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 third 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. I encourage you to go back through our previous posts and read the other two reasons why an Umbrella policy is so important.
Reason #3 - "Protecting Others if you Harm Them"
The third reason is one of the most important reasons to me, personally. In our culture, it's easy to focus on "me, myself, and I." One thing I hear often from prospective or current clients is "I don't have any assets, I don't need an umbrella policy." This argument would be acceptable if the only person or people involved in a typical Umbrella policy claim were that single client. However, that is not the case. You can't sue yourself, so while protecting your assets should be a concern, it's not the only concern you should have.
If you cause a car accident and cause significant bodily harm, you are likely to be held liable for those damages. This liability will include medical bills, time off work, lost wages, pain and suffering, and likely, attorney fees and costs. If you don't have a lot of assets, you may think "well, they can come after me, but they sure aren't able to get anything." This may be partly true, however, if you rely on your lack of ability to pay such a claim, take a moment to think about the OTHER party involved. The person or people dealing with significant injuries to themselves may be left with nothing if you aren't carrying an Umbrella policy.
Here's an example: Let's say you time a single stoplight wrong and crash in to the side of a vehicle with a mom, dad, and their two young kids in the backseat. Let's say they all end up in the hospital for moderate to severe injuries. The mom ends up with significant injuries which require surgery and rehabilitation and physical therapy post-surgery. The dad ends up with moderate injuries and takes time off work to recover and help care for the mom. The youngest child in the backseat dies from the crash, and the older sibling next to the youngest suffers only minor bumps and bruises. When the dust settles, they'll likely have accumulated significant medical bills (alone exceeding far more than your likely $50,000, $100,000 or $250,000 auto policy will provide), they'll have lost significant income, and will be pursuing you for pain and suffering and the final expenses for their youngest child.
A good injury attorney, especially due to lost life, will likely be pursuing you for all of those medical bills, time of work, lost wages, physical therapy bills, and a significant sum for pain and suffering due to the loss of one of their children. Having an Umbrella policy, in this case, better assures that the INJURED party receives appropriate compensation and isn't left with a pile of bills and the loss of a child after the accident.
So for me, the greatest reason to carry an Umbrella policy is NOT to protect my own assets, but more importantly it is to be sure that I am able to reasonably compensate anyone who I become personally liable to.
I would have a hard time personally coping with the aftermath of such an accident, if I knew that someone who was legitimately harmed by me was left with nothing. Part of carrying an Umbrella policy is personal responsibility and accountability. If I'm going to live and drive near others, maintaining an umbrella policy is part of my responsibility to others should I cause an unforeseen accident.
At Absolute Integrity, we offer Personal Umbrella plans with coverage limits between $500,000 and $10,000,000. These plans can be written standalone (i.e. with no other policies placed with our firm) or can be easily packaged with new or existing automobile and home or renters insurance plans.