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Umbrella Insurance: Not Common Enough

June 25, 2013

Umbrella Insurance

Is your house the Hangout House? Do you ever worry about injuries and the lawsuit risk swirling around us these days? Living a high-risk lifestyle such as having youthful drivers, active kids, and serving alcohol in your home can all increase the risk of lawsuits. Keep your family safe with umbrella insurance. 

What is it?

“Umbrella” insurance refers to a policy protecting the insured's assets more broadly than primary coverage.  Umbrella insurance protects yourincome, retirement and home equity by providing a safety net of extra coverage.  An umbrella policy is pure liability coverage above and beyond your regular policy coverage, sold in increments of $1 million.  This may sound like a lot, but later I will offer examples of how these expenses can add up.

How It Works

Umbrella insurance is a safety net or cushion. For example, if the insured has an auto insurance policy with liability limits of $500,000 and a homeowners insurance policy with a limit of $300,000, then adds the $1 million umbrella, the insured's limits become $1.5 million on an auto liability claim and $1.3 million on a homeowners liability claim.

How much does $1 million cost?

Umbrella insurance costs vary, but generally start around a couple hundred dollars for the first $1 million of coverage. Again, this may sound like a lot, but consider reading a medical bill as if you were uninsured—simple procedures cost hundreds of dollars! Unfortunately, we may not realize the reality of how much emergencies and accidents cost until they happen to us.  Umbrella insurance is priceless. 

Homeowners Insurance Policies

Our kids are also priceless—we love seeing them in their active states, and having the neighborhood kids over is part of the social package. But, if your kids are anything like my clutzy-self, they could trip on landscaping or uneven terrain and sprain their ankle.  They could fall out of a tree and break their wrist.  They could obtain a concussion during a seemingly harmless game of tackle football. 
Let’s say your home liability limit is $300,000. If the kids are playing baseball in your backyard and your child accidentally hits the neighbor child in the head with a bat, your home policy will pay up to the $300,000 coverage, and the umbrella pays up to $1 million on top of that.

Auto Insurance Policies

Umbrella insurance also applies to your auto insurance policy.
“When you look at an auto policy with limits of 250/500/100, that is talking about your policy will cover what you are legally liable for up to the limits of $250,000 per person, $500,000 for multiple people and $100,000 of property damage,” says Jayson Jones of Jones Insurance & Associates. Jones provides this explanation:

 So, you run a stop sign and T-bone a car that has in it with the following damages:







2013 Chevrolet Impala


Your policy would pay to fully cover mom at $220,000, cover dad up to the individual limit at $250,000, and use the remaining $30,000 (of $500,000 multiple people) to cover the child. This leaves you to be personally responsible for the remaining $270,000 that was not covered. Your excess umbrella will pay what you are liable for above your auto policy up to $1 million.

“The 250/500/100 above is higher than most people have, so that puts us even
more for the need for an umbrella,” says Jones.

Accidents are called accidents because you never know what is going to happen, who will be involved and what will be damaged.  But, unfortunately, someone has to pay for medical expenses and repairs. If you are at fault, this can happen to you.
If you injure someone, you would owe for lost wages, medical bills, and pain and suffering. The lost wages alone for a breadwinner of a home could be millions of dollars and medical bills might be about $500,000.

Most of us do not have this type of money available in case of emergencies.  Don’t cut your insurance so close: Don’t miss the opportunity to provide a safe, healthy environment for your family.

Author: Jones Insurance and Associates
June 25, 2013

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