Personal Umbrella Insurance

Personal Umbrella InsuranceYou don’t have to be a millionaire to be sued like one. Million-dollar judgments against individuals for negligence are still relatively rare. However, receiving a lawsuit with a million-dollar demand is more common. If you receive such a court summons and you have only $100,000 of coverage, you may lose a lot of sleep.

Umbrella policies offer inexpensive “peace of mind” for most types of negligence claims. Automobile accidents are probably the most common source of serious claims. This policy supplements your basic automobile liability with extra million-dollar layers of protection. It also covers other types of catastrophic claims such as a neighbor’s child drowning in your pool or the delivery man being seriously injured by falling over your child’s toys.

Umbrella Policy FAQ’s….

What is an umbrella policy?

A personal umbrella policy is a type of insurance that provides liability coverage over and above your automobile or homeowners policy.  So, if your liability coverage isn’t enough to cover the damages of an accident you cause or an incident on your property, a personal umbrella insurance policy kicks in right where your other liability underlying limits have been exhausted.  An umbrella policy can protect you when your automobile or homeowners insurance isn’t enough.

Is a personal umbrella policy right for me?

Almost anyone may benefit from a personal umbrella policy, regardless of income or assets.  Accidents can happen to anyone and lawsuits often result.  Some people mistakenly believe that if they “don’t have a lot of assets” they do not need an umbrella policy.  The simple reality is – anyone can be sued and everyone should protect themselves.  Accidents happen every single day and they do not (only) happen to people with a high level of assets. 

Example: A person of modest means is driving to work when they slide on ice and strike the vehicle in front of them.  The vehicle that was struck has a mom, dad, and three kids inside.  Several of the family members are seriously hurt and one is paralyzed.  Between the helicopter ride(s) to the hospital, multiple surgeries, rehabilitation, pain & suffering, loss of future income, etc. – the total damages far exceed the 100k of liability coverage on the driver’s auto insurance policy. 

What does the injured family do?  In most cases, they will sue the driver that caused the incident.  Can the driver simply say – I’m a person of modest means….sorry!”  Of course not.  The driver that caused the incident will be held responsible for any damages above his policy limit of 100k.  This driver could be looking at a lifetime of wage-garnishment and other asset garnishment to pay for the injuries.  Instead of this, an umbrella policy could have paid for most (if not all) of the family’s claim. 

What kinds of scenarios might an umbrella policy cover?

There are literally hundreds of scenarios where an umbrella policy may be needed.  Below are just a few of the potential cases….

A serious car accident – especially a multi-car accident:  A routine drive to work one morning could result in a serious car accident.  If injuries occur, without an umbrella policy you could be in real trouble.  Most auto insurance policies “cap” the liability coverage at 100k or 300k.  If the damages (injuries) exceed the limit of coverage on the auto policy you could be paying for the additional amount yourself.  In some cases, this could force people into bankruptcy. 

A Dog bite:  Your child’s friend comes over to your house and is bitten by your dog.  The child is hospitalized and requires several surgeries.  The parents of the injured child file suit against you for negligence.  They seek 750k in damages.  Your homeowners insurance policy has a 500k cap on the amount of liability coverage it provides.  Without an umbrella policy, you could be paying the 250k amount yourself.

Child drowning in your pool:  While you’re out of town a neighborhood child gets into your backyard and drowns in your pool.  The child’s parents sue you for 1.5 million dollars.  Your homeowners insurance policy will only cover you up to 500k.  Without an umbrella policy you could be facing financial ruin. 

Claims against landlords:  An umbrella policy can protect landlords in several different scenarios.  A few of these scenarios are listed below….

A third party sues you for damages your tenants cause.

A visitor is injured in a fall due to a broken step or handrail.

A guest is injured in your workout or pool facilities. 

You neglect to change the locks on a unit and a former resident with a key burglarizes the apartment. 

How much Umbrella coverage can I purchase?

Umbrella policies are sold in increments of one (1) million dollars.  Erie Insurance offers umbrella policies ranging from one (1) to ten (10) million dollars.  How much umbrella coverage you need is a question that the agents at Spicer Insurance can help you answer. 

Will a personal umbrella policy protect my business? 

A personal umbrella policy is designed to protect against incidents that are personal in nature.  They are not intended to cover exposures related to a business.  For business exposures, there are business umbrella policies that act in a similar fashion.  If you own a business it’s important to make sure you have a business umbrella policy to protect the interests of your business. 

What are some things that umbrella policies don’t cover? 

Although umbrella insurance protects you against most types of lawsuits, there are certain kinds that many policies specifically exclude. For example, many umbrella policies do not cover:

Malpractice lawsuits

Workers compensation claims against employers

Damage caused by a business, or by any business-related activity

Damage that you cause intentionally to any person or property

Also, it’s important to note that umbrella insurance only protects you from being sued for damage to other people.  If you’re the one who gets hurt and needs an expensive operation, it’s up to your health insurer (or you) to pay for it – and anything the health insurance doesn’t cover still comes out of your pocket.  In that case, an umbrella insurance policy can’t help you.

What does a typical umbrella policy cost?

In Virginia, a one (1) million dollar umbrella policy will be about $170 annually.  This assumes the person owns a home and two (2) vehicles.  If the person also owns a boat &/or rental property(s) the cost will be a bit higher. 

Should landlords have an umbrella policy?

Yes – absolutely!  This cannot be over-emphasized.  The second you purchase a rental property your exposure to liability rises exponentially.  If an injury to a tenant (or guest of a tenant) occurs the landlord will often face some type of legal action.  Even if the lawsuit is not successful – it still must be defended and defense (legal) costs can be significant.  A landlord’s best, most cost-effective defense to this exposure is a personal umbrella policy. 

Do I have to insure my home & cars with Erie to have an umbrella policy with Erie?

Before an umbrella policy can be issued, Erie Insurance must insure either the home or the auto(s) of the person seeking the umbrella policy.  If the person seeking an umbrella policy has no underlying (auto/home) policies with Erie then Erie Insurance will not issue an umbrella policy.  This is due to the unique nature of umbrella policies – they only come into play in the event that one of the underlying policies has been exhausted. 

Do I qualify for an Erie umbrella policy? 

To be eligible for coverage, you will need to have and maintain certain minimum liability limits on your auto and home insurance policies.

For auto insurance coverage, the minimum bodily-injury liability limits are $250,000/$500,000 (250k per person, 500k per accident), and $100,000 for Property Damage liability. 

For home insurance coverage, the minimum personal liability limit is $300,000.

If you own a recreational vehicle, watercraft, or rental/seasonal property you will also need to maintain certain minimum coverage on those items as well. 

Does Erie offer any discounts if I purchase an umbrella policy?

Yes –  by having an umbrella policy with Erie you may earn a nice discount on your home insurance policy(s).  In some cases, the discount(s) can really add up and the umbrella policy ends up being “free.”  Here’s how it works – Erie discounts each home insurance policy – including seasonal & rental home policies.  For policyholders with several home insurance policies, in some cases the discounts can equal (or surpass) the cost of the umbrella policy. 

Helpful links:

http://www.kiplinger.com/article/insurance/T028-C001-S001-why-you-need-an-umbrella-policy.html.

http://www.moneycrashers.com/umbrella-insurance-policy/.

http://articles.chicagotribune.com/2014-03-20/business/sc-cons-0320-invest-20140320_1_health-insurance-homeowners-insurance-insurance-coverage.

Frank D. Spicer Insurance Agency offers free, comparative quotes on personal umbrella insurance from multiple insurance carriers so you can get the best possible rate.

Want to see how much we can save you? Just request a quote to find out.