Umbrella insurance is the subject of a few misconceptions that lead people to think it’s unnecessary. Some believe it to be applicable only to the lifestyles of the extremely wealthy, while others think their existing homeowners and auto policies provide enough protection. Both of these views fail to take into account how much exposure the average person is subject to on any given day. You drive your children to school, take your dog for a walk, update Facebook about your interaction with an unfriendly neighbor, have friends over for dinner—all without realizing that a single mishap or accident during any one of these activities could result in a lawsuit.
A personal umbrella policy makes sure you are protected from major claims and lawsuits by providing additional liability coverage above the limits of your homeowners, auto, or boat policies. When the liability on these policies is exhausted, umbrella coverage kicks in. Without it, you would have to pay whatever costs exceed your primary policies out of your own pocket. It is an important coverage to consider as part of your personal risk management strategy.
Still not convinced? Let’s take a closer look at a couple situations in which failure to have an umbrella policy in place could have catastrophic results for you and your family.
You are involved in a car accident. The other driver was injured and you’re found to be at fault. Your auto insurance will cover the other driver up to the limit you selected. But what happens if the driver’s injuries are severe and that limit is not enough to cover the resulting medical bills? What if the injured driver is a surgeon or a trained musician and the accident resulted in an injury to his or her hands that kept he or she from doing their job for an extended period of time? Now you’re being sued for money to cover this time away from work. If your policy only covers a part of these costs, assets such as your house, car, savings, and retirement funds, and even your future income are all exposed.
Remember earlier when you posted about your interaction with your neighbor? If they saw your post and believe you’ve damaged their reputation, they could potentially sue you for slander or defamation of character. Even if their case has no merit, you’ll still be responsible for legal fees until the case is dismissed, which in some instances could take years. Umbrella policies provide coverage for claims like this that are often excluded by other liability policies. It may seem unlikely that libel, slander, and wrongful imprisonment will ever be issues you have to contend with, but umbrella insurance guarantees you protection from the unexpected, allowing you peace of mind.
Just like an umbrella, umbrella insurance policies may not always be put to use, but you don’t want to get caught in a storm without one!
