What is an Umbrella Insurance Plan

 

What is an Umbrella Insurance Plan?

Recent clients have asked me multiple times what an umbrella policy is and whether they need one. You probably need an umbrella if you have assets that you'd like to shield against an unplanned litigation.

Imagine yourself driving at night in an unknown city. You are unsure of how to get back to your hotel because it is raining and dark outside. While stopping at crossroads and scanning both directions, you listen to the GPS system's directions. You turn since there is no traffic. As you make a turn, an inebriated pedestrian unexpectedly walks into the street. You can't hit the individual and stop in time. Your body is overcome by panic as you prepare for the worst.

The pedestrian can demand payment for their medical expenses and missed wages. The family of the pedestrian may file a claim against you if the injured party is crippled and unable to work as a result of their wounds and is the primary earner since they are no longer able to support the family financially. Would the claims made by the injured party be covered by your auto insurance? If your motor insurance was insufficient to cover their demands, would you be putting other assets at risk? (Your residence, savings, and retirement accounts?)

A maximum of $25,000 will be paid to the injured party if your auto liability limit is the minimum required by the state of Illinois. If they need surgery due to an accident-related injury, this probably wouldn't cover the expense. Your own assets could be at danger if the injured party hires a lawyer to sue you. Alternately, your wages can be withheld to contribute to the settlement.

Would you feel at ease if a judge withheld funds from your paycheck to resolve a lawsuit? Or even making you sell your house in order to make a settlement with the harmed party? Would you feel at ease having your bank accounts liquidated to make a settlement with the damaged party?

Even worse, you must take into account that the family will no longer have their main breadwinner if the deceased person leaves a family behind. A judge might hold you accountable for the significant financial strain this places on the family.

For a small monthly fee, you might get an umbrella liability policy to provide you with additional liability coverage. The majority of umbrella insurance start at $150 annually for $1 million in coverage. This kind of insurance policy shields your property against claims and shields you from unneeded stress in the event of an unpleasant circumstance.

Author: RabnawazToor