Personal Umbrella Insurance Basics

Just about true in all aspects of our lives, the more we acquire the more
protection we need, period.  An umbrella insurance is a very inexpensive way to cover your assets!

Think about this story when wondering if you need personal umbrella
protection for yourself and your family. Recently, as reported on the local
news, on a very dark and stormy night, a woman was driving home from a work
event. Out of nowhere rain began to fall in torrents and within minutes the
streets became flooded. Even though the woman was reported to be a very
good driver with an excellent driving record, her car quickly and
unexpectedly became out of control and slammed directly into an oncoming
car in the opposite lane. The severe crash resulted in serious injuries to
the three passengers in the other car.

Unfortunately, the women who hit the vehicle did not have a personal
umbrella policy in place at the time of the incident. The injured
passengers filed suit and damages ensued in and were determined to be over $850,000! The
at-fault driver only had liability limits on her auto policy of $250,000
per person and $500,000 per accident. Those auto limits were quickly
depleted, the remaining judgment amount was then attached to her home,
future wages, savings, retirement plan and all other assets she and her
family owned. After losing everything she worked so hard for, she filed for
bankruptcy. Sadly, she could have purchased a $1,000,000 personal umbrella
policy for less than $200 per year and would have had the adequate
protection needed for this claim!

How it works

Depending on the type of accident, your homeowners, auto or boat policy
liability limits are used up first, then your umbrella policy comes in to
cover all remaining costs (up to the limits you purchased). As in the
example above, if the at-fault driver had purchased the $1,000,000 personal
umbrella policy, then her auto liability coverages would pay for the first
$500,000 in damages. Then, the personal umbrella policy would cover the
rest (including associated legal fees) up to the one million dollar policy
amount that she should have purchased.

When purchasing a personal umbrella policy, most companies will require
that you carry certain limits on your primary insurance policies
(homeowners, auto and boat) in order to receive the excess liability
coverage. For example, a company may require the following primary
liability limits: $100,000 for homeowners, $250,000 per person/$500,000 per
accident for auto and $300,000 for boat/yacht coverage.

Umbrella Insurance provides:

  • Protection for covered claims by others for personal injury or property
    damage caused by you, members of your family/household, or hazards on your
    property for which you are legally liable
  • Personal liability coverage for occurrences on or off your premises
  • An additional layer of protection above your primary auto policy against
    auto-related liabilities
  • Protection against non-business related personal injury liabilities such
    as slander, libel, wrongful eviction or false arrest
  • Legal defense costs for a covered loss. Lawyer fees and associated court
    costs are covered
  • Worldwide coverage- no matter where you go, with the only exception being
    situations involving foreign ownership of dwellings or cars

How much is enough?

Obviously, determining what amount of coverage that is right for you and
your family is a personal decision. Depending on the value of your assets
that you need to protect will help determine what personal umbrella insurance limits
are right for you. There are however many other factors to keep in mind:

  • The value of your future assets;
  • If you are involved in activities that put you at greater risk;
  • The number of vehicles and homes you own;
  • The number of recreational vehicles or boats you own;
  • The age of your children; and
  • Do they drive.

Let any of our qualified account managers at Farquhar & Black help you
determine the coverage amount that works best for you and start protecting
your assets today!