If you have a personal umbrella insurance policy, congratulations.
If you don't, you must not have a lot to lose. This important insurance can
extend your liability coverage beyond your home and auto insurance by millions
of dollars.
We live in a litigious society. Anyone can sue you for any reason.
Those with money are targets simply because suing someone without assets is
pointless.
If you are ever involved in a law suit, it is imperative that
you have insurance to cover your legal liability. Umbrella policies
supplement the liability coverage you already have through your home and auto
insurance, and provide an extra layer of protection. Umbrella policies aren’t
just for the wealthy – they’re for anyone who has assets that might be at risk if
they cause a serious accident. If you don’t have enough liability
coverage to resolve a claim or a lawsuit, the person bringing the action might
go after your home or your other assets to pay for damage.
Umbrella policies cover the excess liability of damage claims that you, your
dependents, or even your pets may cause.
OK, let’s review some scenarios and recommendation for an
umbrella policy:
1)
You drive a fast car and have a net worth of $1 million dollars. You enjoy hitting the bars and clubs every weekend in
your $75,000 BMW M3. Your hobbies include snowboarding, rock climbing, sky
diving, and poker. Given you go out on the weekends, you also tend to have at
least one drink before getting behind a wheel. At the age of 36, you just don’t
want to settle down and have amassed a nice nut.
Assessment: You are higher risk than average. Get an umbrella policy
with liability coverage of at least $1 million if not $2 million given you’re
in the growth phase of your career. Also get comprehensive auto insurance that
covers the damage of your car and liability of around $500,000 per accident.
2)
You drive a $12,000 SUV, have a 12 year old son, are a homeowner, and worth $3
million dollars. You never go
out to party on the weekends anymore. Your idea of a good time is snuggling up
with your husband to watch Revenge on DVD. In six years, your
son plans to go off to college at a cost of $50,000 a year for 4 years. You
also have a homeowner’s insurance policy with $500,000 in liability coverage
and a $5,000 deductible.
Assessment: You are an average risk person. Get an umbrella policy
with liability coverage between $2 million to $3 million. Weight the value of
peace of mind vs. the increase in monthly premiums for higher coverage. Make a
decision what the likelihood is that you will be sued for your entire net
worth. $3 million is a nice figure that lots of people would love to lay their
hands on. Your SUV is probably not worth getting comprehensive auto insurance,
so just got with liability. If it gets destroyed, it sounds like you can easily
buy a new one.
3)
You drive a $8,000 Honda Accord, are the only working spouse, have three
children, are a homeowner, and worth $800,000.
You spend all your time at the office and then at home with the kids. Seldom do
you ever go out. You’ve sworn off alcohol ever since you drove your car
straight into a tree six years ago. You are working like a mad man to provide
for your family and wonder whether tuition costs will continue to spiral out of
control. Every time you think of the fact that three people are depending on
you, you start to get a panic attack.
Assessment: You are an average risk person who definitely needs an
umbrella policy. You do everything a normal person would do as determined by
the insurance actuaries, but you’ve got three dependents. If something happens
to you, or you cause an accident, a lot of people will be negatively impacted.
Not only get a $1 million umbrella policy get another $1-2 million in term life
insurance policy that will go towards your kids if you die. A comprehensive
auto policy is probably a waste of money, but it depends on your liquid assets
and how safe of a driver you are now.
4)
You have two teenagers and a net worth of $600,000. Try as you may, you feel you can no longer control your
children. They aren’t very good students, aren’t going to win any athletic
scholarships, hang out with the wrong crowd, and have a lot of angst. Because
you don’t want to be the uncool mom, you allow your teenagers to drive.
Assessment: Your teenagers put you at huge risk because you are
responsible for all their actions before the age of 18. Every day you pray they
come home safe. Absolutely get a $1 million umbrella policy! Your teenagers
could bankrupt you in a heartbeat!
5)
You are a landlord and/or business owner with a $350,000 net worth. When you have customers, you invariably open yourself
up to more risk. I feel sorry for doctors who are trying to save lives but
constantly operate under the assumption they will get sued by their patients.
As a landlord, no matter how hard you screen your tenants or assess the safety
of your unit, something bad may happen. Same thing goes from running any
business.
Assessment: You absolutely should get an umbrella policy worth $1
million or greater for potential garnished wages. Landlords should have
landlord insurance and business owners have various business insurance
options. The world is a very litigious place. Live the American dream but
protect yourself.
904-677-5884
