Personal umbrellas often get overlooked as part of a strong protection program, but here’s why they shouldn’t.
Umbrella Policy Benefits
Umbrella policies are an added layer of personal liability protection that extends over your underlying policies such as a homeowner, auto or renters’ policy. Most underlying policies have a cap at which you can set your personal liability limit. But what you may not realize is once that limit is met in an accident, you are responsible for any overage. Huh? Say what? Let’s look at the following example.
Let’s say that you have a pool at your home and you decide to invite the neighborhood over for a pool party. The party is going smoothly, and everyone is having a good time. But before anyone has a chance to go out and enjoy the pool, one of the neighborhood kids gets out the back door and falls in the pool. 911 is, and while they get the kiddo out, they determine it best to airlift them to the hospital. And that’s just the beginning of the medical treatment they will receive. While it was an accident, it happened on your property, and you are responsible for the medical bills that follow. Unfortunately, the personal liability limits on your policy are only $300,000 and with the all the treatment the child needs, they get used up pretty fast. This means you are responsible for the rest out of pocket. But if you have an umbrella policy, it would pick up where your homeowners left off up to the limit on the umbrella policy. Most umbrellas are sold in limits of $1 million. Sure, it may sound expensive to have $1 million of coverage, you can get an umbrella policy for a few hundred dollars or less a year.
Other situations where an umbrella policy is beneficial:
- Your daughter dislikes her gym class as well as the teacher. She goes on social media and writes some very disapproving comments about the teacher that show him in a bad light. The teacher sues and is awarded $500,000.
- Your 17-year-old child chooses to pick up some friends and go “cruising” in your car. He loses control of the car while showing off how fast the minivan is. Each child is severely injured. Your umbrella policy helps cover the medical bills.
- Your teenage daughter is babysitting the neighbor kids and decides to leave the house for a minute to run to the store. When she gets back, one of the children is severely injured and needs surgery. The child’s medical bills exceed $300,000. The parents of the children decide to sue you to cover the medical bills.
Protecting Your Future
Umbrellas aren’t just for people with big houses or fancy cars. They are for anyone who wants to protect their financial future. Even if you don’t have a lot of assets now, you want to protect any future earnings, and that is what an umbrella policy can do for you.