What is an umbrella policy you may ask, and why would anyone need one? Well, lets consider this situation. You’re driving down the street and look down at your phone for a split second, you look back up only to realize you are too close to the other vehicle and even after slamming on your brakes, you hit the car in front of you. The driver and both passengers of the other vehicle are not seriously injured, but they do need to go to the hospital. Afterwards, they sue you for negligence, pain and suffering, and failure to yield amongst several other charges. They end up winning the case, and the judge declares that you owe $1,050,000 for all the charges against you. Your auto policy only carries $100,000 per person, $300,000 per accident of liability limits. Now what? Without an umbrella, you carry the burden of having to pay out the additional $750,000.
The Personal Umbrella Policy was designed to provide coverage in the event of a catastrophic claim, lawsuit, or judgment. Personal umbrella policies provide excess liability insurance over the basic primary policies (i.e. homeowners, personal auto, boaters policies). Coverage is provided on a worldwide basis for the entire family and pay only after the limits of the underlying primary policies are exhausted. Coverage provides for bodily injury and property damage liability. Furthermore, coverage is usually broader and applies to some loss exposures not covered by the primary policies after the retained limit (deductible). For covered claims, defense costs are also covered and they can add up significantly.
With the frequency and cost of lawsuits having increased dramatically in the last 10 years, you may want to consider obtaining excess liability coverage for your own benefit and protection. The great perk about an umbrella policy is that they are relatively inexpensive. On average, someone will pay around $200 in premium for $1,000,000 of additional liability coverage.
Factors you want to consider:
- Your assets are greater than your insurance liability limits
- You have children
- You have guests over to your property
- Your home has a swimming pool
- You own other properties or watercraft
- You own a dog
At the end of the day, just because you may not be at high risk of being sued doesn’t mean you are at NO risk. Even if you are a very careful person, anyone is susceptable to bad luck. The safest course of action is to be insured, which is what umbrella insurance is all about— protecting your assets and making sure you’re covered in case of any unforseen events.