Sunshine and Umbrellas


It’s Raining on Sunshine

Is your Umbrella up even on a sunny day? This isn’t a crazy question!

I’m referencing a very important type of insurance coverage that most people don’t have.  Too many don’t even know about it.  That type of coverage is Umbrella Liability Coverage.  Have you heard of it?

We live in a society where the risk of legal liability is high.  It may well be the biggest financial risk you face!  Unintentional incidents like hitting a car in a parking lot, someone slipping on your stairs or wet floor, your child throwing a ball through a neighbor’s window and breaking an heirloom can bring on a multi-million dollar lawsuit.  Certainly you didn’t mean for these things to happen.  Accidents do happen and protection from their consequences is essential.  This is where having an Umbrella liability policy can save you money.  It can protect all you have accumulated.

We all have liability coverage on our auto insurance and on our homeowner’s coverage. Do you have a pool?  A fence alone isn’t protection from someone climbing over, drowning and the family suing you.  How about a trampoline?  Do you have a boat or Jet Ski?  If so you have liability coverage on the watercraft.  Most states have a minimum liability coverage requirement on each type of property that is insured.  We recommend a higher minimum, especially on auto liability for both insured and uninsured drivers.  The cost differential to increase your liability coverage above the state requirement is usually quite minimal.

Another risk you may not have thought about – pets.  Do you have an invisible fence?  As you know these are meant to keep the pet in.  They don’t keep children or others out.  Children are even attracted to pets in the yard.  Many pets are territorial and may aggressively lunge for any trespassers.  This can happen even if the person is just walking by your property.  Even if your pet doesn’t bite, if someone falls or feels threatened when walking by they may file a complaint that can turn into a lawsuit.  Yes, even Fluffy can cause problems!

Most policies give coverage as follows.  Homeowners insurance has three main sections:  personal liability, medical payments to others and additional coverage.  Automobile insurance liability is covered in automobile liability and medical payments.  You have the ability to collect personally on the medical portion for expenses you incurred even if you have medical insurance.

What does umbrella liability cost?  You will be surprised at how inexpensive it is.  A Million dollar policy, the minimum stand alone policy, can cost in the $250/year range.  A small cost for a large amount of protection, don’t you agree?  Umbrella policy face amounts tend to be $1 Million, $2 Million or $5 Million.

Where do I get this insurance?  Contact your property and casualty agent.  If you have your vehicle insured with one company, your house with another and your boat with yet another it will be a bit more challenging to get coverage.  If all are covered by one company, then it is easier to write.  You will have to increase the liability coverage on each of your current P&C policies to the company minimum in order to get the stand alone Umbrella policy.

How do I know how much to buy?  Obviously a $1 Million policy is the minimum.  As financial planners we look at risk exposure.  Do you have several children who are active, driving, or in college?  Multiple insured dependents increase the statistical probability of a claim.  Do you or your household earn over $100,000/year?  Is your net worth growing?  The more you have, the more you need to protect yourself.

I’ve read the horror stories in case-law review.  One example that stuck with me concerned a college student home for a break.  The student borrowed a parent’s car and was involved in an accident with injuries.  To summarize the case, the injured party sued, even though the driver was injured as well.  The injured party who was hit was awarded a $1,000,000 settlement.  The student’s parents only had $500,000 liability coverage on the car.  They did not have an Umbrella policy.  Did the court or the plaintiff forgive the remaining $500,000 due?  No, absolutely not.  This student’s parents ended up selling their home and other assets to pay off the remaining $500,000 claim.  Don’t think this can’t happen to you!  Think about the financial and emotional devastation suffered by this family that could have been avoided had an umbrella liability policy for $1 Million been in place.

 Take action!  If you don’t have this important Umbrella protection, make a call to your property and casualty agent this week!

Owning an Umbrella policy can assure the sun can be shining even when it is raining bad news.



About Sara Seasholtz

Sara Seasholtz, CFP®, was voted one of "50 Most Influential Women in Charlotte" by The Mecklenburg Times in 2011, and has assisted her clients with their financial planning needs for over 40 years. Have a financial question? ASK SARA!


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