This month's Eastern Insurance Guest Blogger is Michelle Rodriguez, a Personal Lines Team Lead, who is happy to share some of her knowledge of Umbrella Insurance with you.
As a client of Eastern Insurance, it is likely that you have been encouraged to carry liability limits that are higher than the “standard” recommendations on your home, auto, or renter’s insurance policy. It is one of our jobs to provide you with the coverage options necessary to protect you, your assets, and your finances in a worst-case scenario. Our personal lines agents will often suggest higher liability limits, or an umbrella policy, to help provide you with the protection you will need if you are ever found liable for property damage or bodily injury to others following an accident. If you just thought, “But wait, what is an umbrella policy?” then read on – this blog is for you! Michelle Rodriguez of Eastern Insurance’s Personal Lines Department is going to help explain what an umbrella policy is, and why you should consider one.
What Is Umbrella Insurance?
If you think of it literally, imagine a giant umbrella providing an additional level of protection over the standard liability limits of your homeowners, auto, or renters insurance policy. In the event that a liability claim is made against you, and you were not doing anything illegal at the time, the liability coverage on your standard policies will respond. However, when you consider rising health care costs and expensive legal fees, it is easy to imagine how even a well-insured person could quickly run out of coverage. This is when your personal umbrella liability policy kicks in. Once the limits of your standard policies have been exhausted, your umbrella coverage can provide an additional, and often substantial, amount of liability coverage to prevent you from being held personally responsible to pay legal fees, medical bills, or settlements.
An umbrella policy usually costs only a few hundred dollars annually and can provide coverage in varying amounts, from $500,000 to $5,000,000, or more.
Why Should I Consider Umbrella Insurance?
You might be thinking, “I’m a pretty cautious person, I don’t think I would find myself in a situation where I would be held accountable for that much money.” You might be right, but some of the most common sources of liability lawsuits stem from very ordinary circumstances.
For example, do you:
Car accidents, issues with pets, legal issues regarding libel and slander, and “slip and falls” are all incredibly common scenarios where you may not behave recklessly, but you may still be held responsible to pay for property damage, bodily injury, pain, and suffering, or loss of wages following an accident.
So now you might be thinking, “Okay, I do some of these things, but I don’t even have enough assets for someone to take!”
Do you have:
A savings account?
If you are ever held liable for a large claim that exceeds your standard policy liability limits, all of these things could be in jeopardy in order to pay the legal fees or settlements against you, even your future paychecks.
Examples of Why You Need an Umbrella Insurance Policy
After a long day at work, you’re rushing to pick the kids up from daycare, thinking about what to make for dinner, wondering if you paid the cable bill, and completely missed the stoplight in front of you turning red. It’s not your lucky day and you are in a bad car accident, in which you are at fault. On the plus side, you’re not injured and are well insured with $300,000 of liability coverage from your auto policy. However, the person in the other vehicle is injured and is unable to work for six months following the accident. When all is said and done, the ambulance, medical fees, missed wages, and legal fees of the victim total over $325,000. Your defense fees from the resulting lawsuit and settlement quickly added up to $75,000.
After your auto insurance liability limits are exhausted, you have been found to be held personally responsible for $100,000.
Would you be able to pay this settlement? How long would it take you to do so? How would it affect your future? If you had umbrella insurance, these questions would be a lot easier to answer.
You’re hosting a celebration at your home, and an elderly aunt stops by. Your dog, understandably excited by all the guests, runs up to greet your aunt, catches her by surprise, and causes her to fall and break her hip. After emergency transportation, surgery, complications during her hospital stay, and extensive rehabilitation, your aunt is finally home, but in need of a long-term caretaker for the rest of her life. Combined, these expenses total $470,000, and your legal expenses exceed $30,000.
You are now responsible for $200,000 after your homeowner’s liability limits of $300,000 are applied.
Perhaps you are fortunate enough to be able to cover these expenses out of pocket, but at what cost? Can you still afford to send your kids to college? Do you lose the opportunity to buy the second home you always wanted? With umbrella insurance, your dreams could remain intact.
Understanding Your Umbrella Insurance Policy
Now you understand why you need an umbrella policy. What should you know before purchasing coverage? Here are a few of the terms you will encounter:
Policy limits: How much monetary coverage you will receive in a claim. Normally between $1 - $5 million.
Underlying limits: These are the minimum limits required by the carrier to avoid a “gap” in coverage.
Retention: Acts like a deductible and the insurance company pays the loss over that amount.
Gaps in coverage: When underlying coverage is lower or non-existent.
Besides signing on the dotted line, this is some of the information you will need to provide when purchasing an umbrella policy:
First Name, Birth Date, Sex, Marital Status, Years Licensed, State Licensed, and Occupation of all drivers in your household.
Violation and Accident information for the last 5 years of all drivers in your household.
All the property you own including Home, Auto, Watercraft, Recreational Vehicles (RVs), Rental Units, Land, and Motorcycles.
Information about your current insurance company including Expiration Dates and Losses and Claims in the past 5 years.
The liability limit you are requesting which is typically between $1 - $5 million.
Don’t wait for a rainy day to find out you need the additional protection personal umbrella insurance can provide. Eastern Insurance represents more than 20 insurance companies that provide comprehensive coverage at competitive prices. To learn more, get in touch with one of our personal lines agents by either requesting a quote online, by calling 800-333-7234 (Option 2), or by emailing us at firstname.lastname@example.org.