9/7/2018 By Agent Ken CobbBy Agent Ken Cobb
You insure your home. You insure your cars, your boat and your side-by-side. You even insure your diamond wedding set. So you have lots of insurance. But have you overlooked insuring yourself – or, more specifically, your financial future?
When talking to clients, I often share my belief that the primary purpose of insurance is to protect yourself against catastrophic financial loss. So let me pose a question: Which would be a more catastrophic financial loss – a) Your $20,000 SUV gets stolen or totaled in an accident; b) You are being sued for $1 Million after hitting and severely injuring a motorcycle rider who came out of nowhere?
If you own a car or truck valued in the five digits, I’m sure you have protected it against loss or theft by fully insuring it. So if you didn’t want to risk that five digit loss, it may also make sense to protect yourself against the potential of a much larger loss – if you are sued for someone’s bodily injury, personal injury or property damage.
Of course, you likely do have some basic liability coverage that comes with the insurance policies you already have. Your Personal Auto policy* protects your liability for a car accident that you might cause. Your Homeowners policy* covers you if sued for a variety of scenarios, including if someone is hurt on your premises. Your Watercraft policy* includes liability protection if something goes wrong out on the water.
So while you already carry basic Liability protection on your existing insurance*, the question is whether the limits on these policies are enough. For example, the most common Auto liability limits we see are 100/300/100. If you carry 100/300/100, then you have $100,000 in protection if someone is seriously injured in a car accident and is suing you. As you might imagine, a seriously injured individual could burn through the first $100,000 in medical care within hours of the accident – leaving you personally on the hook for additional medical bills, to say nothing of the economic loss claim you could face.
Even if you carry the maximum liability limits offered within your personal insurance policies (usually $500,000 with most carriers), the question would be whether a $500,000 limit of protection is sufficient in the event of a serious injury. In many cases, it might leave you somewhat at risk for what life could throw your way.
A Personal Umbrella policy picks up where your primary insurance policies leave off, providing a second layer of liability protection. For example, let’s say you carry a $300,000 Liability limit on your Homeowners policy and also have a $1 Million Personal Umbrella. If your dog runs out into the road and causes a bad car accident for which you are being sued, you will have a total of $1.3 Million in liability coverage to protect and insulate you from this lawsuit.
In addition to adding a second layer of liability coverage, many Umbrella policies will also fill in liability gaps left by your primary insurance policies. Hence the term “Umbrella” – when properly configured with your other insurance, the policy typically extends over all your underlying liability exposures^ to provide you extra protection and peace of mind.
Here’s some good news. Umbrella policies are quite affordable. In fact, your Personal Umbrella insurance might be least expensive policy you buy. While Umbrella rates depend on your underlying exposures and risk factors, most of our clients can buy a basic $1 Million Umbrella policy for $100 to $250 a year.
*In describing Liability coverage on Personal Auto, Homeowners and Watercraft policies, I speak of coverage that is typically found on standard insurance policies common in the industry. It is possible that some types of policies might not include standard Liability coverage, although this is somewhat rare. This post assumes that you as the reader carries coverage which most people carry for the things you insure. You should review your policies carefully to confirm this is the case.
^While it is generally true that a properly configured insurance plan will allow your Umbrella to extend over all your underlying exposures, there could be some cases where certain exposure(s) might be excluded, depending on the rules, offering and policy language of the issuing Umbrella carrier.
The coverage information shared in this post is general in nature. Please read your insurance policies carefully to fully understand all terms and conditions.
About the Author
Agent Ken Cobb
Ken is the owner and principal agent at Pine Country Insurance in Bemidji. Active in the insurance industry since 2000,Ken uses his years of personal insurance knowledge and experience to assist clients in customizing insurance coverage to fit their needs. Ken considers himself a "farmer" rather than a "hunter"; rather than focusing on writing a lot of new policies as quickly as possible, he works on cultivating long term relationships based on trust with his clients. When writing new policies and meeting for annual reviews, Ken spends time with his clients explaining and helping them understand their insurance, and he is also pleased to share his knowledge with his blogging audience as well.
Ken Cobb is owner of Pine Country Insurance and has been active in the insurance industry for over 15 years. Meet Ken.
Coverage descriptions found in this blog are summaries provided for general educational purposes and cannot fully detail the terms, conditions, limitations or exclusions of a specific insurance policy. Please read your policy carefully.