A Valuable Safeguard
By: Virginia Kinneman
The purpose of insurance is easy to comprehend. Quite simply it exists to safeguard our assets, the welfare of our families, and the financial security of our businesses. Car insurance is a necessity as is homeowner insurance. Actually, you won’t be allowed to register a car in most states or take out a mortgage without those policies. You are not required to have umbrella insurance in most instances yet you will sleep better if you do.
Umbrella insurance is a form of liability insurance protecting you against lawsuits and the coverage limitations of your other policies. Umbrella coverage takes over once your other policies hit their coverage limits. With medical and legal costs as high as they are those limits could be reached quite soon. Suppose you are judged responsible in a multi-car crash. Everyone can make a mistake, but if you do, your car insurance may only carry a $300 to $500k limit on medical coverage for others. What if there were five people injured and multiple cars totaled? You could easily be on the hook for a million dollars with only $300k paid from your car insurance policy. If you had a $1 million umbrella policy, your life saving & retirement, and your kid’s college funds will not be at risk along with all your future dreams.
Umbrella coverage can also protect you from libel or slander lawsuits that cause injury to someone else since it will typically extend to other members of your household who do not have auto or property insurance in their own name. Do you have a teenager who posts regularly online, possibly libelous comments, or play pranks on his/her friends that might result in property damage? How is their driving record? Teenagers do not always display the best judgement, nor can parents always keep up with their activities moment by moment. Your umbrella policy can insure the entire household.
Although the policy will cover you against most types of lawsuits, there are some that are excluded such as damage you may cause intentionally to anyone else or their property. Also, the policy will not cover any injury to yourself, for that you need to make claim on your own health or auto policy as appropriate. Any costs above those limits will still come out of your pocket.
The best part of umbrella coverage is the reasonable cost. For such protection and peace of mind, the average $1,000,00 policy costs between $150-$250 per year depending on various personal risk factors. A commercial umbrella policy for the same amount starts around $400. Some risk factors considered when a policy cost is being formulated will be those inherent in your job and hobbies, your driving record, history of previous lawsuits, and the presence of a household dog, especially one that is considered an aggressive breed.
Commercial umbrella rates have been rising because of escalating losses and lawsuits leaving many commercial policies inadequate in coverage limits. The incidence of falls with traumatic brain injury, traffic accidents involving commercial vehicles, and the ever pervasive trend of lawsuits have drastically increased the frequency and severity of umbrella claims. Have your Financial Advisor or Attorney review your risk so that you are insured with an adequate umbrella policy limit. You may need more than an additional $1 million policy.
Not all days are bright and beautiful but umbrella insurance when needed, is the best safeguard you can purchase.
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