Umbrella insurance policy
Stand alone personal liability umbrella policy
What are underlying limits in umbrella insurance?
In my career, I have seen many times, potential clients asking for the bare minimum when it comes to liability. Whether it's because they want to save money, or because it's all they think they'll need. However, auto liability is the most important part of car insurance, and should be viewed as such.
Simply put, it prevents someone from suing the pants off you if you happen to cause an accident that results in damages or physical injuries. The limit of how much the company will cover however, depends on what you set as your auto liability limit.
So how do you know if you have enough auto liability to make sure you will be protected from a lawsuit? First, you need to know your net worth, by taking into account the equity in your home, savings, retirement, income, investments etc.
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The state minimum liability limits are $25,000/$65,000/$15,000. The first number is per person, second number is per accident, and third number is property damage. This is the most the company will pay in the event of an accident. First and Second numbers cover medical bills, lost wages, legal fees, funeral costs etc.
However, I do not recommend these limits and I will avoid signing anyone up at these, here is why. First, $15K in property damage is almost nothing. Most cars on the road average $30K-$50K or more, meaning if you have these limits and crash into a car worth more than $15K, guess who is responsible for the rest? You. Also, $25,000/$65,000 is not going to go very far when it comes to medical expenses.
If you cause an accident and multiple people go to the hospital, need surgeries, rehabilitation, can't work or even pass away. $65,000 is barely going to make a dent.
This means you will be responsible for the rest and will most likely get sued, especially if you have a lot of assets or money. This is why auto liability insurance is so important and must not be overlooked. Please make sure you have enough in auto liability. If you have any questions on this please feel free to reach out to me personally.
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Umbrella liability insurance protection is the 2nd layer of defense.
The umbrella policy is the 2nd layer of defense. It is the cheapest and most effective insurance product on the market. Typically umbrella policies start at $1 million in coverage and are usually about $300 a year or $25 a month. Of course you can increase it to however many million your provider allows, or however much your situation requires, but it starts at $1 million.
Depending on your insurance provider however, they will require you to have auto liability coverage limits that satisfies them before they will issue an umbrella policy. Most company's want to see that you have at least $250K/$500K/$250K. So, unfortunately you can't have state minimum liability and purchase a $1 million umbrella. This of course means that you will be paying much more in monthly premium then the state limit of $25K/$65K/$15K.
So how does it come into play? Simple, in the event of an accident once your underlying limits are used i.e. $250K/$500K/$250K your umbrella activates and pays up to $1 million dollar limit. Another awesome thing about an umbrella policy is that it covers not only your auto liability, but also your personal liability. This means it covers you if for example someone slips and falls on your property, your dog bites someone, or whatever it may be.
The same rule applies for the underlying limits. Insurers want you to have at least $300K in personal liability before they will issue the umbrella. Some insurers may only offer the umbrella if you have auto insurance with the appropriate limits with them. So, if you just have home insurance with an insurer they may not let you purchase an umbrella. Another great thing is that it can be applied to liability for your boats, ATV's, jet ski, motorcycles, snow mobiles etc. I recommend shopping around and bundling as much as you can.
Not only is it cheaper to bundle but typically if you bundle everything with one company and purchase an umbrella policy, it will cover everything liability wise that you have insured with that company. Meaning the umbrella will apply to liability claims arising out of your cars, boats, ATVs, motorcycles, jet ski, snow mobiles, houses etc. For more information email me by clicking here.
Umbrella policy can be bundled with your other policies!
Another point I want to make about bundling, let's say you have cars and umbrella insurance with company A but you have your motorcycle insurance with company B and your home insurance with company C. The $1 million umbrella policy will only be applied to claims that arise from cars insured by company A, and will not be applied to motorcycle or home insured by companies B or C.
However if you have cars, umbrella, motorcycle and home insurance with company A the umbrella will cover everything you have. As always it's up to you to figure out the benefits, costs and to do your own research so you can make an education decision on whether to boost your liability limits, bundle coverages or even purchase an umbrella. If you still feel that you are not sure please reach out to professionals and they are more than capable of navigating you through it. For a free quote for a stand alone umbrella policy click here.
