It’s always an amazement to me how many people have never been told about these types of insurance policies. They are also known as Personal Liability Policies. They get the name “Umbrella” because they are basically LAWSUIT PROTECTION and are designed to go over the top of all your personal lines policies…auto, home, landlord, boat, RV, jet ski, vacation home, etc.
They are sold in blocks of $1,000,000 increments, and for what they do, they are extremely inexpensive. If you’re price-centric as most insurance agents & companies tend to be, chances are this might be the first time you’ve ever heard of them. If you’re protection-centric, like I am, if you’re my client, you’ve heard of them.
Let’s take the scenario above and play it out. First, I cannot have those minimum state limits of 25/50/10. Most of the companies I represent require 250000/500000/100000 to have an umbrella. A lot of the direct writing agents, like State Farm, Allstate, Farm Bureau, etc. only require 100,000/300,000/ 100,000
So now, I have my 250/500/100 limits on my auto policy PLUS I have a $1,000,000 personal liability in addition to that…and I have my at fault accident and once again, I’m in the court room. What happens now?
Lightning strikes in the form of a lawsuit and an over-zealous attorney…I’m covered this time!
TOTAL JUDGMENT: $1,000,000
Insurance settlement: $1,000,000
Bonus: Got to keep it
Home w/equity: -0-
Cash value in life policy: -0-
SUBTOTAL: ZERO out of pocket
In addition, two additional key problems are solved. First, since the judgment was paid by my insurance company, my wages are not garnished, so I got to keep that 35% of my salary garnishment. Secondly, remember when I had to hire my own attorneys for the amount that wasn’t covered by insuranceIn this scenario, the insurance company attorneys represented me at their expense. So, all those dollars I paid my attorneys I got to keep.
Annual cost of a $1,000,000 Umbrella PolicySomewhere between $200-400/year…depending on the client & their needs. Most agents can issue up to $5,000,000 with no financial evidence. So, ask yourself “Why hasn’t my agent told me of these?”
Let’s reverse the situation again. Let’s say I’m the injured party in that accident and that young girl has ruined my life with her poor driving and negligence. In the earlier scenario, I only have $250,000 coverage for uninsured motorist. What if my needs total $1,000,000?
This is on a company by company basis, but many of the companies I represent will extend the umbrella coverage in the event of an uninsured motorist claim for up to $1,000,000. So, in a nutshell, by adding this additional benefit to my umbrella policy, I now have access to the needed $1,000,000 for my own personal use.
Consider it a “lump sum disability” benefit in the event of a catastrophic event. Once again ask yourself the same question as to why your agent hasn’t told me about these. Chances are his umbrella policy might not offer this benefit.
Scenarios where umbrellas are mandatory:
- You own a watercraft of some type…boat, jet ski, etc.
- You own rental properties with tenants.
- You have teenage drivers at home or in school.
- You have regular savings & investment accounts (non-retirement)
- You have inherited assets not in a trust.
- You make more than $75,000/yr. in annual income
- You have a title either in front of, or after your name (Dr., J.D., PhD, etc.)