While it’s difficult to pinpoint the monetary consequences of the risks you and your family take each day, are you certain your current liability insurance offers you enough protection?
The Basics of Personal Umbrella Liability Policies
If you are found to be legally responsible for injuring someone or damaging their property without umbrella coverage, anything beyond the limits of your standard liability insurance coverage will come out of your own pocket. Standard liability insurance generally includes homeowners, renters, auto and watercraft policies.
A personal umbrella liability policy provides an extra layer of insurance coverage over your standard liability policies. It protects your personal assets by kicking in when your standard liability coverage is exhausted.
An umbrella insurance policy protects you from a downpour—that worst-case scenario where you could lose everything in a lawsuit.
Who Needs an Umbrella Liability Policy?
We recommend that everyone should consider carrying an umbrella policy. If you engage in a high-risk activity or hobby that increases your odds of getting sued—such as having a teenage driver, owning a swimming pool or entertaining frequently—it is wise to supplement your insurance with a personal umbrella liability policy.
How Much Coverage Do I Need?
You’ll want to take into consideration not only your total personal assets but also your potential personal risks. For example, do you operate a business in your home and have employees and clients to your home on a regular basis? Does your profession or location of your home make you an easy target for a big settlement? Determine your personal risks to evaluate the amount of additional liability coverage that makes the most sense for you.
Coverages start at $1 million and can go as high as $10 million.
How Much Does Coverage Cost?
Additional liability insurance is inexpensive when compared to the added coverage you gain. Depending on the policy value and your personal risk factors, such as recent auto tickets, your credit rating and more, a $1 million umbrella policy typically costs about a dollar per day. Costs go up an additional $50 to $75 for each million thereafter.
Umbrella Coverage in Action
Now let’s take a look at a real world example…
After a hectic work week, Jim Marshall was looking forward to a relaxing weekend with his wife and kids. He was just a few blocks from home when his cell phone rang. He glanced down to see who was calling.
That split-second distraction was all it took for him to miss the approaching stop sign.
Jim plowed into the side of a passing car. The accident resulted in serious injuries to the driver and passenger of the other vehicle. Jim was sued, found at fault and ordered to pay $1 million for medical expenses, lost wages and the “pain and suffering” of the injured parties.
Although he had auto insurance, the policy had a limit of $300,000. That meant that unless Jim had another way to pay the remaining $700,000, his assets (retirement savings and college funds for his teenage sons) were at risk of being garnished.
Fortunately, Jim was able to keep his assets because he had a personal umbrella liability insurance policy to cover the remaining balance. Just as an umbrella shields you from the rain, an umbrella insurance policy protects you from a downpour—that worst-case scenario where you could lose everything in a lawsuit. Even if your assets are few, umbrella insurance also protects your income; in some settlements, wages can be garnished up to 10 years.
In addition to extending the limits of your auto and homeowners policies, umbrella insurance also covers personal injury claims, including false arrest, libel and wrongful eviction, typically excluded by those policies. Dependent teenage drivers on your auto policy are also covered.
Why put your nest egg, retirement savings and other hard-earned assets at risk? Umbrella insurance is an affordable layer of protection typically starting with $1 million in coverage, with additional coverage available if your financial situation changes.
Count On Us
Don’t wait for a rainy day to find out you need the additional protection a personal umbrella liability policy can provide. Contact us to discuss your unique needs and learn more about available insurance solutions.
This article was adapted from Zywave. The information provided is not intended to be exhaustive, nor should it be construed as advice regarding coverage. Readers should contact an insurance professional for appropriate advice concerning their needs.