Umbrella Insurance

Why do I need an umbrella policy?

It is a common misconception that umbrella policies are only for wealthy people who have a lot of assets to protect.  The aim of this article is to explain why this type of policy is not just for the wealthy, and why this common misconception could endanger you and your family.  

Without a personal umbrella policy (PUP) your essentially driving around with everything you own in your trunk. This includes all of your assets and investments, even your home.  The fact is accidents do happen.  And, in many cases accidents result in lawsuits that can cost you time and money.  That's why a majority of people choose to have a personal umbrella policy in place to fill in any gaps in coverage. 

It is very important to remember that NY State is a wage garnishment state. If you don't have enough assets to cover another person's awarded damages you will have a portion of your income garnished until the debt is paid in full.

The reasonable cost of a one year PUP policy is more than worth it when you consider what you have at risk.  In fact, most people never consider have cheap a policy with one million dollars in coverage might be. 

When might an umbrella policy come into play? 

If a neighbor slips and falls on your property they can sue you.  If a weather related mishap occurs on your property, or you're involved in a major traffic accident you're also at risk of being sued.  If your auto or homeowners liability coverage does not offer enough protection to cover expenses related to one of these situations the consequences could be disastrous.

But I don't have any assets to lose, why should I have a PUP?

Even individuals with little or no assets, including young adults, should think about purchasing PUPs. 

Consider this: If you're 25 years old you most likely have 30-40 years of potential future income remaining.  If you earn $40,000 a year thats $1.6 million dollars in lifetime earnings at stake.  What if you're found at-fault in an auto accident?  With the rising costs of medical care today, what you would be responsible for if you injured someone in an accident could easily go beyond what your home or auto policies cover.  Tort rewards often exceed $1 million, effectively limiting your future income to less than half.  In fact, its not uncommon to see a jury award $20 million dollars these days. 

Many people purchase an affordable PUP simply because they want peace of mind knowing that if an unfortunate accident happens, and the liability limits of their other policies are maxed out, their home, assets, and future earning potential won't be taken away if they're sued.

Worried? Well you should be.  Americans these days have a propensity to sue.  Almost everyone I know has had to face a lawsuit of some type over the course of their lives.  Because of the nature of the society we live in, you can't afford to not have an umbrella insurance policy. 

How an umbrella policy works

Umbrella policies usually come into effect after your auto or homeowners liability limit is exhausted.  For example: lets say you have liability limits of $300,000 on your homeowners policy, and a $1 million dollar umbrella policy.  If someone is injured on your property and a jury awards $800,000, your homeowners policy would pay the first $300,000 (less your deductible), and your umbrella policy would pay the rest.