Insurance If You Get Sued
Umbrella Insurance for worst-case scenarios
When you buy insurance policies, you need to contemplate worst-case scenarios. Hardly a pleasant thought, but in our opinion, the possibility of catastrophic events is the reason insurance exists in the first place. "What if" you're driving to work and you are temporarily blinded by the sun's glare, causing you to proceed through a red light at a busy intersection. You broadside another car and later find out that you severely injured the sole breadwinner in a family of four. The breadwinner will not be able to work again. This person has suffered an economic loss and also probably will endure pain and suffering because of injuries and the inability to work. So this person sues you. How much can he or she get from you? Everything you have.
So how much liability insurance is enough? The answer is different for everybody. It depends on what you want to protect and how much risk you're willing to assume. Let's say you have a net worth of 1,000,000. (Congratulations by the way). Your net worth is the total value of your various possessions: home(s), cars, furniture, art, stock and bonds, etc...1,000,000 is how much you have to lose. Let's say your auto insurance liability limit is 100,000. If you're sued for 1,000,000, your auto insurance will pay a maximum of 100,000, leaving you holding the bag for 900,000! Remember, your net worth is basically a target for attorneys representing someone who has suffered injuries, lost wages, and experiences pain and suffering as a result of something you did.
The point of all of this; for a very affordable cost (usually 125 to 200/year) you can carry liability protection of 1,000,000 or more. And the typical strategy for doing this is by purchasing umbrella insurance. Umbrella insurance provides additional liability coverage, not only for your auto policy, but also your homeowner's or renter's policy.
How It Works...Umbrella insurance actually sits on top of your auto and homeowner's or renter's liability coverage. Say you have an accident in which the driver of the other car is ultimately awarded 1,000,000. Let's say your auto insurance bodily injury limit is 250,000. Your auto will pay the first 250,000. Then your umbrella will kick in the remainder. Some umbrella policies have deductibles (usually anywhere from 250 to 2,500) depending on the insurance company. Because umbrellas are over the top of the auto, homeowner's or renter's liability limits, some insurers will require you to have your auto and homeowners with them as well. Some will not, just depends. Also, most insurers offering umbrella coverage require you to have minimum limits of liability on the underlying auto or homeowner's policy--usually 250,000 on the auto and 100,000 on the homeowners.
For more information on this vital element of your insurance planning, just give us a call. We represent a number of insurance companies offering umbrella insurance. Even if your insurance history or driving record has a few "glitches", we can usually find an umbrella policy for you. As an independent agency, we'll be happy to research your options to find the best plan for you!
