What you'll discover in this report:
If insurance is for a rainy day, umbrella insurance is for a storm! A day when someone hits you with a lawsuit for hundreds of thousands, even millions, of dollars.
Think it can't happen to you? Just think for one minute about how lawsuit-crazy this country is. You can't pick up a newspaper these days without reading about somebody suing somebody else for . . . anything. You read the article and say, "That's crazy. There's no way somebody should be able to sue for that."
Well, guess what? The courts are clogged with these "crazy" lawsuits, and sometimes the person bringing the lawsuit wins. So do you really need coverage for crazy lawsuits? Maybe not.
But remember, a lot of lawsuits aren't crazy at all. Some get settled. Actually, most get settled. Often, the person being sued winds up having to pay the person who brought the lawsuit. Not to mention the fees the defendant has to pay to his or her attorney.
* Example. Say you're at fault in an auto accident that causes serious injuries to the driver and/or passenger(s) in the car you hit. Your auto insurance has liability limits of $100,000 per person and $300,000 per accident. (Which are pretty common limits, by the way, even for people with a lot of assets.)
How far do you think $100,000 will go, particularly if the persons involved suffer injuries that keep them from working for months, or years? The accident victims could sue you for medical bills, lost income, even pain and suffering. In this scenario, $100,000 is not nearly enough coverage.
Guess what happens if, say, you are hit with a judgment for $250,000 in the case of one person involved in the accident. Your auto liability insurance will cover the first $100,000 -- and you're stuck with the rest. Again, that doesn't include the legal fees you have to pay to your attorney. And, in some cases you might have to pay all or part of the legal fees the other party or parties incur. Ouch.
If you don't have a combination of insurance and cash on hand to pay the judgment, the court can order liquidation of your assets (including your family's home!) In the state of New York, if you still owe money after these resources are exhausted, the court can order you to pay a percentage of your future earnings, called wage garnishment.
Umbrella insurance is for these very rainy days. While it may seem unnecessary, it really isn't, particularly for people with homes and other significant assets to protect. Do you really want to hand over your home, savings or future earnings to someone you injure in an auto accident? It could happen. But it doesn't have to.
Because it is designed for those very rare rainy days, umbrella insurance is cheap. It is also versatile. Umbrella insurance provides additional liability coverage not only for your auto policy, but also your homeowners or renters policy.
If you have "toys" such as boats, motorcycles, ATVs, snowmobiles or a motor home, the umbrella coverage can be designed to provide additional liability protection for these possessions as well.
* Note. Umbrella insurance doesn't cover everything. For example, if you are sued and the court assesses punitive damages against you, those damages won't be paid by your umbrella insurance. What are punitive damages? They are damages awarded to someone in order to punish the person being sued. Punitive damages are awarded for outrageous, totally reckless conduct -- at least what a judge or jury perceives to be outrageous, totally reckless conduct.
You can usually buy umbrella policies with $1 million limits for $150 to $250 per year, depending on the number of cars, homes, "toys" and young drivers in the household. If you need more than $1 million limits, you can usually buy each extra $1 million of coverage for $100 to $200. Think about this. For only a few hundred dollars, you can increase your per-person liability limits 5 times, 10 times, or more -- and it applies to your auto, homeowners or renters, and "toys” as well.
Umbrella insurance actually "sits" on top of your auto, homeowners or renters, and other policies with liability coverage. Say you have a per-person liability limit of $250,000 on your auto policy. Say also that you cause an accident in which a driver or passenger in the other car is ultimately awarded $450,000 for their injuries and loss of income.
Your auto policy will pay the first $250,000, and your umbrella will kick in the remaining $200,000.
Because umbrellas provide coverage over the top of the auto, homeowners or renters liability limits, some insurers offering umbrella policies require you to have your auto and homeowners policies with these companies as well. That's not typically a problem because most insurers are happy to be able to provide someone's auto, homeowners or renters, and umbrella insurance, and often offer multi-account discounts which reduce your costs even more. We also represent companies that can write a "stand-alone" umbrella in those cases where you need to place your auto and home coverage with different insurance carriers.
Most insurers offering umbrella coverage require you to have liability limits of a certain amount on your auto and homeowners policies. The cost for increasing your underlying policies to these limits is fairly minimal.
Our licensed agents will be happy to assist you in reviewing your options and finding the best combination of coverage and value for your budget and your family's needs. Call us to discuss umbrella coverage further.