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Umbrella is VERY cheap, everybody should have it. I think my 3 million coverage is only about $200 a year. That's $16 a month. I have teenagers that drive. The liability risk is not worth it if your house is paid for or not. I'll take the paid for house and $16 a month for coverage over a piece of crap HELOC any day.
I agree and do have a smaller ($1M) umbrella policy too.
(My teens are now 20's and on their own)
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The notion about adding an encumbrance is not about what insurance can do for you (to fight or pay off a lawsuit etc) in the event of something happening, or doing this completely in lieu of umbrella insurance which I'll certainly continue to have, but rather it is about what we can do to minimize that suit being filed in the first place.
When the scummy PI contingency lawyer does an asset search he'll quickly see he is 3rd in line.
Beyond that... in the event I ever wanted that cash for some other purpose or needed it in on short notice... having the HELOC established in advance would be a GoodThing.
I haven't said I'm doing this... but I am mulling it over.
Thanks for your comments.
Umbrella is VERY cheap, everybody should have it. I think my 3 million coverage is only about $200 a year. That's $16 a month. I have teenagers that drive. The liability risk is not worth it if your house is paid for or not. I'll take the paid for house and $16 a month for coverage over a piece of crap HELOC any day.
i just listened to an NPR story about the number of people that own their homes that choose to not carry insurance at all! they were speaking specifically about what's happening with the tornado in the southeast. unreal.
i just listened to an NPR story about the number of people that own their homes that choose to not carry insurance at all! they were speaking specifically about what's happening with the tornado in the southeast. unreal.
That goes beyond foolish and more into the stupid range.
Even if your net-worth is $100 million, paying $600 a year for $450,000 of coverage just makes perfect sense to me.
I agree and do have a smaller ($1M) umbrella policy too.
(My teens are now 20's and on their own)
---
The notion about adding an encumbrance is not about what insurance can do for you (to fight or pay off a lawsuit etc) in the event of something happening, or doing this completely in lieu of umbrella insurance which I'll certainly continue to have, but rather it is about what we can do to minimize that suit being filed in the first place.
When the scummy PI contingency lawyer does an asset search he'll quickly see he is 3rd in line.
Beyond that... in the event I ever wanted that cash for some other purpose or needed it in on short notice... having the HELOC established in advance would be a GoodThing.
I haven't said I'm doing this... but I am mulling it over.
Thanks for your comments.
Good luck with your choice.
I won't bash anybody with HELOC just, personally, think of HELOCs as a Credit Card secured against your house.
I just don't think you should let a personal injury lawyer scare you out of building wealth and financial success!
it was more about people with no net-worth "not being able to afford" insurance. in my mind...you can't afford to NOT have insurance.
If you can't afford to buy home owners insurance ... You have no business being a home owner. I'm sure there is enough government "cheese" to get into some low income renting and pay a small premium of $5-10 a month for renters insurance.
Something in excess of 60% of people "own" vs rent.
I can see that about half of those might be finished with the mortgage paying (as I am)...
but 30% does still seem a bit high on that scale.
Yes, but the 40% that are renters live in houses owned by homeowners too, so those have to be accounted for as well. My guess would be, seeing so many investors paying cash, that a proportionately higher number of investment properties are fully paid for.
When you figure in people who own 10 or 12 houses outright (we manage rentals for several owners in this situation), that drives the percentage up.
If you just looked at homeowner occupants who only own their primary residence, I would guess the percentage would be much lower.
There should be a third option, too: How many even own any equity in their home?
Really, American households come in four, no five categories:
1. Rent
2. Mortgaged, owe more than value
3. Own equity, but still mortgaged
4. Own outright, clear of mortgage
5. Also own a second home or vacation property, or an income-generating rental.
We could get really detailed and break category 5 down further into 5-2, 5-3 and 5-4, referring back to your previous 2, 3 and 4 categories.
What do these mean? We also own our house outright. Never heard any of these. Well, we're young so maybe that's why we never heard of these. lol. Anyway, please explain.
A lot of people don't know about umbrella insurance but it's a good thing for homeowners to have. (Although MrRational's plan to open (without actually drawing money) a Home Equity Line Of Credit is intriguing.) I don't know if renters should get it or if they CAN get it, but I just rent a room in a house and can't see where I could possibly need umbrella insurance.
When you buy homeowner's insurance, you get a certain dollar amount of loss coverage (fire, vandalism, etc) and liability coverage.
Umbrella insurance is additional general coverage (it works like an umbrella to cover gaps in homeowner's, auto, etc insurance).
For example, your car insurance might include $1M of liability coverage, and you might also have $3M of umbrella insurance. If you are at fault in a car wreck which causes $2M liability loss (property, injury) to others, your car insurance will cover the first $1M of liability and your umbrella insurance will cover the second $1M.
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Anyway, please explain. 
