Yes, You Should Get an Umbrella.
If you’re asking the question, “Do I need an Umbrella?” then you should probably have one. An Umbrella is an extension of the Liability coverage you have under your more typical, primary insurance policies. It’s an insurance policy that protects your assets when standard insurance policies don’t provide enough coverage. There’s a couple of important things you should know.
What Type of Insurance is an Umbrella?
An Umbrella is a form of Liability insurance. In personal insurance policies (such as Car Insurance and Homeowners Insurance), part of the coverage you have is Personal Liability. Personal Liability provides you with financial means to defend yourself from – and pay for – Bodily Injury and Property Damage to others when you are legally liable. The Umbrella policy extends the liability coverage limits provided by your other insurance policies.
What does Umbrella Insurance Cost? Is it Expensive?
Not at all. A Personal Umbrella policy can cost as little as $150 per year; however, the more exposure you have (such as multiple cars, homes, boats or young drivers), the more expensive your policy gets. The amount of coverage you get for such a small premium is one of the best values in insurance.
What Kind of Umbrella Coverage is Available?
Umbrella policies provide liability limits in increments of $1,000,000. You could have a $1,000,000 Umbrella policy, a $30,000,000 Umbrella policy, or anywhere in between. The amount of coverage you should get is dependent upon the assets you have that need to be protected.
How Does it Work?
I think it helps to run through an example to see how an Umbrella Policy can protect you. For this example, let’s take a look at a family of four. The parents are in their early 50s and have a couple of kids in college. They’ve worked hard for 30 years to pay for their kids’ education, own a home that they’ve paid off the mortgage on and have saved some money for retirement. One day, the father gets into a car accident on his way to work. Luckily, the father is fine but the driver of the other vehicle is significantly injured.
The accident investigation shows that the father didn’t do anything illegal, but is legally at fault in the accident. It also turns out that the driver of the other vehicle that was injured made an income of more than $150,000 a year and due to the accident, can no longer perform their job. A lawsuit is filed for the loss of income, as well as for the pain and suffering that the other driver incurred. Due to the significant loss of income, the medical expenses and the potential for a lengthy and painful rehabilitation, the other driver could sue for damages in the amount of several million dollars.
In the course of the lawsuit, either via a settlement or a jury judgement, it’s determined that the father is liable for $1,000,000 in damages. Let’s assume that the family had good limits of coverage on their personal auto policy – including a liability limit of $500,000 – but didn’t carry an Umbrella. The auto insurance policy would coverage up $500,000 in damages, but the family would have to pay the balance of the settlement or judgement – another $500,000 – out of pocket. To do this, they might have to take out a new mortgage on their home, take money from their savings or retirement, and/or pay a portion of their income for a number of years. They won’t lose their livelihood over this, but it will undoubtably be a life changing event.
An Unfortunate Reality
This example is not an uncommon occurrence. Risk is a part of life and accidents happen through no fault of our own, but we can still be legally liable for the damage done to others. Insurance helps us to manage the risk of life and Umbrella policies help to protect us from not only financial hardship, but from financial ruin.
A million dollars in coverage may seem like a lot, but you don’t have to be a millionaire to be sued like one. If you have assets to protect, you need an Umbrella.
What to do Now?
No one wants to be in a position where they have to use their insurance, but accidents do happen – often when you least expect it – and there’s no controlling them when they come. Taking the time to prepare for them helps you to navigate them when they come.
The first step is to take a quick mental inventory of what you need to protect. How much equity do you have in your home? Do you own any other property or have ownership in a business? How much money do you have in savings or retirement? How much income do you currently make and what will you make in the future?
Next, find ten minutes during your day and call us at 215-643-3490. We’ll walk through your current coverage and let you know where we might recommend some improvements and find a solution to protect you, your family, and your future.
If you don’t have time for a call – email us and we’ll call you. Don’t want to forget this important and valuable protection.