Just as an umbrella protects you from a rainy day, umbrella insurance protects you financially by providing an umbrella of liability coverage for you.
People who do not have liability coverage can find themselves bankrupt very quickly under certain circumstances. Having an umbrella policy is definitely a case of “better to be safe than sorry”, as the old saying goes.
Liability coverage comes into play when you are involved in an accident where someone else is injured. Your insurance has paid the maximum that it will pay out, yet the injured party feels they deserve more for their injury and sues you for more money. If the judge finds in their favor and you do not have enough liability coverage to pay the victim for further injuries, this can lead to the liquidation of your assets, such as your home or savings account.
For example, say you are involved in an auto accident in which the other party sustains serious debilitating injuries. Your insurance has paid the maximum – let’s say $300,000.
But the victim was in the hospital in intensive care for weeks, and then had to undergo weeks of therapy as part of the recovery process.
The injured party then sues you for the total cost of their medical bills – $700,000. If you do not have umbrella insurance, you are going to be required by the court to come up with $400,000 to pay them.
Most people do not have that kind of money just lying around. The judge can then order your assets attached – this can mean your home and property, your retirement accounts, your 401k, your savings accounts and any other expensive items you possess.
Umbrella Policies are Available to Add to your Auto, Homeowners’ and Business insurance.
It is sold in increments of one million dollars. Fortunately it is relatively inexpensive; a policy can be had for as little as $200 per year depending on the amount you choose. If you own valuable property or other assets you need umbrella insurance.
Because of the nature of our justice system, anyone can file a lawsuit and it costs nothing. There have been people who have unfairly filed claims for injuries or damages that were minor or even non-existent – yet sometimes even dishonest people can create a compelling enough story to win the lawsuit in court.
Liability insurance helps to protect you not only from legitimate injury issues but from these types of shysters as well.
Some people are concerned that having a comprehensive liability policy will only serve to make them a target for people to file lawsuits against them. However, there is no valid way for anyone to know what kind of coverage you possess unless you choose to tell them.
Keeping your insurance coverage private, the same way you would your finances, is a wise idea to prevent this from happening. A person’s insurance coverage is kept as private as their privileged health information, meaning your agent is actually breaking the law if they divulge that information to anyone other than yourself or a power of attorney or other legal representative of your affairs.
Protecting your hard-earned assets is just good business. A liability policy offers you an umbrella of coverage that could save you from financial ruin. Given the relatively small price tag of liability insurance, can you really afford to not have coverage?