Umbrella

I never thought I would be sued. Now what?

When it comes to insurance, many people do not spend much time thinking about it…until something happens. Then all of a sudden, their insurance becomes VERY important. Why? Because they want to know if they have coverage, and will it be enough. The time to prepare for disaster is not after it happens. If you do not own an Umbrella policy, now is the time to consider getting one…before something happens.

What is an Umbrella Policy?

Picture an opened umbrella. Underneath it, picture your home, your cars, your family, your paycheck, your investments, and any other assets you own. The Umbrella sits on top of those things adding extra protection beyond the limits you have on your underlying policies, like home and auto. Umbrella policies offer limits starting a $1 million, $2 million and so on.

That may sound like a lot of money, but it only takes a split second for tragedy to hit, and if it is serious enough or someone has an aggressive lawyer, the judgment against you could be financially devastating. Are you prepared?

While it is true we live in a very litigious society, where we could be sued for just about anything, there are some common risks that increase our exposure to lawsuits. Here are some of them:

Do you (or other household family member)….

Own a dog? Horse? ATV? Trampoline? Exotic Pet?
Have a pool or a pond?
Own, borrow or rent a boat?
Baby-sit?
Have teens actively posting on the Internet?
Become distracted by cell phone/texting/etc. while driving?
Drive long distances?
Have youthful drivers under 25 on your auto policy?
Have friends of your children over at your home/property?
Volunteer as a teacher, coach, leader, board member, etc.?
Supervise young people or children at events, on the playground, etc.?
Entertain? Serve alcohol?
Have property that contains risks that may cause damage to a neighbor’s property (dead trees, water run off, etc.)?
Have a high-income or high-profile profession?

If responsible for an accident, injury or property damage, you may be sued and have to pay for:
Property losses
Pain & suffering
Loss of essential services (Lawn, house cleaning, etc)
Attorney fees
Loss of wages
Medical bills
Car damage
Loss of use
Towing
Car rental
Damage to personal property
Damage to business property
Environmental cleanup
Liability losses

So how much coverage does a person need?

Since juries award damages based on the severity of an accident and not your ability to pay, it is best to purchase as much coverage as your budget allows in relation to the amount of risks you have, your assets, and your estimated future earnings. Otherwise, you maybe be left in a position where you are forced to sell your home and liquidate assets to cover these costs, and perhaps have future earnings garnished.

Let’s look at an example: Mark, a 58 year old male, did not see the stop sign and continues though an intersection, hitting a mother and her toddler. The mother has two broken legs, but the toddler sustains serious internal injuries. Mark’s auto policy has $100,000 per person and $300,000 per accident for bodily injury. The most his policy will pay out just for bodily injury is 200,000. A suit is brought against him for $800,000. After his auto policy pays out $200,000 for the covered accident, how will he pay for the remaining $600,000?

Thankfully, Mark purchased a $1 Million Umbrella policy. All he is responsible to pay for are his deductibles. For the average household, an umbrella policy will cost anywhere from about $200 to $300. But if the policy is packaged with the home and auto, you will probably get discounts on those other policies, thus making the overall cost less.

Who doesn’t need an umbrella?

Even if you assume your risk of being sued is low, that does not mean you have no risk. Even if you are careful, bad luck can happen, our children can make foolish mistakes, or even our guests can. And animals, well, they’re animals. Bad things can happen to anyone.

The safest course of action is to be insured. You have worked very hard for where you are today, why risk your earnings and assets when you can protect them inexpensively with an umbrella policy?