When to Consider Purchasing an Umbrella Insurance Policy

Umbrella insurance policies offer an additional layer of protection beyond the basic liability limits of other insurance policies. They are particularly valuable for those with significant assets, such as businesses owners, high net worth individuals, or individuals driving high-value vehicles. In this article, we'll explore the scenarios in which purchasing an umbrella insurance policy is a wise decision.

What is an Umbrella Insurance Policy?

Umbrella insurance, also referred to as 'excess liability insurance,' is a type of insurance that provides additional coverage to protect personal assets from lawsuits or other financial damages. Unlike standard liability policies like auto, home, or business insurance, which have fixed limits, umbrella policies offer coverage up to a specified amount beyond those limits.

Why Choose Umbrella Insurance?

There are several key reasons why individuals and businesses might consider purchasing an umbrella insurance policy:

High Value Assets: People with valuable assets, such as personal real estate or businesses, are more at risk of having their assets seized if they are found liable for a substantial judgment. An umbrella policy can help protect these assets. High-Value Vehicles: Owners of expensive cars or other high-value assets can be held personally responsible for damages beyond the standard liability limits of regular insurance policies. Business Owners: If a business owner is involved in an accident that results in a lawsuit, an umbrella policy can provide additional coverage to protect their personal assets. Liability Risks: Certain activities or professions carry higher risks of liability claims. For example, self-employed individuals, real estate agents, or healthcare providers may want additional coverage to protect themselves and their clients.

Real-Life Scenario: The Importance of Umbrella Insurance

Let's look at a real-life example to illustrate the importance of umbrella insurance. Consider the case of a young adult who was involved in a car accident and tragically killed another driver. The parents of the young adult had a $1,000,000 umbrella policy on their son's car, providing additional coverage beyond the standard liability limits.

This young adult had a history of driving recklessly and racing, and this incident was the second time he had resulted in a death. During the trial, the jury found the driver 25% at fault for pulling out of his driveway improperly, and the young man 75% at fault for racing. The total judgment was $750,000.

Due to the existence of the umbrella policy, the widow received the full $750,000 judgment. In the absence of the umbrella policy, the judgment could have potentially led to the sale of assets such as bank accounts, real estate, or other valuable properties to cover the remaining amount.

Conclusion

In conclusion, if you have significant assets, own expensive vehicles, operate a business, or engage in activities that carry a higher risk of liability claims, purchasing an umbrella insurance policy is highly recommended. It can provide an essential level of protection that other policies cannot offer, helping to safeguard your assets and financial well-being.

For more information or to discuss your specific insurance needs, contact a qualified insurance professional today.