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by Justin Honey (Principal Agent)

In a nutshell, an Umbrella policy provides additional coverage when your primary insurance policies are exhausted.  Let's be honest, we live in America, and our legal system gives us the freedom to pursue others (and rightly so) for the financial burdens and damages that they have caused.  Your auto insurance policy, for example, may only provide coverage for the first $250,000 (or possibly less) in damages.  Have you ever wondered what happens if I cause a major accident and multiple people are injured, or someone can't go back to work and I get sued for $1,000,000 for their disability or time off work?  What if a neighborhood child steps on my property and gets injured on my playset or falls in to my swimming pool?  A Personal Umbrella policy addresses these concerns.

 This is the second of three articles that I am going to write on the subject, explaining the top 3 reasons why, in my opinion, everyone should carry an Umbrella policy.  Whether you have a lot of assets or not, an umbrella policy is a crucial part in your insurance and risk management planning.

Reason #2: "Avoiding Costly Lawsuits"

We all know that attorney's can be costly.  In most cities, attorney fee's range from $200-$400 per hour, on average.  In small towns, fee's usually range between $100 and $200 per hour.  In the case of vehicle related injury attorneys, the fee's can be as much as 40% or more of all that you settle for (this means if you hire an attorney to handle your insurance injuries, while there are times when this is useful, they'll receive as much as 40% of the total amount that you settle for... which includes 40% of all compensation for medical bills, time off work, pain and suffering, lost wages, disability income, and more).

These fee's are typically associated with what comes out of your settlement if you are suing someone else for damages they caused to you.

Flip the story around, though.  What if YOU are the unfortunate individual who caused injuries to another person.  While the injured party is seeking compensation from you, their attorney's will be compensated quite heavily by your insurance policy proceeds.  What about your own legal representation?  What if the injuries total hundreds of thousands of dollars plus their attorney fees? 

In these cases, it's easy to see how $250,000 could be an inadequate amount of insurance. 

The daily "room and board" cost of hospitals, in Indiana for example, can range on average from $2100 to $2500 per day.  This doesn't include any procedures, surgeries, medications, etc.  That's simply the cost to be there and breathe their air.  Add in a possibly surgery, braces, treatments, medications, nursing staff care, physician bills, potential physical therapy for an extended period of time, and other related medical costs... these are all the expenses that the injured party will incur, and undoubtedly expenses that you are expected to pay (or at least your insurance policy).

When the auto insurance policy is exhausted and the insurer has paid it's limit of liability, if an individual does not have an Umbrella policy, the remaining bills are left for you to pay while your insurance company has left the scene.  While many auto policies will cover defense costs, they cease to cover defense costs once their own limit of liability has been exhausted (meaning they won't continue to defend you or pay your legal fees once they've paid the other party all of the coverage limit available).  In a million dollar lawsuit, you won't want to be left defenseless after that first $100,000 or $250,000 has been paid out.

A Personal Umbrella Policy provides an additional blanket of coverage in the event that you do have a major accident or cause injuries that exceed the limits of your automobile, specialty vehicle, landlord rental, watercraft, or homeowners insurance policies.  A Personal Umbrella Policy will cover your defense and pay additional damages that are awarded to an injured individual when you are found liable.

This is the second reason of our Top 3 Reasons why you should carry a personal umbrella policy.  Stay tuned next month for our third of our Top 3 reasons, and to some a reason that might be the most surprising of the three.

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