Umbrella Insurance – No Longer Just for Millionaires!

Umbrella insurance has long been considered necessary only for high-net-worth individuals. But in today’s litigious society, you don’t have to be a millionaire to be sued like one. And if you are a millionaire, you’re doubtlessly aware of the need to take every precaution to protect your assets. Smart consumers are increasingly adding an umbrella insurance policy (also known as excess liability insurance) to provide coverage for damages that exceed their primary insurance liability limits should they be found at fault in a personal liability lawsuit.

For example, you’re sued for $1 million after an auto accident or an incident on your home or property. But your insurance only covers up to $500,000 in damages. Who’s responsible for the other $500,000 if you’re ordered to pay it? Unless you have umbrella insurance, you are. In such a scenario, your financial assets – retirement savings, child’s college fund, etc., can be in jeopardy. If you’re sued for damages that exceed the liability limits of your homeowners or automobile insurance coverage, an umbrella insurance policy helps pay what you owe.

Insurance companies sell umbrella insurance only if you already have either auto or property insurance – usually homeowners, but possibly another policy, such as renters or condo. You must buy a minimum amount of liability insurance on those coverages before you can buy an umbrella policy.

Who needs umbrella insurance?

Net worth is not the only consideration. Some people are at higher risk than others for being sued. Risk factors include the following:

  • Owning rental property
  • Coaching childrens’ sports
  • Participating in sports in which you could accidentally injure or kill others (hunting, skiing, surfing, etc.)
  • Being a carpool driver
  • Owning a high-performance sports car
  • Serving on the board of a non-profit organization
  • Volunteering
  • Regularly posting reviews of products and businesses

Other risk factors include having a swimming pool, hosting large parties, having a teenage driver and owning a dog. Even a breed that doesn’t have a reputation for aggression can inflict severe injury, especially in the case of a toddler.

Umbrella coverage is also provided should you be sued for:

  • Slander – injurious spoken statement
  • Libel – injurious written statement
  • Malicious prosecution
  • False arrest, detention, or imprisonment
  • Shock/mental anguish
  • Other personal liability situations

The first three lawsuit types in the above list have become more numerous because of social media’s prevalence. Those who feel their reputation has suffered damage can sue, claiming that statements made about them on social media were false, and caused a negative public perception that affected their quality of daily life (for example, making them the target of harassment and personal threats).

How do you know if you have enough coverage?

A policy with a $1 million coverage limit may seem adequate, but reality is different from perception.

As Forbes magazine staff writer Ashlea Ebeling reported in an article about umbrella insurance:

“… today actual jury awards are in the millions. Examples: a dog bite case in Maryland for $5.9 million; an Internet bulletin board defamation lawsuit for $11.3 million; horrific automobile accidents including a $21 million verdict in Texas and a $49 million verdict in California.”

The same article gives the example of an independent insurance broker talking to a new client with two homes and multiple cars about raising his umbrella limit to $5 million. The client mentioned that he regularly drives six kids to soccer tournaments, which prompted the broker to bring up the very real possibility of each of their families suing him if there were a terrible accident. The client decided to go with a $10 million policy.

Considering your exposure to risk, it is recommended to buy at least enough umbrella insurance to cover your net worth. This includes your income, savings and other assets.

Of course, the only way to know the amount of umbrella insurance you need is to talk with your insurance agent. Our team of personal insurance professionals at Strassman Insurance Group can review your portfolio to see if an umbrella policy is right for you, and advise you on coverage and limits to ensure you have the best protection for your personal assets, at the best price. Contact us today.


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