Understanding Insurance: Umbrella Policies
By Terri Powers
This story’s played out thousands of times.
Distracted for just a moment you plow into the back of an expensive car. It all happens in a split second, and in that moment comes a wave of consequences. The car you’ve hit is driven by a top-level business executive who now is in transit to a hospital via Life Flight.
Thankfully, you met with your insurance agent who recommended you increase the liability coverage on your auto policy and boost your liability coverage even further by adding an umbrella policy.
As it turns out, your “old” liability coverage of $300,000 would not have been enough to deliver the coverage you need.
These situations can have several financially debilitating results.
As the victim recovers, undergoes months of physical therapy and lost wages, the costs mount and personal financial exposure increases. If the victim loses his job and house due to personal injury the likelihood of a lawsuit is assured.
With the proper coverage in place your insurance carrier will provide the legal support and liability coverage you need to address a decision that awards a substantial claim against you
Umbrella insurance was designed expressly for these circumstances. These policies are relatively inexpensive and typically purchased in increments of $1 million.
This is particularly important for people with substantial net worth and assets – which would otherwise need to be liquidated to satisfy a judgement in the event you are found liable for injury to another.
Some financial experts recommend that anyone with a net worth of more than $200,000 should have umbrella insurance.
Because of the litigious environment we live in, umbrella insurance goes well beyond auto accidents.
Should someone slip on your front steps or if a heavy tree branch falls and damages your neighbor’s house, or worse, injures someone in that house, you could be the target of a lawsuit.
Umbrella insurance is not limited to personal coverage. Most businesses are candidates for commercial umbrella policies designed to protect them from the long list of liabilities they face.
Understanding umbrella insurance is easy when you distill it down to its essential element which is to provide additional liability coverage. Also important, is understanding that additional coverage is generally inexpensive and readily accessible. Just ask your agent.
Terri Powers, CIC, CPIA is President of Premier Choice Insurance Agency Inc. in Oregon City and is licensed in Oregon, Washington, and Tennessee.