An umbrella policy provides additional coverage or ‘excess’ liability above the limits of your underlying policies. It can protect you from bodily injury liability claims and property damage liability claims. Umbrella policies also provide a broader form of coverage and can help cover legal fees, false arrest, libel and slander.
Your umbrella insurance is activated if you are found liable and are required to pay damages, or if you are sued and need to pay for your legal defense, even if you are not at fault or responsible. An umbrella policy only pays once your underlying liability limits have been exhausted. For this reason most umbrella policies require a certain level of underlying liability coverage so that they are not responsible for the first smaller portion (typically $300,000).
Your car, home, investments and retirement accounts, even future income, are all considered assets. It is important to know that if you are sued for a lot of money and do not have enough liability insurance or an umbrella policy to cover those costs, all of these assets are exposed.
People typically choose to buy an umbrella policy because they want to prevent the possibility of financial ruin due to one misstep or accident. Umbrella insurance can provide the protection needed to protect your current and future assets.
When choosing your coverage limits, consider three things:
• Liability exposures- Consider risks as a homeowner or renter, the risk of causing bodily injury in a motor vehicle accident and any potentially dangerous activities you participate in that could put those around you at risk.
• Value of your assets- This includes properties, possessions, stocks, savings and retirement funds. The more assets you have to protect, the higher the umbrella policy limit you should consider.
• Future income potential- Since liability lawsuits can result in loss of both current assets and future income, even those with few current assets to protect may want to consider the potential consequences of a serious claim.
When considering umbrella insurance, a major factor to think about is your future earning potential. You may not have many assets now, but if you’re on track for a high paying career you could be involved in a lawsuit that can target money you haven’t earned yet.
Protecting your assets and income against potential lawsuits is the main motivator for many people to purchase umbrella insurance. The primary purpose of liability insurance is to protect you if you are found liable for causing property damage or bodily injuries, and for your legal defense even if you are not liable. When someone sues you, they are seeking compensation for damages you may or may not have caused. Your underlying liability insurance will pay the costs associated with the claim after your deductible has been met, and up to the limits of the liability policy. If the wronged party is awarded more than your underlying liability coverage, the umbrella insurance begins to pay out up to the limits afforded by the Umbrella policy.
If you have a substantial amount of personal net worth you should seriously consider purchasing umbrella insurance to protect yourself.
Contact Kovalev Insurance today and request a complimentary consultation to ensure your property and family are properly protected.
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