Umbrella Policies Can Protect You From Financial Ruin

If you are sued or found liable for negligence, and your homeowner’s or auto insurance policy doesn’t cover the cost of damages or legal expenses, all of your assets may be exposed. This includes your retirement accounts, checking and savings accounts, and can even apply to income you will earn in the future. That’s where umbrella policies come in.

Umbrella policies only take effect if the basic liability limits of your primary insurance policy are exhausted. They also provide coverage if your primary policy excludes coverage for a particular claim. Take the following scenario, for example. You have a rottweiler. She’s sweet and gentle, and she would never hurt a fly. However, your homeowner’s insurance policy refuses to provide you with liability coverage for your dog, because she is one of the five “aggressive breeds” excluded for coverage. One day, your rottweiler runs into the street in front of your house. A car swerves to avoid hitting the dog, and hits a car heading in the opposite direction. The accident results in thousands of dollars worth of damage to both cars. You are sued because your dog ran into the road, causing the accident. Unfortunately, in this scenario, your homeowner’s liability coverage will deny your claim for protection because the accident was caused by the “excluded” dog. If you don’t have an umbrella policy, you will have to pay for the damages out of pocket. If you do have an umbrella policy, it may be the difference between financial disaster and a good night’s sleep.

Basically, umbrella policies prevent you from being financially ruined in a lawsuit.

Umbrella policies cover most, but not all, types of property damage. However, this type of insurance only provides payment when you are responsible for the property damage or bodily injury. For example, if a postal carrier slips and falls on your walkway because you neglected to shovel a path through the snow, you may be sued for negligence and an umbrella policy would cover costs above and beyond your liability policy. However, if your house is damaged due to flooding, an umbrella policy would not provide coverage. You did not cause the flood, therefore, the umbrella policy does not take effect.

Examples of Claims That Are Typically Covered By Umbrella Policies

• Property damage
• Bodily injury
• Lawsuits
• Dog bites
• Professional liability
• Medical malpractice
• Rental property
• Car rentals

Examples of Claims That Are Not Typically Covered By Umbrella Insurance

• Uninsured Motorists
• Floods and other natural disasters
• Harm or property damage caused by intentional acts

A $1 million policy will generally cost between $150 and $200 per month. How much coverage you need depends on several factors. By asking yourself the following three questions, you can determine an appropriate coverage amount.

• What risks do I face? Do you participate in any potentially dangerous activities, have an extra long commute to work, or have an exclusion in your primary policy for a potential liability (such as an “aggressive breed” of dog)?
• What is the value of my assets? For some people, their assets are relatively basic - house, cars, retirement plans, and checking and savings accounts. However, others have an extensive list of assets, such as stocks, multiple properties, and valuables, that require more in-depth analysis.
• What is my potential for future income? Even if you have relatively few assets, future income can be on the table when involved in a hefty lawsuit. If your potential for earning is high, take this into consideration when purchasing an umbrella policy.

You don’t have to be grossly negligent to get sued. It can happen to all of us. You cause a car accident while adjusting your GPS, a neighbor slips and falls on your icy driveway, the family dog bites a child. All of these scenarios can occur to the most responsible, kind, cautious people. Unfortunately, homeowner’s and auto insurance policies don’t always cover the extent of the damages. Umbrella policies step in when your basic liability policy is exhausted. At Altman & Altman, LLP, we have nearly 50 years of experience protecting the rights of clients across Massachusetts. In addition to fighting lawsuits, we are also committed to helping you recover yourself financially if you’ve been injured, or if you are the one who caused the property damage or injury. Accidents happen. You might be on the receiving end, or you may have inadvertently caused it. Either way, Altman & Altman LLP is here to help. Contact us today for a free consultation about your case.