I was having a conversation with a Ft Worth homeowner about his home insurance policy and he mentioned that he was reading about umbrella policies. He wasn't real sure what it was, and asked if he needed one. We spent some time discussing how an umbrella policy works, why he might want one, and how to put it in place.
What Is An Umbrella Policy?
Umbrella policies sold by Insurance For Texans provide an extra layer of liability protection above and beyond your home, auto, RV, motorcycle, golf cart, and/or boat policies. All of the policies just mentioned carry what is known as liability coverage. This portion of each policy will protect you, the insured, from claims made against you that you could be determined to be liable for in court.
The easy scenario to envision is a catastrophic car accident where you were determined to be at fault and the other driver is severely injured or heaven forbid dies. Your liability in that scenario can escalate in a hurry above $1,000,000 when you factor in just how much a life is worth. But what if you were driving a boat on the lake and ran into a family? Or maybe your roof was being replaced by a contractor that did not have insurance coverage and a worker fell off of the roof and landed on a power line?
All of those scenarios are real, and have been experienced by Texans. All of them also have liability as described by court precedent. The driver of the car and boat seem pretty obvious to most folks. But the homeowner question often gets puzzled looks from regular people. The homeowner was definitely found liable for the workers injuries since they did not require insurance from the company doing the work. So what does that mean for the potential insured?
In each case where serious injury and death was involved, the family of the other party obtained legal counsel. The attorneys were well trained and went after not only the limits of the base insurance policies (auto, boat, and home), they also went after the personal assets of the insureds. Will $50,000 provide comfort when you just lost your husband in a car accident who was the primary breadwinner of the family? Most of us would say certainly not. How about $250,000? Many would still say no. An umbrella policy provides at minimum an extra layer of coverage on top of those policy's liability limit that is at least $1,000,000. So when you're auto policy stops paying out at $250,000 to a family, the umbrella can provide the additional $1,000,000 to make sure that the grieving family is taken care of with a total benefit of $1,250,000.
In addition to the sum of money that is provided on your behalf, the umbrella policy will also provide you with legal representation so that you do not have to secure it if sued. What this can mean for you functionally is that not only are you able to provide financial relief, but the insurance company provided attorney can make sure that the legal situation goes away. This allows you to have an extra layer of protection at your benefit while knowing that you can move on with life without being destroyed financially on two fronts. That's the peace of mind that most of us seek.
Should I Get A Personal Umbrella Policy?
Ultimately, that decision is up to you. No insurance agent can force you to do that. So let's break this down practically for Texans.
- When discussing potential liability situations, we can't really predict who it will happen to or when. The reality is that if you move or own anything, there is a potential claim against you if something goes wrong. Even it not's completely your fault.
- How much is a life worth? Most of us would say that our own life is incredibly valuable to our family. And monetarily speaking, over the course of a career that averages $75,000 per year for 25 years your life would be worth $1,875,000 in income to your family. That's a ton of cash!
- If you were to cause an individual to not be able to work due to death or disability during an accident, do you have the ability to defend yourself AND write a check for that kind of lost income to a family?
Most Texans don't want to foot the legal bill, much less write a big check. That means you need an umbrella policy. We always hear the statement "I don't have assets so there is nothing that they can take"! Not so fast my friend.
They can attack your bank account, which most likely has at least a little money in it, stocks, real estate, or other valuable assets. It doesn't take long to be wiped out and be forced to file bankruptcy and start over. "But they can't take my home". While that statement is correct, a properly executed judgement can be attached as an abstract lien against your home which will reduce any profit you may see upon sale.
Did we mention that umbrella policies are some of the least expensive policies that we sell, yet provide some of the largest protections possible. In most cases, the cost of the $1,000,000 umbrella is less than a dollar a day.
How Do I Obtain An Umbrella Policy?
If you decide to obtain an umbrella policy, it is actually really easy to get one. If you own a home, rental property, auto, motorcycle, etc you will need to maximize the liability coverage on each policy. The companies that provide these policies will want proof that you have proper liability protection on the underlying policies before extending an offer. Most of those companies require at least a certain level of coverage on those policies. For home policies it is typically $500,000 in personal liability and auto they will seek $250,000 per person in bodily injury protection. Once the proof of the coverage for those policies is established, it is fairly quick to get the policy put in place. And if you are working with one of our preferred carriers, you will see policy discounts available for bundling all of those items together.
If you've never considered a personal umbrella policy before, it's one of the most cost effective kinds of insurance you can obtain to protect your financial future. Working with a local independent insurance agent means that you can navigate the process of finding proper liability protection for these scenarios in the most cost effective fashion possible. The agents at Insurance For Texans would love to fill that role for you. Click the button below to get started!
