for the umbrella insurance? Or find some other way to gift them the $250.

Her car insurance can easily cover a $200k+ liability max. The vast majority of American adults

1) operate cars
2) do not need umbrella coverage


If OP asked "Does an old lady with $200k in assets need umbrella liability protection?" every single person on here, and every financial advisor, would say "No." The fact that she has it now is not a reason to keep it.

[Anonymous]

She could increase her auto liability to an amount that provides enough coverage and see if that makes more sense.
Best thing is to get on the phone with an insurance agent and walk through options. If she can has funds to cover it, raising the deductible can save a lot.
But the other issue is what provides peace of mind.

[Anonymous]

Anonymous wrote:She could increase her auto liability to an amount that provides enough coverage and see if that makes more sense.
Best thing is to get on the phone with an insurance agent and walk through options. If she can has funds to cover it, raising the deductible can save a lot.
But the other issue is what provides peace of mind.

it can, and I have high deductibles and a $3M umbrella liability policy. But for someone who is struggling to come up with $250 annually for an extra expense, a high deductible is probably not a great idea.