“You don’t have to be a millionaire to be sued like one.”
It is an old adage that, while shocking in its delivery, is still based in reality as new lawsuits are filed for serious accidents and causing ensuing claims with insurance carriers. So how can we, millionaires or not, protect ourselves best against such a worst-case scenario?
The Chris Bailey Agency is here to help you be smarter about your insurance. After all, the more you know, the better you can plan and protect against the unexpected.
What is a Personal Liability Umbrella Policy?
Think of an umbrella policy as a simple extension of your auto and home policies’ liability limits, as well as that of any “toys,” such as an RV, motorcycle, boat, jet ski, or snowmobile. An umbrella policy picks up coverage when your underlying policy limits are exceeded. These policies sit on top of those base amounts and usually have set standardized benefit limits of $1 Million, $2 Million, $3 Million, and so on.
Am I Eligible for a Personal Liability Umbrella Policy?
In most cases, personal liability umbrella policies require clients to have specific underlying policy liability limits, such as auto policies covering $250K (per person)/$500K (per accident)/$100K (property damage), or $300K liability on a homeowner and/or renter’s policy. It is very rare for someone to be ineligible for coverage, unless they have a pending or past legal issue.
What is Covered?
If you were to be involved in an auto or home lawsuit and found responsible for another party’s injuries and/or damages, you would likely have to pay the other party for those costs— hospitalization, medical expenses, rehab, lost wages, etc.—which can quickly become very expensive.
Umbrella policies cover legal expenses to support the client and provide settlement up to the policy limit. Since Farmers’ (the insurance company) money is at risk when you’re sued, we’ll protect that money with our own legal team, and we do this at no cost to our clients. So an umbrella policy can be considered as having a top-tier legal team, on retainer, should you encounter a serious situation.
What if the other party doesn’t have insurance or is underinsured? You can count on Farmers. Only a few insurance companies still extend coverage in the event their client is injured as a result of an uninsured or underinsured motorist. Farmers still provides this coverage, while most others do not.
What’s Not Covered?
Any intentional acts are not and will not be covered, nor are any acts that are deemed criminal or of a discriminating manner or nature, or any acts that cause self-harm.
Umbrella policies do not cover high-risk or unnecessary use of a vehicle, or indirect damage to your own vehicle or home. Auto and home insurance covers those indirect scenarios.
Typically, personal umbrella policies will not provide protection for libel and/or slander. Farmers still provides this rare coverage endorsement, but it is done through a policy endorsement. (For information about this kind of coverage, please call our office.)
How Much Coverage Do I Need?
The amount of insurance that is right for you depends on your individual situation and risk tolerance; there is no precise formula for calculating the amount of liability coverage you may need.
Sometimes it is best to match your current expected income with your future income potential, your current assets, and potential assets. But it is best professional practice to determine the level of coverage by consulting with each client and making recommendations on case-by-case basis for each client household.
At the Chris Bailey Agency, we provide that level of attention and service. We are here to help guide our clients to a solution they feel comfortable with.
How Much Does a Personal Liability Umbrella Policy Cost?
When you think about the purchase power of having $1 Million or more of an insurance company’s money supporting you, with the added benefit of having high-end legal support at no out-of-pocket cost to you, the premium cost of a policy offers tremendous value for the money. Roughly, premiums usually range from around $350/year for $1 Million of support for a one-vehicle household to $2,000/year for $5 Million of coverage for a multi-car household.
The benefit of transferring most of the financial risk to the insurance company is a winning formula for any client, regardless of their net worth.
Each individual or household’s rates will differ, and your specific premium amount will be based on your age, driving history, the number of vehicles currently owned, previous auto and/or home claim history, and other variables such as location and coverage amount requested.
If you have assets you want to protect, a personal liability umbrella policy could significantly limit your exposure to many financial risks.