Umbrella coverage is an additional layer of protection over-and-above your underlying liability insurance on your auto, comprehensive personal liability, or your liability coverage on your homeowner’s insurance. Some umbrella coverage will even defend you in the event you don’t have appropriate underlying limits but would be subject to what is known as the “self-insured retention.” However, some client’s ask me why they should have an umbrella policy when they don’t have “much to protect” or they “don’t think an accident of such magnitude will happen”. So why buy an umbrella?
Nearly every state has what are known as “financial responsibility laws” which hold the driver of a motor vehicle responsible for injury to another when in an at-fault accident. In this instance, the driver at-fault in the accident is at risk of being sued to pay for property damage, medical bills, financial hardship and other hardships resulting from injuries sustained in an accident. Such lawsuits can result in garnished wages, seizure of property or other personal assets from the at-fault party. The same holds true for homeowners, watercraft owners, motorcyclists, and states are now requiring liability for off-road vehicles. As you can see, the potential exposure is very great, and does not affect only those with substantial assets. Imagine having your wages garnished—however great or meager—as the result from any terrible accident.
Who can benefit from an umbrella policy?
Any of the following customers should at least consider or have an umbrella presented to them:
- Anyone who drives a car or lets another person use their car
- Those who host dinner parties or other gatherings
- Customers participating in car pools and/or other group activities
- Households with young drivers (the highest incident of auto accidents comes from youthful drivers)
- Customers who own a home, rental properties or multiple residences.
Obviously this list of customers is not exhaustive. I would even put customers with rental policies in this category because they too can become embroiled in a lawsuit. In a recent case that I have done some research on, a couple was sued when their daughter had a party at their house without their knowledge while they were out of town. Some participants in the party drove off drunk and the result was an auto accident in which two passengers died and the driver sustained expensive medical bills. The defendant’s homeowner’s insurance protected them for only $100,000 in a multi-million dollar lawsuit and the defendants did not have an umbrella policy to protect them.
Other real-world incidences that resulted in claims according to one of our carriers, Safeco:
- Customer hit the gas instead of brake by mistake and ran through the front of a restaurant seriously injuring several people.
- Customer did not see a motorcycle and pulled out, causing the motorcyclist to hit the side of the customer’s car.
- Customer’s car went off the road. The driver over-corrected, causing the vehicle to roll multiple times.
- Customer’s son was allegedly driving under the influence and hit a bicyclist.
- Customer accidently set fire to his apartment which spread to other units.
So again, why an umbrella?
The good news is that for most customers, umbrella coverage is very affordable. An additional $1,000,000 in coverage can be as low as $119 for some persons, depending on the carrier, the number of vehicles and the underlying liability coverage the customer carries. In most instances, my clients can rest assured that their umbrella is “open peril” which means if it’s not specifically excluded in the language of the policy, then it’s covered! In addition, your umbrella may give additional discounts on homeowner’s insurance costs, depending on carrier. But the number one reason for buying an umbrella is the peace-of-mind it can bring to you and your family. I have an umbrella policy and I would highly recommend it to anyone for the value and peace it affords me.