Umbrella Insurance Policies

What is an Umbrella Policy?
Many people have heard of Umbrella Policies but are not quite sure what they mean. An Umbrella Policy is a policy that is not part of your car insurance policy or your homeowners’ policy. It has to be purchased separately and usually cannot be purchased unless there is a Liability Coverage on your car of at least $250,000 per person, $500,000 per accident and $100,000 in property damage. There must also be a homeowners' or renters' policy of at least $300,000.

What's the purpose of an Umbrella Policy?
The purpose of an Umbrella Policy is to provide protection when other policies do not. If there is a situation where an accident occurs and the policy in place does not cover the policy owner, or if the policy isn’t enough to cover all of the expenses, the Umbrella policy will kick in. One aspect of this coverage to remember is the limits of any homeowners' or underlying auto insurance must be completely exhausted before the Umbrella Policy can be used. This type of policy is not generally offered by agents, you have to ask. Generally, a one million dollar Umbrella Policy will cost somewhere in the area of $200 to $400 a year. This is a layer of protection no one should be without. This is an effective way to protect your assets. I would always have an Umbrella Policy if you own a home or have valuable assets. You should ask your insurance agent if you qualify and how much it would cost. Make sure your assets are protected.

Related: Tips To Lower Insurance Costs For Young Drivers

An example of an Umbrella Policy
Let’s look at an example. Mary was up all night working a double shift, and as she gets in her car she can hardly keep her eyes open. As she heads home, Mary begins to doze off. She runs a red light and slams into the side of another car. The driver of the other vehicle is killed and the passenger of the other vehicle was injured.  This was a tragic accident. As tragic and horrible as it was, it is still an accident. Mary wasn’t drinking, nor did she intend to have a wreck. It just happened.

Mary had what she thought was good automobile insurance. If there was more than one person injured, the insurance company would pay up to $250,000 for each person, not to exceed $500,000 in the total amount paid. The wrongful death settlement or jury trial verdict on behalf of the other vehicle with the death of the driver and the injury of the passenger would easily be over $250,000. In fact, the settlement should be well over $1,000,000. Mary could lose everything.

This is where an Umbrella Policy comes in. If Mary had a $1,000,000 Umbrella Policy, she would have additional coverage over and above her car insurance limits. The Umbrella Policy would pay the damages in excess of the $250,000. Mary’s house and all of her other valuable assets would be protected.

Related: Is The Insurance Company Really My Friend?

As a Kentucky Accident Attorney, I know nobody plans on a tragedy like this, and I hope it never happens to you. Unfortunately, it could. That is why I think an Umbrella Policy is a good investment. Without it, your family could lose the stability and assets that you have worked so hard to provide for them.

Michael Schafer
The Personal Injury Attorney for Louisville and Kentucky
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