Umbrella By normal definition: (Noun) A protecting force or influence- Folding canopy designed to protect a person against rain or sun.
Umbrella By Insurance Definition: (Noun) also know as excess liability insurance, is a type of insurance policy that provides additional liability protection beyond the limits of your existing insurance policies. It acts as a supplementary layer of coverage that kicks in when the limits of your primary policies, such as auto insurance or homeowner's insurance, have been exhausted.
Umbrella coverage is how you protect your assets, your savings, and your future earnings. Many people don't realize that in the event you are sued they can come after everything, your homes and cars, that savings account you started for your child since the week they were born to pay for their college, even your current and future earnings.
Many people look at what tangible items they have and figure they are not worth suing, but it is so much more than that. If your future earnings are garnished for the unforeseeable future, that is something that will impact both you and your children for as long as it takes for the settlement to be paid off.
Another reason people don't think they need umbrella coverage is that they believe they wouldn't ever be in a situation to be sued. If you are a human, with air in your lungs and hair on your head (Or no hair👨🏼🦲😉) lawyers don' t discriminate. If you drive a car, if you have a pet, if you have children, if you coach, if you volunteer, if you have company over to your house, hell if you leave your house. You can be sued.
You get groceries right?
One of the most powerful stories I have heard was a woman was just out grabbing a couple of tomatoes at the grocery store to put the finishing touches on her dinner, when she lost her footing and fell into a young boy who happened to hit is head on a display case that left him alive but in a coma. The parents kept him on life support and quickly exhausted through the woman's underlying homeowners coverage of $500K and through her $5 Million dollar umbrella. The woman was happy she had that coverage and was able to have a way for those funds to be available while the family held out hope for their son to wake up. I think we all can relate to a simple grocery trip, and we can all relate to the parents who held out as long as they could waiting for their son to come back to them.
Do your kids play outside?
Another coverage that umbrella policies provide that most people don't know of is excess underinsured/ uninsured motorist. This sits on top of the underlying auto policy coverage but can be crucial coverage for you or your family. This story hits close to home with one of our very own here at CAL, our Managing director of Private client services. As a young girl she was hit by a car and sadly the person did not stop. Her parents carried UM coverage, which allowed for her hospital stay to be fully paid out, as well as a decent sum so that she would be able to get cosmetic surgery as an adult. Due to broken nose and orbital bones, the doctors projected she may need a nose job and some other work. She ended up not needing reconstructive surgery (and looks beautiful as all get out) and the settlement ultimately paid for her college!
So how do you choose the right amount of coverage?
To evaluate for the correct umbrella amount, you will want to take into consideration your savings, investments, properties, vehicles, and any other valuable possessions, as well as your future income. It's also important when evaluating total assets that home equity can still hold significant value and can be considered an asset in terms of your overall net worth. Once you have that full amount totaled, you will have a good idea on the umbrella limit that would be sufficient to protect both you and your family.
Final Thoughts
Umbrella coverage is extremely inexpensive for the amount of coverage you get and the peace of mind it provides. The cost of getting sued for an amount well over your underlying policies and capabilities to handle out of pocket, can be catastrophic for you and your family. If you are going to place importance on any kind of additional "expense" this year, it should be on this, peace of mind for something that can realistically happen to any of us and the cost would be detrimental to you and your loved ones. But hey don't go out on a limb just because I said so. As long as you don't drive, have kids, have pets, have friends, or leave the house don't get umbrella insurance! That would just be overkill! 😉
If you have any questions on umbrella insurance and how it can benefit you and your peace of mind, feel free to shoot me an email!
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