Do I Need A Home Insurance Personal Umbrella Polic?

What does an umbrella policy do? 

It kicks in extra money to cover a claim when your primary auto insurance or homeowners insurance is maxed out by a claim that exceeds the limit of liability coverage.  

So, say your kid has an arsonist streak in him and he decides to play with fire in a unwise location (like, under the neighbor’s porch) and this lack of wisdom leads to a full blown house fire…  you get my drift.

These umbrella policies can be as little at $500 a year for an additional $1,000,000 in coverage.  

This adds a huge pot of money for a very small up front investment.

So why not ask about an umbrella policy?  Most insurance agents now offer them automatically when quoting new clients.  

How Umbrella settlement amounts can be calculated

If you are responsible for an accident, either at your home or with your vehicle, the amount of money you pay the other party will be determined by a few factors. 

Severity of injury, annual income of the claimant at the time of the accident, and expected lifetime income based on their current earnings.  

If you hit a surgeon or other high income earner, causing him to sustain massive brain injuries, there will be a settlement offer made by your lawyer and insurance company.  

 The settlement will hinge on the claimant’s ability to continue working in the same capacity some day. 

If they are permanently changed and will never return to their occupation, you will be asked to replace that income stream for their family.  

Seems fair, since the same thing would happen for you if you were the victim in an accident. 

Social Inflation and why it matters to you…

There is a trend happening in courtrooms across America.  It even has a fun little name for us to use… 

“Social Inflation” describes how many jurors have trended towards being very plaintiff friendly in recent years.

If you think about it,  Juries are made up of regular folks and it seems as though these regular people are becoming less and less sensitive to awarding huge settlement amounts to injured parties.  

Considering the increased jury awards being handed down these days, having at least a $5,000,000 umbrella seems like a no brainer.

So he threw it in the back of his pick up and started down the highway.  He almost made it to the landfill with the tree in the back, except it was caught by the wind and flew 130 feet towards a van that was following him.  

The van happened to be packed with 10 people, most of whom were not wearing seat belts, because seat belts are apparently optional when you ride in a van with a ton of people.

Mike’s Christmas tree caused the van to swerve and roll over.  The people inside the van suffered major injuries and had to be rushed to the hospital.  

Because Mike had failed to secure the tree in the back of his truck, he was found liable for the injuries for all the van occupants who required medical care.  

Mike had a $5,000,000 personal umbrella policy, which paid out the full amount for the medical expenses of the van occupants. 

This is a perfect example of why you need additional liability protection.  

I especially recommend these policies to anyone with teen drivers at home.

There are a few simple steps you should take when setting up a Personal Umbrella Policy.

Step 1:  Confirming your Home and Auto Insurance have adequate limits

The Personal Umbrella policy underwriter is going to expect the home and auto insurance policies his Umbrella will be expected to extend over are insuring you for smaller claims.

It is typical for a Personal Umbrella policy to ask the homeowner policy to have at least $300,000 in liability insurance limits. 

This amount varies, but $300,000 is a normal coverage limit.

The Personal Umbrella underwriter will expect the Auto Insurance policy to have at least $250,000 per person bodily injury, $500,000 per accident bodily injury, and $100,000 property damage coverage.  

A True Umbrella

Some Personal Umbrella policies have a clause that allows them to “drop down” and pay liability claims that have been denied by your home or auto insurance companies. 

When shopping around, find out if this is the case with the companies you are quoted.  It's a nice way to fill the coverage gaps!

Agent Dan's Last Piece Of Advice

If at all possible, have your auto insurance and umbrella with the same company. 

 If you have a really big claim that requires the umbrella to respond, the insurance company is not going to love the idea of paying that much money. 

 Having a clean “pass through” from your home or auto policy to the umbrella policy will limit the number of claims adjusters who have to be involved. 

This just makes life easier.

Agent Dan