You don’t have to be a millionaire to be sued like one.
That point, more than any other, is all anyone really needs to know when they’re deciding whether to buy excess liability, or as it’s more commonly known, umbrella insurance.
Given how relatively inexpensive an umbrella policy costs – and because, sadly, we live in a lawsuit-happy world – it’s hard to justify not buying it. Yet awareness of umbrella coverage isn’t high, even among well-compensated professionals.
In the simplest terms, an umbrella kicks in when the underlying liability limits of your various other policies have been exhausted.
Umbrella insurance covers not just the policyholder, but also other members of their family or household.
For instance, imagine that your teenage son triggered a six-car accident. Your auto insurance’s property damage coverage isn’t likely to be high enough to pay for all six accident victims’ replacement vehicles. The limit on your auto liability coverage also isn’t going to high enough to pay the medical bills of six people and any of their passengers. An umbrella policy, however, can take care of all of that.
Here are some other examples of events an umbrella policy would cover if your homeowners or auto insurance wasn’t enough:
- Your dog attacks a neighbor, who in turn sues to cover medical bills, lost wages and pain and suffering.
- Your daughter punches another girl in a fight at school, breaking her nose. The girl’s parents sue.
- Your teenager throws a party at your house while you’re out of town. Someone brings alcohol to the party, and one of the guests gets arrested for driving under the influence on the way home. You get sued.
Umbrella coverage also covers claims often excluded by liability insurance policies. That includes slander, libel, malicious prosecution and other personal liability situations.
The better umbrella policies also cover the cost to defend a lawsuit, even if it is groundless.
Umbrella limits can range from under $1 million to $50 million. While that might sound like a lot to many of us, the fact is that one good-sized judgment can wipe out years of retirement savings, not to mention mountain homes, wine and art collections.
Umbrella coverage, in short, is a small price to pay for the extra piece of mind.
Tim Stenger is an Insurance Advisor in CCIG’s Private Client practice. Reach him at 720-330-7129 or TimS@thinkccig.com
How Big Should Your Umbrella Be?
The amount of excess liability coverage that is right for you depends upon your personal finances. The more you’re worth, the bigger your umbrella. Need help figuring things out? Don’t hesitate to use the form below to reach out to us!