An Umbrella Policy? Really?

The world is becoming more and more litigation happy.  Everything from a hot cup of coffee, leaving a child’s toy in your yard covered in leaves and even social media posts can land you in “hot water” and potentially facing a lawsuit.  Lawsuits, of course, don’t just begin and end with the frivolous.  Car accidents where another party is seriously (or not) injured can force you into the courtroom, saying the wrong thing about the wrong person or just being a landlord have the potential to open yourself up to some serious liability.

Regardless of whether you think about the rules and regulations surrounding when and why someone can file a lawsuit, from an insurance prospective it’s important to know that you have options to better protect yourself so that if you do find yourself in a terrible situation, you might not be stuck paying out of pocket for damages, court and attorney fees.

The way you accomplish this is through an umbrella policy from you Dallas insurance agent.

What is an umbrella policy?

The most simple way to think of an umbrella policy is to think of it as an extension of the liability protections already on your Texas homeowners and auto insurance policies. In the event that a claim is filed against you, generally the lability protections on the auto or homeowners policy are paid out first and you have to hope that you have enough insurance to cover the total amount of the payout.  With an umbrella policy, after those initial lability limits are reached the umbrella can kick in to cover an additional amount up to the limit of the umbrella policy (typically at least $1,000,000). 

Think about it like this: you’re driving home from work and are involved in an automobile accident where you’re found at fault and negligent. One of the passengers in the other vehicle is injured to the point of requiring serious medical care. Helicopter trip to the hospital, numerous surgeries and tests, physical rehab, lossed wages, are just some of the costs the other party might expect you (and your insurance company) to pay for if you’re found to be at fault. Depending on what kind of auto insurance you have here in Dallas, you could be looking at having to pay the remainder out of pocket. If you can’t pay, and let’s face it most of us don’t have a few hundred thousand dollars just laying around, you could see a lien or judgement placed against you or even have your wages garnished until the judgement is settled.

Considering the ever increasing cost of medical care it might be worth adding some additional protection in the form of an umbrella policy, or at the very least increasing your liability limits.

Who needs an umbrella policy and how much do I need?

This is the million dollar question. Some people will say that, technically, everyone needs an umbrella policy because everyone can be sued and have a judgement placed against them.  Others will tell you that only those with high net worths and exposed assets need to have this extra protection.  Here at the Lewis Family Insurance Group I try to ask questions of clients and prospective clients to find out what amount of assets they have exposed, and their level of risk tolerance to help guide the conversation.  As with any of the products and services we offer, the client is always the boss.  It’s never our job to force coverage onto people, but rather to give you all of the information available so that you can make the most educated decision that makes the most sense for you and your family.

If you do decide to add an umbrella policy to your insurance portfolio the most simple way to determine the level of coverage you need is to assess your total net worth (assets minus liabilities) and purchase a policy that is slightly larger than that number.  A more accurate way is to have us send over our assets exposed worksheet that takes into account a number of different factors, including future earnings potential, to find out more precisely what level of coverage is right for you.

An umbrella policy can help you protect current and future wealth, regardless of how much money you have or don’t have right now.  If you’ve ever talked to me, you know I believe that your liability coverage is the most important and (often) most inexpensive portion of your insurance policy, and as a result everyone should consider increasing their liability limits.  It’s a lot easier to come up with an additional $500 when you raise your deductible from $500 to  $1,000 than it is to come up with two or three hundred thousand dollars to settle after an auto accident.

Regardless of your current situation, here at the Lewis Family Insurance Group, we can help you find the coverage that best fits your budget and your needs.  Give us a call at 972-752-0307 or fill out the online quote request to learn more.