What is an Umbrella Policy, and should I have one?

An Umbrella Policy provides “extra” liability coverage over and above your auto and home liability limits.

It’s a separate bucket of money with limits ranging from $1,000,000 to $5,000,000 depending on your individual needs
It protects you from a lawsuit brought against you from an auto accident or homeowners claim where you are found to be at fault
The umbrella coverage is triggered once your auto or home liability limits are all used up
Without the umbrella, you would be personally liable for any remaining damages above and beyond your auto or home coverage limit (i.e. your retirement savings, home equity and income would be at risk)

Here are some real world examples from our clients:

Linda called us last year, as a new client coming from a different insurance company. “Why didn’t anyone ever tell me about this type of coverage?”, she asked after telling us her story. Linda never saw the girl on her bicycle who was speeding past her car as Linda was turning and hit her. With a $850,000 lawsuit on her hands, her $100,000 liability limits for ‘bodily injury’ on her auto policy ran out almost immediately. Linda was forced to sell her $700,000 home, liquidate her assets, and move to a mobile home, her life forever changed. With the $1M umbrella policy, her carrier would have paid the rest of that lawsuit for her, and she could have stayed in her home, unaffected financially.
Carl hydroplaned on the freeway last fall, two hands on the wheel, spun around and came to a stop facing oncoming traffic on the left median. Another car, ran into him, causing serious injuries to the driver, and, tragically, a fatality to a baby girl in the backseat. It remains to be seen who will be ‘at fault’, as the claim will likely last several years. Despite the emotional burden of this lengthy process, Carl will at least experience financial peace because of his updated policies. He came to us with $25,000 liability limits and we bumped him up to $250,000 on the auto policy and added a $1M umbrella. For the $17/mo he pays for the umbrella, the lawsuit is covered by insurance and he will not have to pay it out of his own assets and future income.
Dustin is the teenage son of our current clients. He and a buddy were in the back yard having a bonfire, roasting some s’mores, no big deal. Dustin tossed a glass bottle into the fire to see what it would do….it shattered and landed in the eyeball of Dustin’s friend, sending him to the hospital. After several doctor visits and months of recovery, thankfully, his eyesight was left unaffected. But there were several rough months when Dave, the Dad, was calling us regularly with so much stress that the claim was going to skyrocket. Thankfully, he had $500,000 liability limits on his home policy, and a $1M umbrella policy over that, for $1,500,000 total protection. The enormous costs for this claim were completely contained and covered by the policies we helped Dave hand-select.

Most people say “it could never happen to me” but as you can see, it does happen. I want you to think lawsuits. The big claims. Your ‘underlying’ auto or home or boat or landlord policies will pay first with their liability limits, and then the umbrella (1M-5M+ limits available) will slide over and pay second, so you don’t have to pay the lawsuit with your own money and future income.

These policies cost around $200-300 per year ($15-25/mo) depending on youthful drivers (which means you just need it all the more), number of vehicles and the other types of policies you have.

Frankly, I don’t care about which deductibles you have, whether or not you have towing coverage. Ok, I do, but those convenience coverages pale in comparison to having the right liability limits in place. Our goal is not to squeeze an extra $5 of commissions out of you but rather to make sure we do our job and do it well by giving you the peace that comes with the right coverage. We passionately wish to protect the financial wellbeing of our clients. No one wakes up the day of a big accident expecting to have a life changing event, so let’s make sure your liability limits are where they need to be, protecting you when those moments do come.

Give us a call or shoot us an email and we’ll review your coverages and talk more about adding a liability umbrella to your insurance plan.