March
1, 2008
Umbrella Insurance Protects You from More than Just Rain
By
Alandale Insurance Agency
Although you have probably heard of umbrella insurance, there’s
a good chance you have no idea what it is. An umbrella policy is
designed to protect you from almost everything that your
homeowner’s and auto insurance policies do not, as well as fill in
gaps in coverage when the limits of these policies are exhausted.
Lawsuits are filed daily against ordinary citizens, with reasons
ranging from the frivolous to the justified. More often than not,
people have no extra protection to block the plaintiff from going
after their personal assets in the lawsuit. Umbrella insurance will
protect you from this type of situation.
An umbrella is often referred to as excess liability. This excess
liability coverage kicks in when the underlying limits on your
homeowner’s or auto policy have been exhausted, or if you are sued
personally for something that neither your homeowner’s nor your
auto insurance covers. Depending on the insurance company, you can
purchase anywhere from 1 to 5 million dollars worth of excess
coverage, and sometimes as high as 10 million.
The amount of coverage you select depends on how much you are
worth. If you have 5 million dollars worth of personal assets, you
should get a 5 million dollar umbrella. It is not uncommon for
someone to buy a 5 or 10 million dollar umbrella policy even if that
number far exceeds their net worth, because the coverage is so
inexpensive to purchase.
Most insurance companies will not offer you umbrella coverage
unless you already have both your homeowner’s and auto policies
with them. Also, the insurer will require that you maintain a
certain level of liability on the homeowner’s and auto policies in
order to qualify for the excess policy. Usually, you must maintain
at least $250,000 of bodily injury liability per person, $500,000
per accident, and $100,000 for property damage for your autos, and
$500,000 of liability for your home.
The good news is that coverage is cheap. It is possible to obtain
1 million dollars worth of excess liability for just over $100 per
year. The more cars and homes you have, the higher the premium, but
the cost is still low. In addition to your home and cars, liability
associated with any other conveyances you may have, such as boats,
motorcycles, and other recreational vehicles, may also qualify for
coverage under the umbrella, depending on the insurance company.
You are probably wondering when the umbrella coverage would ever
be used. As an example, if you are involved in a car accident where
you crashed into a pedestrian who was walking on the sidewalk,
resulting in medical expenses that cost more than what your auto
policy covered, the umbrella policy would kick in. Or, if the
pedestrian decided to sue you for negligence and punitive damages,
your umbrella can be utilized to cover your legal expenses and to
pay any judgments levied against you.
You should also know that the excess liability covers you for all
sorts of things that have nothing to do with your cars or homes.
For example, coverage includes personal injury protection, which
includes false arrest and imprisonment, malicious prosecution,
defamation, invasion of privacy, wrongful entry, or eviction.
Also, some umbrella policies provide coverage for you if you are
sued in connection with any charitable boards or organizations of
which you are a member. You may have to contact your insurance
company and pay an extra premium for this type of coverage.
Hopefully this has helped illuminate the importance of having
umbrella insurance. Without it, your personal assets are vulnerable
in any lawsuit or legal action. The risk of a multi-million dollar
lawsuit greatly outweighs the cost of protecting yourself with an
umbrella policy. Give us a call to us about what type of policy
might be right for you.
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