How Does an Umbrella Insurance Work

[Scott Mac]

So many in here seem to like Umbrella Insurance compared to an LLC.

I'm an LLC guy, but I have some questions about your experiences with Umbrella Insurance.

Both owners and Insurance Sales Experts are invited to comment.

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Dr. Advanced Degree in private practice, buys a 4 plex looking to build generation wealth (or just a bigger Mercedes), decides to use an Umbrella Policy vs an LLC for this investment.

Scenario 1

Ms. Clumsy Renter falls though a broken stair tread cuts her leg and bleeds to death before help arrives. She leaves behind 11 crying children (all now orphans), and one Slip and Fall Attorney.

Dr. Degree faces a BIG lawsuit, but less than the Umbrella Policy. The Doctor loses this case due to negligence, unrepaired stair tread.

Will the insurance company handle the lawsuit (at zero cost to the doctor), and either fight it or settle, and then drop the good Doctor as a customer, or raise his rates to the sky forever after.

Will the Doc never have to pay anything out of pocket—ever.

Scenario 2

Mr. Nuisance Suit pretends to trip over a piece of heaved sidewalk he notices near the front door of the place, has a Slip and Fall Attorney on speed dial.

Dr. Degree faces a BIG lawsuit, but less than the Umbrella Policy. Insurance company settles for $10,000 (less than the cost to fight it).

Will the insurance company handle the lawsuit (at zero cost to the doctor), and either fight it or settle, and then drop the good Doctor as a customer, or raise his rates to the sky forever after.

Will the Doc never have to pay anything out of pocket—ever.

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It being a given that if the Doc had the apartments in an LLC that he would have had to foot the bill for all attorneys fees, vs the insurance company paying those attorney bills.

What about getting your personal and (other than real estate business) bank accounts unfrozen after being served compared to an LLC—which takes some time and extra attorney fees.

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What are your experiences and thoughts about this?