boston lawyer personal injury insurance case

What is an Umbrella Policy?

An umbrella policy is insurance coverage over and above what your auto and homeowner’s insurance policies provide. It is relatively inexpensive and can save you from losing your life savings (this includes your home, retirement accounts, checking and savings accounts, and can even apply to income you will earn in the future.) if you were ever to be found liable for an accident where someone got seriously hurt or killed. If you own a home and a car you should have an umbrella policy.

How Does an Umbrella Insurance Policy Work?

umbrella policy info liberty mutual boston attorney

The graphic above from my own insurance company, Liberty Mutual, will help explain how an umbrella policy can save you from financial disaster. For example, let’s say you are driving your car approaching an intersection when you looked down for a moment at your phone because you heard a ping indicating you just received a text message. During the 2-3 seconds that you had your eyes off the road, a man had stepped off a curb into a crosswalk and had begun to cross the street. Because you looked away momentarily, you did not see him in time and you hit him causing very serious bodily injury. The man spends a month in the hospital and is left with permanent injuries as a result. He hires a lawyer, you get sued for negligence, the case goes to court, and a jury awards the man $800,000 in damages. You have car insurance, but your policy limits are only $250,000, clearly less than the jury’s award of $800,000. Where does the remaining $550,000 come from to satisfy the jury award? If you do not have an umbrella policy the remaining $550,000 comes from your personal assets. You may have to sell your home, dip into retirement savings etc. to satisfy the judgement. In other words, you have a major financial crisis unless you are super wealthy. If you have an umbrella policy, it will pay additional money to the injured man up the limits you purchased and since most umbrella policies minimum coverage level is $1,000,000 you will not have to pay any funds from your personal assets. Hopefully this example alone has you calling your insurance agent now to learn more.

Now I used the example of a car accident above because it is the most common scenario where we see this problem arise, but it is not the only scenario. People can and do get seriously injured and even killed each year in homes. In fact, each year over 120,000 people die in household accidents in the United States.  If someone is at your home and is injured or killed and you are found to be liable for the accident this same scenario can play out. We have handled cases where clients were injured in swimming pool accidents, deck collapses, dog bites, fire pit explosions, slip and falls on icy driveways and walkways etc. Any of these types of accidents can lead to catastrophic injuries or death that could leave you in financial ruins if you are not properly insured.

What Else Does an Umbrella Insurance Policy Cover?

An Umbrella policy provides additional liability coverage over the limits your auto, home, watercraft or recreational vehicle policy. People with boats, ATVs, and snowmobiles (all statistically high-risk activities) will also get additional coverage from an umbrella policy should they cause injury to someone.

An umbrella policy also covers all family members living in your household. So if it were your son or daughter driving in the scenario I described above they would get the same protection.

With my umbrella policy, my family and I are covered anywhere in the world. Should I cause an accident in a rental car while vacationing in Europe, I am covered.

If you own rental property and you are sued for libel or slander, false arrest, malicious prosecution, violation of right of privacy, wrongful eviction or wrongful entry an umbrella can provide coverage.

In addition to paying if you lose a lawsuit, an umbrella policy will also ensure that you are provided an attorney for no cost to defend the case, even if the lawsuit is frivolous.

How Much Does an Umbrella InsurancePolicy Cost?

What is the cost of this additional coverage? Although I can't give you a specific answer because each person's situation is different (number of cars, houses etc.) I can tell you that the large increase in protection is relatively inexpensive. Based on my own experience, an additional $500 per year in premiums gets me $1,000,000 in umbrella coverage. That extra $40 per month buys me a lot of piece of mind.

You need to know that in order to purchase an umbrella policy you must carry minimum dollar amounts of coverage on you auto and homeowners’ policies. My insurance company requires me to maintain a minimum of $100,000 in liability coverage on both my auto and homeowner’s policies to qualify for umbrella coverage. The increase in your underlying policy coverages need to be factored in to the overall cost associated with obtaining an umbrella policy.   

Should I Get an Umbrella Insurance Policy?

Whether to spend the additional money to get umbrella coverage is a personal decision that should be made after considering your current and likely future financial situation as well as the risks you are likely to encounter in your everyday life.

What risks do you take every day? Most of us drive a car each day. The risks of being involved in a car accident are higher than most of us think. Where you drive matters as well. City driving, encountering many pedestrians and cyclists greatly increases the chance of causing harm to someone. Also, a long commute each day on highways increases the chance of an accident. If you have young, inexperienced drivers in your home (teens) you’ll want umbrella coverage. The risk of an accident is 3x higher for 16-19-year olds, and teens account for about 8-10% of fatal crashes every year.

Do you own a dog? Do you own a pool? Do you own a boat? All questions that should be considered when assessing your risk of causing harm to someone.

Another important part of the decision-making process should be knowing what you are trying to protect. Is your home paid for or do you have a sizable mortgage on the property? How much equity do you have? Do you have savings, a retirement account, investments etc. We work hard for many years to accumulate wealth, so it makes sense to take reasonable steps to insure against losing it all because of a momentary lapse in judgement that might cause a serious accident.

Finally, since our future earnings can be affected by a large jury award against us, we should consider our potential for future income. Are you about to retire or do you have many more years of substantial earning potential ahead of you?  Even if haven’t accumulated much thus far, your future income may be your biggest asset and therefore worth protecting.

Knowledge is Power After an Accident.

The best thing you can do if you have been injured in a Boston car accident and want to be fairly compensated or have been sued as a result of a car accident is to understand your legal rights before you make any decisions. Before you speak to an insurance company adjuster, sign or submit any paperwork or hire a lawyer, you owe it to yourself to get as much information as you can, so you can make a smart decision on what you need to do next. At Spada Law Group, we offer free consumer guides and videos that answer many of the questions bicycle accident victims have. Take a look, download our free information or contact us for a free consultation. Learn what Spada Law Group is all about and how we might be the right car accident lawyers for you.

Len Spada
Personal injury attorney in Chelsea, Massachusetts, focused in auto accidents, bike accidents and injury law.
Join The Conversation
Bob Armstrong 08/18/2020 05:07 AM
Thank you Spada law!! Great information.
Post A Reply
Post A Comment