Financial planning is not only about accumulating wealth,
but also protecting it. There are three ways that many people—other than you,
that is— believe they can get rich quick: inheritance, hitting the lottery and
litigation.
That neighbor of yours that comes to your barbecue and has
too many cocktails and falls on your driveway? He could sue you. Have a teenage
driver or a pool? Many accidents involving either one of these can happen in
which someone may try to benefit off of your hard-earned savings. Is everyone
is out to get you? Of course not. But you need to protect yourself.
Here's the good news: There is a cheap solution that can
offer you big-time protection. It’s called personal umbrella liability
insurance.
Personal umbrella liability insurance, or umbrella
insurance, kicks in when you reach the underlying liability limits on your
homeowners, condo, rent, or auto policies. It can even cover you for such
things as libel and slander. In today’s extremely litigious society, an
umbrella liability policy is a must-have for anyone holding $250,000 or more in
assets.
Umbrella
Policies 101
Let's start with some important information that underlies
this type of insurance:
• Personal
injury liability settlements and awards reach $1 million or more in 13% of
cases.
• Roughly
20% of families worth more than $5 million do not have umbrella policies.
• Approximately
$380 annually can provide protection for $1 million to $2 million.
• Liability
through auto and home policies often fall below $500,000.
• There are
minimum liability limits that one must have on property and casualty insurance
to get umbrella policies.
As an example, say you have a trampoline in the backyard
that your kids and their friends often play on together. One day, Timmy from
across the street falls off of the trampoline and breaks both of his legs.
Timmy’s dad is a well-known personal injury attorney and decides to sue you.
Your homeowner’s policy has a liability coverage limit of $400,000. Timmy’s dad
sues you for $750,000. If he wins the case, you will need to come up with
$350,000. However, if you have an umbrella policy for $1 million, your umbrella
policy will cover the rest of the lawsuit settlement and you won’t need to
deplete your savings.
For a couple
hundred bucks a year, it is a must-have for responsible families.
Umbrella
Policy Coverage
Umbrella policies provide coverage for personal injury or
property damage, which may be caused by you, your family, or by potential
hazards on your property for which you are liable. This includes attractive
nuisances, some examples of which include trampolines and swimming pools.
Personal umbrella liability insurance also features coverage for incidents that
occur away from your home—for example, if your dog bites a neighbor.
Umbrella policies also offer extra protection for your
vehicles beyond your auto insurance policy. And they cover slander, libel,
wrongful eviction, or false arrest. Lastly, it covers lawyer fees should you
need to defend yourself.
For a few hundred dollars a year, you can protect your
family—and your future nest egg. If you have substantial assets or own a pool,
a trampoline, jet skis, or if you have teenage drivers, etc., make sure that
you aren’t opening yourself up to the risk of someone using you as their
get-rich-quick scheme. Do not ignore how important it is to protect the assets
you’ve worked so hard to accumulate.