A Personal Umbrella will provide an additional layer of liability coverage over both your Home (Renters, Condo etc.) and Auto policies. This additional coverage can be crucial in the event of a serious accident in which you are determined liable. Let’s use the example of a distracted driver that strikes and seriously injures the driver and passengers in another vehicle. Claims will include:
- Medical payments
- Loss of Income
- Pain and Suffering
- Permanent Injuries
- Emotional distress
- Court Costs
Total damages awarded could be huge! A common rebuttal is "well I don’t have much." Keep in mind, when Policy Liability limits are exhausted, you are on your own. If the settlement far exceeds your Policy limits what is left to pay damages to the injured parties?:
Your remaining Assets (Savings, Home Equity, etc.)
- A portion of your future income
Most individuals are pleasantly surprised when they discover how low the annual premium is for a $1,000,000 Umbrella. For most, assuming a respectable driving record, if you have a home a couple cars and maintain good limits on your current auto policy (e.g. $500,000) the annual premium can be $200 or less. If you currently have low Auto Liability limits the premium increase will be greater since you have to maintain limits of about $500,000 to satisfy the requirements of the Umbrella Policy.
If you have an Umbrella policy make certain you are in compliance with the required limits. Example, an Insured has an Auto Policy with a limit of only $100,000. An accident occurs with total damages of $600,000. "I’m good" he say's, "I have an Umbrella. My total limits with the Umbrella equals $1.1 Million." Wrong. The Umbrella will not kick in until the first $500,000 has been paid. That’s $400,000 (since the 1st $100k was covered by his policy) that has to come from somewhere before the Umbrella triggers. No problem if you invested that First Communion or Bar Mitzvah money wisely - but for the rest of us - big problem.
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posted by Dan Hebbeln: email@example.com