The San Diego Insurance Blog: You and Your Liability Umbrella

In the world of meteorology, whenever it looks like rain, an umbrella is good to have around. In the world of insurance, a Liability Umbrella can protect you from getting soaked as a result of losing a liability lawsuit.

People are suing each other today more than ever. Verdicts amounting to hundreds of thousands of dollars are being awarded by juries across the country in increasing numbers. If you accidentally injure someone or damage their property, you could be the one being sued. Even though your underlying policies may provide substantial liability limits, it is not uncommon today for juries to award damages that exceed those limits.

Coverage amounts are written in increments of $1 million and supplement your present policies to provide additional personal liability protection.

So, how does it work?

Typically you'll have insurance on both your home and your vehicles. Those policies can cover both loss through physical damage and protect you if you are sued. You can get sued for any number of things but usually you'll get sued if someone is injured at your home or injured as the result of an auto accident that is your fault.

Courts can award damages to cover doctor costs, pain and suffering, lost wages, loss of future income, loss of companionship (in the event of a death) and many others -- the list can be almost endless.

A Liability Umbrella steps in and pays when the limits of those policies are exceeded in the judgment. A $1 Million Umbrella gives you an additional million dollars of protection over and above BOTH your Home and Auto policies

Example: Your auto policy will pay up to $250,000 in personal injury damages when you are found at fault for an accident. You happen to hit a doctor one rainy Saturday night and he can't work for a couple years. The court awards $750,000. If you have a $1 Million Umbrella, your auto insurance pays $250,000 and your umbrella kicks in with the additional $500,000.

Obviously, umbrellas can go a long way to protecting your hard-won assets. I've seen cases where the judgements exceed their protection. They have to either go into the equity of their homes and pay from there or they get put on the LIFETIME MONTHLY PAY PLAN and have to sacrifice significant portions of their earnings for many, many years to pay the judgment. NOT a pretty picture.

The saddest part is that Umbrellas are generally extremely cost effective.

You can get a $1 Million Umbrella usually for under $300 a year. Many companies (including mine) will give you a sizable discount if your home and autos are insured with the same company. That can bring your cost down to the low $200's. In some cases a $2 Million, $3, or even a $5 or $10 Million Umbrella will make sense. Generally the more your net worth the higher your limits should be.