Insurance Mistake #4: Not having a personal Umbrella policy when you have a high income or net worth
The personal umbrella policy has one of the best values in the insurance industry for providing peace of mind and asset protection in today’s litigious society. If we think about the liability exposures we face every day, our biggest exposure is driving around in our vehicles. The average cost of an automobile accident when there is a critical injury (medical bills, loss of income, pain, and suffering) can easily top $500,000 per person. If the injured person requires a couple of surgeries, physical rehabilitation, and has a loss of income, these costs will likely exceed the coverage limits on most auto insurance policies.
If you were to carry bodily injury liability limits of $100,000 per person and $300,000 per accident and you were involved in an at-fault collision in which two people were seriously injured, your coverage would almost certainly be insufficient. In this scenario, once the insurance company pays out the $100,000 per person, which would be $200,000 (two people) they would, be out of the picture as far as additional money for the other party’s injuries. This could leave you open to being sued for additional bodily injury costs associated with the injured persons.
A much better scenario or coverage option would be to increase your bodily injury liability limits to $250,000 per person and $500,000 per accident and also carry a $1,000,000 (or more if needed for asset protection) personal umbrella policy. In this coverage scenario for the same accident you would have your auto coverage, plus the additional $1,000,000 umbrella coverage. All of the insurance coverage, which effectively amounts to $1,250,000 per person and $1,500,000 per accident would have to be paid out before you would be responsible for any of the bodily injury you have caused.
The personal umbrella coverage also typically extends all of the other liability limits of the underlying policies such as your auto property damage, home insurance personal liability, boat liability, etc. for an additional limit of coverage in million-dollar increments. Some personal umbrella policies will also cover personal injury which can include libel/slander, defamation of character, mental anguish, and wrongful eviction if you are a landlord.
The overall cost difference between carrying the lower limits versus the higher limits with the umbrella coverage is typically pretty nominal. The umbrella does increase or vary based on the number of drivers/their ages, cars, boats, rental properties you have within your household. There are many people that truly don’t realize the exposure they have to being sued for an unintended injury or accident. You should check with your insurance agent or give us a call to discuss the benefits of a personal umbrella policy.
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