You have likely accused a friendly local insurance agent of simply trying to scare you with horror stories of accidents and claims gone wrong. The agent calmly describes a scene that turns into a payout of a large sum of money leaving your pocket to compensate a family even though the situation was completely an accident. Or maybe you have watched afternoon television while home from work one day to see attorneys begging injured people to "get what they deserve". Or have you heard about tort reform in the state of Texas and how you just cannot sue someone for as much any more. Confused enough? Will someone just give me the skinny on whether or not I really need an umbrella policy?
What Is An Umbrella Policy?
Simply put, an umbrella policy is a personal liability policy that sits on top of your other policies to keep a rainy day from ruining your financial future. It extends the liability coverage of your home, auto, boat, motorcycle, etc policies in the event of a large accident. If a proposed accident payout is large, it helps satisfy that judgement even if it's just an accident.
I Have Good Insurance, So Why Do I Need That?
The reality is that your liability coverage associated with policies like your Texas Home Insurance have a maximum that they will pay out for a claim no matter how great your policy is at paying. If a confused teenager jumps your fence and lands face down in your pool, the policy will only pay so much. The same can be said for Texas auto insurance as well in the event of an accident. What do you do when that payout exceeds your policy limits?
That's Great, But What Do I Have To Worry About?
Let's consider a story. A true Texan Tale if you will. There is a family that has worked very hard to provide for their children. They have a nice house in the suburbs that is paid off. They working couple both have great jobs. Their youngest son is a student at one of the more prestigious Universities in the Texas an closing in on that Business degree. It all seems to be going to plan until a rainy day one fall.
The son is driving home from college in the rain looking forward to spending the weekend with the family. They will be celebrating his sister's birthday and he can't wait to spend quality time with them. His driving record matches his grades. Impeccable. But as he crests a hill at speed, he notices flashing lights in front of him. He pumps the brakes, but the car begins to hydroplane and he looses control. The car go airborne and ends up careening into the one of the police cars with the flashing lights. BOOM!
What happens next is a bit muddled, but the end result is that one police car struck another. This leads to a chain of collisions that destroys two police cruisers, the guard rail, and takes the life of one police officers while seriously injuring another. When a few seconds have passed, a bad situation has moved to a full blown crisis. Even though no one was doing anything wrong. It's horrific.
How Does An Umbrella Help This?
In the scene that we just witnessed, we have a lot of resulting damage. If your life was taken from your family, would suing someone sound appropriate? What if you could not work for months while rehabilitating from injuries? Would it now seem appropriate to sue a driver? How do those two police cruisers get replaced? Who pays for the guard rail repair when the state sends you a bill for the damages?
There is an old saying that you do not have to be a millionaire to be sued like one. This story is a very real and true story that has happened to a friend. The family is all still on the same auto policy, which means that mom and dad are financially responsible. They did nothing wrong. The son really did nothing wrong. But who pays for those bills?
In Texas, the typical maximum payout for bodily injury on an auto policy is $500,000. I ask you, is that enough money to take care of the two police officers that we mentioned above? The rational and caring Texan would say no. The umbrella policy would go above and beyond that maximum payout by at least $1,000,000. The cold hard truth is that the cost for maximum liability and an $1,000,000 umbrella policy is going to be around a dollar a day for most Texans.
For around $1 per day, you can easily make sure that a jury doesn't render a judgement against your family that forces you to liquidate assets that you've spent a lifetime accumulating. Your non-protected assets are up for grabs in that scene. That's why an umbrella policy really is a needed tool in your family's financial plan.
If you aren't sure what you do or don't have, speak with an independent insurance agent today. They can help you discover holes in your insurance plan to make sure that you don't lose it all, even when it's just an accident. The agents at Insurance For Texans are experts at helping you decipher how to protect your financial future in the best way possible.