If you currently own an Umbrella Liability policy you may reach a point in your life where you start to question the necessity.
We get this question from time to time. Our answer starts with a question, why did you buy it in the first place?
Often that answer is related to a few things:
1) Additional protection from lawsuits
2) More assets to protect
3) Younger drivers on the road
Do you Drive?
#1 and #2 are different sides of the same coin and #3 is in the mix. The theme is additional money to protect from the unknown threat of lawsuits. In our experience, driving a vehicle is the #1 cause of Umbrella Liability lawsuits.
Young drivers don’t seem to be the issue, OLDER drivers are the issue. Umbrella claims are not common in our agency but the cause is usually an older driver, at fault in an accident with significant injuries to a third party.
Auto accidents can happen to anyone at anytime.
Right now, we have an older driver staring down a $350,000 lawsuit AFTER substantial limits on their auto policy were exhausted.
How about another, mid sixties driver who blacked out behind the wheel of their car WHILE entering an intersection. Turns out there was a medical condition they did not know about. That one cost $1,000,000 bucks.
Going Without an Umbrella
There are usually three objections to purchasing an Umbrella Liability policy.
- Not enough assets to warrant a $1,000,000 starting limit
- Additional premium cost that will likely not be used
- If it does not exist, attorneys won’t want more money
- I will just declare bankruptcy
All of these reasons are legitimate but lets tell a story. Mid 40’s driver pulls out in front of another vehicle that has the right of way. No injuries at the scene and the “injured” driver refuses medical attention. Sounds unfortunate but when the lawsuit for $500,000 came in, the game changed. Issue was the at fault party auto insurance limit was $250,000. This lawsuit lasted for three years and was settled at the last minute for $250,000.
Do you have a crystal ball?
This story feeds the third item on the list but let’s look deeper. If for three years you thought the need for $250,000 was hanging over your head, how would that make you feel? This person had assets but no more than the average person. Kicker was they are in the midst of buying out a business. They could afford the premium for Umbrella Liability policy but never got around to the purchase, even after is was suggested.
What they did have was income that could be garnished. Don’t forget, lawsuits are not based on your assets, they are based on injuries and the realities of a third party. Throw in the “value” of the lawsuit and assets become and afterthought.
So what happens when you have a lawsuit over your head and you are trying to buy or sell a house, finance a business or put children through college? What happens when your spouse tells you ” I told you we should have bought an Umbrella Liability policy!” and you ignored it.
Umbrella is a No Brainer
To us, there are two insurance policies that are no brainers. They are cheap for the value. Not to have them simply makes little financial sense for the average person. What are the two?
- Umbrella Liability policy
- Renters Insurance
For $20 a month, or less, there is no better value but guess what? The take up for both policies is low. Consider yourself in the “know” and make the wise move.