Question from Kirsten W. of Westfield:
The commercials I’ve seen asking people if they know if they’re covered for a certain situation has got me thinking. How do I prepare for the worst?
Response from Andy Warren:
Those commercials have got a lot of people thinking. Insurance prices have stopped dropping and it’s a great time to lock in a solid rate with the best coverage available.
Adding an umbrella policy (also known as a catastrophe policy) is easily the best way to get on track with that goal. An umbrella policy is all about having the peace of mind in knowing your family and assets are protected.
The most common umbrella claim is an auto accident involving multiple injuries and very costly medical bills. The other common claim is an incident on your property that results in injury. Medical and legal costs can eat up the underlying limits of your homeowner, auto, boat or motorcycle policy pretty quickly. Your umbrella policy or your personal assetscover these costs when your normal policy limits are exhausted.
Your independent insurance agent will be able to help you settle on a level of coverage you are comfortable with. Most people should be pretty comfortable with an umbrella limit of $1 million, but limits more than $10 million are available if you are looking for superior protection.
I don’t want to say umbrella claims are unpreventable, but they are the type of claims that happen no matter how prepared you are. Some things make a claim more likely, such as having a pool, living on a lake, having a young driver and owning a boat, snowmobile and basically anything fun. Instead of talking about prevention this week, I want to go over a claim scenario to illustrate how an umbrella policy will work.
Claim scenario: The insured’s son was driving his car on a short road trip with a friend, the claimant. The car drifted off the road and into a phone pole when the son fell asleep at the wheel. The passenger was hospitalized for more than a month with broken bones and internal injuries. The hospitalization was followed by some time in a wheelchair, but he was able to walk again after six months of physical therapy. This claim cost $1,200,000 with $300,000 coming from the auto limits and $900,000 coming from the umbrella limits.