Protection for the Unexpected: Why Umbrella Insurance is Essential
We can all agree that 2020 was a challenging year. Last year showed us that no matter how much we plan and prepare, life is full of uncertainties. As we entered 2020, businesses were not preparing for shutdowns and students were not planning on attending school virtually. Even in the absence of a global pandemic, unplanned realities are not uncommon. Consider the following incidents:
You are running late on Monday morning and on your commute to work, you cause a multi-car accident, resulting in both bodily injury and property damage.
Your son has a friend over and they are playing with the dog in the backyard. The dog takes playing too far and bites the son’s friend, resulting in bodily injury.
Your business has been hired to repair a damaged HVAC system. Your employee damages the plumbing in the process, causing property damage.
You are upset about a recent experience you had a restaurant. You leave a negative review online and the business claims injury because of libel.
Although accidental (in most cases), these situations are the result of negligence and you could be held liable. The damage caused could lead to lawsuits with expensive judgments.
No worries, you’re protected because you carry homeowners, automobile, and business liability coverage. Well, take the second incident, where your dog bites your son’s friend. The family sues and you are liable for $1,250,000 in damages because of the injuries and trauma. But your policy only provides $500,000 of liability coverage. Insurance coverage has been exhausted, so how will you pay for the remaining $750,000? For many individuals, they would be left paying the outstanding amount via assets or future wages.
The amount of time it takes to accumulate wealth far exceeds the amount of time it takes to lose everything. Most people have worked hard to save, invest, and build wealth, often their entire lives. The same goes for many businesses. As evident in the incident above, that wealth, however, could be lost in the blink of an eye. The reality is it only takes one accident to risk everything you own. But what if coverage could be purchased that would have assisted with the judgment and protected your assets?
Umbrella insurance is designed to prevent this nightmare. If umbrella coverage had been carried in the above incident, the policy would have paid the remaining $750,000. The underlying coverage carried – homeowners, automobile, or general liability – remains your first level of defense. The umbrella policy responds with excess liability coverage if the underlying limit is insufficient. Below is information specific to umbrella insurance:
Umbrella coverage limits are offered beginning with $1,000,000. Limits are available up to $10,000,000. In select cases, higher limits are available.
Umbrella coverage cannot be purchased as a stand-alone policy. All carriers require certain qualifications, including underlying coverage and specific limits, to be met before the umbrella coverage will respond.
Personal Lines umbrella coverage will respond in excess of homeowners, automobile, watercraft, and rental property liability policies. In some cases, the coverage will respond in excess of recreational vehicles, including ATVs, golf carts, or snowmobiles.
Commercial umbrella coverage will respond in excess of general liability, business auto, and workers compensation coverage. In some cases, coverage will respond in excess of professional liability and employment practices liability coverage.
Umbrella insurance does not protect the insured’s possessions. It provides protection for others that are injured or incur damaged property because of the insured.
Often referred to as “asset protection” coverage, umbrella insurance is a cost-effective way to protect what you have worked so hard to build. Umbrella policies start as low as a few hundred dollars. How far would that same money get you with an attorney? I bet not far.
If you have questions or are interested in adding umbrella coverage to your insurance portfolio, please contact us today.