Question from John H. from Carmel:
What’s the deal with umbrella policies? It just seems like an added cost, but my agent suggests I add one every year.
Response from Jamie Ianigro:
You are right to say that an umbrella policy is an added cost, but it is well-worth that cost for the additional protection it provides. I always encourage my clients to at least consider adding the extra layer of liability protection that an umbrella/catastrophe policy will add. An umbrella policy is really all about having the peace of mind in knowing that your family and assets are protected.
There are many ways to end up with an umbrella claim but 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 assets cover these costs when your policy limits are exhausted.
This is definitely a topic you should discuss with your independent insurance agent to make sure you are protected by a level of coverage that you are comfortable with. Most people should be pretty comfortable with a coverage limit of $1 million, but limits more than $10 million are available if you are looking for more.
I don’t want to say that umbrella claims are unpreventable because they are the type of claims that happen no matter how prepared you are. There are some things that make a claim more likely, such as having a pool, living on a lake, having a young driver or owning a boat/ATV/snow mobile (basically anything fun).
A quick claim scenario… The son of a policy holder 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 $800,000 with $300,000 coming from the auto limits and $500,000 coming from the umbrella limits.