Accidents happen, and in this litigious society, people like to file lawsuits. No matter how careful you are, you may find yourself in a situation for which you are found liable for bodily injury or property damages. Your neighbor falls in your yard, your kid spills punch on someone’s expensive rug, you look away from the road for a second and rear-end the guy in front of you, or your tenant’s dog bites someone. These situations happen every day. Both your auto and your homeowners insurance policies contain liability coverage, but what happens if it’s not enough?
Umbrella insurance is personal liability coverage designed to kick in after the liability limits on your home and auto policies have been exhausted. It’s called ‘umbrella’ because it provides an extra layer of protection. The Umbrella policy will begin paying once you reach the maximum limit on the underlying policy.
Here’s an example: You cause an auto accident that results in $500,000 in injuries to others. If the bodily injury liability limit on your auto insurance policy is $300,000, that leaves $200,000 left to be paid. Legally, your assets and your future earnings can be seized in order to pay the remainder. If you had an Umbrella policy, it would pick up the rest, and your assets would be safe. It would also pay the legal costs.
Umbrella policies are usually sold in coverage increments of $1 million. As a general rule, you should consider setting your coverage amount at $1 million above your total assets. It is not only wealthy folks who need Umbrella coverage; anyone with assets and future earning potential could use the extra protection. It’s a very inexpensive policy, and can save you from financial ruin in case of a lawsuit.
If you’d like a quote for an Umbrella policy or have questions, please let us know.
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