Picture this: Your car skids on a wet road. You crash into an expensive vehicle being driven by a highly paid CEO. He is injured so badly he cannot return to work. A jury finds you at fault and awards him millions of dollars you are responsible to pay. You are now financially ruined because the legal system has taken your savings, assets and, for years, requires you to forfeit a portion of your paycheck.
You may be thinking, “this won’t happen to me,” but that is not necessarily the case. Unfortunately, many people find themselves in a similar situation and are not adequately prepared. Those who are prepared, however, have what is called an umbrella policy, or excess liability coverage. This is an additional insurance policy, which provides liability coverage above and beyond the limits of liability coverage on your personal auto insurance, homeowners insurance, boat insurance and recreational vehicle insurance policies. This additional coverage is used after you have exhausted your primary coverage if you are responsible for damages as a result of an accident, especially an unexpected catastrophic one involving your car, property or recreational activities. It is important to keep in mind that as you accumulate assets, you become a target for lawsuits. If you lose a lawsuit and do not have enough liability insurance, your assets could be seized to satisfy the judgment. In addition, your assets most likely include savings and investments. Even your future earnings can be garnished to satisfy a judgment against you.
The umbrella policy, or excess liability coverage, is one of the most underutilized personal insurance polices and is readily available through most agents. Unlike your home and auto insurance, no one mandates that you buy umbrella coverage; however, the umbrella policy could turn out to be the most important part of your insurance portfolio.
The coverage amount for an umbrella policy starts at $1 million and can go upwards of $10 million. The annual cost for coverage starts as low as $150 and increase based on the amount of coverage provided by your auto, home, boat and recreational vehicle policies. In many cases, for less than $20 per month, you can protect your hard-earned assets.
So if your car skids on a wet road and hits the expensive car of the highly paid CEO, you will have the peace of mind with umbrella insurance coverage that you are protected. In the litigious society that we live in, don’t be the person that says “It won’t happen to me”.
By Bryan Williams
This article was featured in the Summer 2011 issue of The Village Journal at Haile Plantation.