April Showers Bring May Flowers! (The importance of Umbrella Insurance)

We all know the saying and for everyone in New England, we’ve seen the rains.

As I type this, it’s pouring outside and there seems like no better time than now to discuss the importance of umbrella insurance coverage.

If you’re not familiar with the concept of umbrella insurance, it has nothing to do with rain but everything to do with protecting your assets.

An umbrella policy will provide additional liability limits above and beyond your underlying insurance limits.

Let’s look at an example:

You have $250,000 per person in auto liability coverage.

The brakes on your vehicle go and you seriously injure a pedestrian.

There is $500,000 in medical bills for the injured party and you are responsible.

The insurance company will pay $250,000 and you are left on the hook for the remaining $250,000.

This means you may have to liquidate assets, they may garnish your wages, and you may lose your house.

If you were to carry an umbrella policy, the insurance carrier would pay the entire loss.  Yes, all $500,000 of it.

For this example we will say that there is $1,000,000 in umbrella insurance coverage in place.  The underlying policy would pay the first $250,000 of the loss and the umbrella would kick in the additional $250,000.  You’re covered.

There is a big difference between having to come up with $250,000 and the insurance company paying the entire loss.

But how big?  What does umbrella insurance cost?

Good thing you asked.

One million dollars in umbrella coverage starts at less than $250 a year!  Doubling this coverage typically would not double that premium amount.  The cost of the umbrella will vary depending on driving records, prior loss history, the types of policies it is covering over and certain high risk occupations.

How much umbrella coverage do I need?

Another great question.

It’s not possible to protect yourself against all risks and exposures you may face.  However, you can do your best to insulate yourself from situations that may put your assets are risk (risk management).

It’s often said that you want to cover your “net worth” with umbrella coverage.  If you have five million is assets, you want to make sure those assets are not subject to a settlement if an accident does occur.  This includes your house, investments, cars, retirement accounts and even your bank accounts and future earnings.  Even if you don’t have significant assets now, consider your earnings potential (because the attorneys will come settlement time).

With the increase in litigation, we recommend everyone increase their liability limits.  Both the frequency and severity of auto accidents continues to rise as drivers have more and more distractions in the car.

The underlying limits on a home, auto, boat, or motorcycle policy will only go so far.  Most carriers cap liability on these types of underlying policies between $250,000 and $500,000.

Will this be enough if someone is seriously injured?  What if the accident results in a permanent injury or even the loss of a life?

Don’t get soaked by not having the coverage you need #umbrellainsurance

Give our office a call or reach out via email to discuss your options for umbrella insurance.

Bring on the May flowers!!

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