Do you remember that time you were walking to the store, finishing up your errands? The clouds began to circle you, as you realized that you forgot to bring your fancy umbrella. Suddenly, it begins to pour. Perhaps a little rain never hurt anyone, but an insurance claim that surpasses your primary coverage may.

How does an Umbrella Liability Policy work?
An Umbrella Policy sits on top of your other insurance to protect you from liability after a significant accident. Here’s a quick example:

Event #1: Mary was walking her dog across the street. Bobby who is Mary’s neighbor began to taunt the dog which resulted in a serious bite. Bobby sued Mary for bodily injury and loss of income from missing work which resulted in a settlement of $700k (excluding legal cost).

Result: The first $500K of the settlement will be covered by Mary’s Homeowners policy. An additional $200K would be covered by the umbrella liability coverage.

Event #2: Mary’s husband Edward is driving to work. Edward drives over a patch of ice and loses control of the vehicle hitting a car with 3 individuals. The vehicle also hit the side of a storefront. Damage to the car and storefront is $150K and the passenger’s medical bills are $600K.

Result: The auto insurance in place covers $250K of bodily injury per a person with a maximum of $500k per accident. As such Mary’s auto insurance will cover only $500K of the bodily injury and $100K for property damage. The remaining $150K will be covered by the umbrella liability policy.

What would happen if Mary did not have an umbrella?

In Event #1, Mary & Edward would have to pay $200K out of pocket.

In Event #2, Mary & Edward would have to pay $150K out of pocket.

As you can see, an Umbrella Policy can shield you from catastrophic risk, which is why it is so important to have. Most importantly, it is an efficient and low-cost way to increase your general liability coverage on multiple risks (primary home, vacation home, automobile, boat, etc..) without having to increase each individual policy’s primary coverage. In fact, $1M of coverage for an Umbrella can cost as little as $200 a year.

Reach out to Wesfair to learn more about how to protect yourself with an Umbrella Policy.