Imagine this scenario: you’re just a few years away from retirement. You have a nice retirement account; a house and car are paid off. Collectively, your assets amount to just over a million dollars. In sum, life is pretty good. Then, one day, you get into a car accident.
Fortunately, you’re not seriously hurt, and the damage to your car is within the limits of your auto insurance. Unfortunately, the other vehicle involved in the crash is full of executives from a large company. Their injuries and damage to the car are much more severe; this is where your Umbrella insurance comes in.
What is Umbrella Insurance
The whole point of umbrella insurance is to protect your assets from a lawsuit. For example, if you have $500,000 in assets, and your auto insurance only covers you for $100,000 per accident, an umbrella insurance policy protects the rest of your assets.
Umbrella insurance shields people when they’re sued after an event that occurred in their home or car, or because they did something. For example, if you’re skateboarding and accidentally hurt a fellow skater, they could sue you for medical expenses. Or say you’re hosting a party at your home, and someone falls down the stairs. They could sue you for any damages as well as emotional pain and distress. While some insurance plans include this type of personal liability, there are limits to what they can pay.
Once those limits are met, your umbrella insurance policy kicks in. Think of umbrella insurance as a back-up policy, with your homeowners, renters, or auto being your primary policies. An umbrella policy will pay for legal expenses and protect you if you lose the case. If you win, an umbrella policy will cover your lawyer’s fees.
Who needs Umbrella Insurance?
Would you have enough coverage if something like this happened to you?
- A jury awarded $900,000 to the estate of a 43-year-old father who died after an automobile accident. The award was based in part on the father’s future earning potential.
- While helping a friend paint his home, a 40-year-old man fell and broke his heel. Although the homeowner was found only partially responsible, the fall cost him $1.2 million.
These examples are real and could happen to anyone. You should also consider umbrella coverage if you have a swimming pool at your home or have young drivers since they can increase your chance of a lawsuit. An umbrella policy will provide peace of mind by giving you that extra layer of protection against the possibility of a high jury award in a personal liability case.