Buy a $1,000,000 Umbrella!

My first post is the one prompted today by question from a Facebook friend who has actually read some of my blog. I encourage anyone who reads either blog to write with questions. He asks:

Hey Burt, I believe that I have seen you write on Personal Liability Umbrella policies. Is this something that both (my wife) and I would have individually? Are there any things that I need to look for in the policies? No hurry and thanks in advance for your wisdom.

Best to you and Nancy.
This is a terrific question. Let’s say you are 50 years old with a business, 20 employees, $100,000.00 in savings, $2,000,000 in retirement benefits, a $400,000 house paid for, and a net worth of $3,000,000.

In that case, a personal umbrella is not an option. You risk everything if you don’t. I once represented a couple in similar circumstances, and salvaging a denied underinsured (U.I.M) umbrella claim saved their business and their children’s inheritance.
 
But, what if you are younger, have a net worth under $300,000,  a professional or business career, $5000 in savings, a house with $20,000 in equity, $50,000 in an I.R.A., 2-3 cars, and a house full of “stuff”.

In other words, what if you are like “most people”? I say a personal umbrella is also essential.

I have several articles on this subject. Just go to my blog and search for “underinsured”, “coverages”, “ininsured” or “umbrella” for more details.

But, if you are just reading this, remember, there are two categories of “personal liability” claims;  

1. Claims against you for mistakes your make (run a stoplight, rear end someone);  and, 

2. Claims you have against others for mistakes they make that injure you.

If you cause negligently cause someone to become a quadriplegic, they have a $2,000,000 to $50,000,000 claim. Your option? Bankruptcy, and the loss of most of what you have.

If someone puts you in the hospital for two months, to be off work for a year, and $500,000 in medical bills, with a permanent impairment that requires you to go back to college for two years for a new skill and pay for replacement prosthetics for life, what do you do if they have $20,000 in per person liability coverage? In short, you are screwed. They pay the $20,000 and probably do not even need to file for bankruptcy. They have nothing worth suing them for.

So, here are the fundamentals of your personal umbrella:

1. Never, never, never let your insurance representative forget to have underinsured and uninsured coverage at the same limits of your liability coverage. My clients’ insurer tried to deny them “umbrella” coverage because their agent forgot to write it! Thanks to a good lawyer who found a brilliant insurance expert to back him up, the coverage was reinstated, and a big part of it paid!

2. When you get an umbrella policy, coverage of at least $1,000,000, it adds that limit to:

a. Your auto personal injury and property liability coverage;

b. Your homeowners;

c. Your auto’s underinsured and uninsured coverages.

3. When you pay for your umbrella, your carrier makes you upgrade the coverage you already have, so now your liability coverage is higher, and your underinsured and uninsured coverages are probably at least $200,000 per person and $600,000 per incident. This is how they can write the umbrella for so little; (Ask your agent, but I think that mine costs less than $100 per year!)

4. But, you say, “What about that $20,000,000 claim by the paraplegic?”

a. First, those claims are very rare. Do NOT text while driving!

b. When a plaintiff can settle for $1.5 million, faced with the threat that you will file bankruptcy, they almost always will take it and count their blessings. A good lawyer can distribute and preserve that settlement in a way to maximize the benefit of the injured person.

c. So, get a personal umbrella, and if you are the guy with a net worth ever $3,000,000, buy a bigger umbrella!

This post was written by Burton Hunter