Buy a $1,000,000 Umbrella!
Ok; my having to squeeze in 3 blog articles on a Sunday evening, with the last 100 laps of the Nascar race playing on the t.v in the background, is not exactly J.K. Rowling scratching out her masterpieces on the fire escape after her children finally went to sleep.
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
I have tried to explain why it benefits clients to get an umbrella policy and never felt confident in what I was saying. This is a very helpful post and I will be filing it for future reference.
Thanks for the kind comment.
Very informative! Although I do have a question: How much coverage per person/per occurance does a person have to have to be elligiable for an umbrella?
Excellent question Rachel. If you are interested in purchasing an umbrella, your agent will go over with you ALL of your coverages, most of which will have to be increased, even your Homeowners. Your underinsured and uninsured coverages will probably have to be increased to something like $200,000 per person, $600,000 per occurrence. That’s why the umbrella is relatively cheap. Clearly, an umbrella is designed for people who have built up more that the average West Virginian’s personal “estate”, but it can be the difference between a bankruptcy (losing everything), and protecting what you and your spouse have built up during your working lives. Thanks for asking. jbh
Thanks Burt. Looking for a rule of thumb here, 70 years old and total assets of 4 million and happily retired? Would 4 mil work as a personal liability umbrella as well as the liability amount where my carrier is in an adversarial roll insuring me?
Excellent question. It shows you understood my article. 1. I am not an insurance sales agent but I am at the other end in the “real world” where someone’s life blows up from the results of poor insurance decisions. 2. So, take my article to a real sales agent if you can. You probably have USAA. The gals in Texas are very polite and knowledgeabe, so a phone consult will do. But you are correct in worrying about what happens when a moment of innate nation by you causes a child to become a paraplegic. Answer? You have enough assets that you should expect the parents to come after you, your 401K, and your house. 3. Also, Ca. Law is different from WV, so you might even speak to a Ca. PI lawyer, again, showing her my article. 4. In WV your carrier will want you to bump your own liability, UIM, and UM up to $200,000 per person; $600,000 per occurrence. So, a $1,000,000 umbrella takes you up to around $1.5 Mil. And remember all your coverages, homeowners, etc. Umbrellas used to be dirt cheap, but buy what you can afford, and do what you do in every other phase of your life; do a risk – benefit analysis. Just your luck, no underinsured asshole will ever put you in the hospital for six months and require you to get new knee and hip! Bummer, but better safe than sorry. JBH. If this was helpful, feel free to post to my FB professional site, J. BUrton Hunter III and Assocs, PLLC, or http://www.merchants.com. Good luck.
I should have prefaced this with “I think four million would be plenty and better than 99% of people have, but check with your representative and do a cost benefit analysis. Burt