Paying for Peace of Mind
By Gina Dostler
Insurance provides some level of comfort that everything in your life is not in jeopardy of collapsing when not-so-nice things happen. Though there are many types of insurance offered, such as policies for renters, homeowners, business owners, and car owners, but another layer of insurance is often considered by people who own high-priced real estate and have considerable net worth.
In his warm and friendly style, agent Eric Siess, of State Farm Insurance in Newport Beach, explains that sometimes an umbrella policy is needed to protect oneself against losing everything.
Q: What is an umbrella policy?
A: By definition it is excess liability coverage to your existing insurance policies that protects the assets and future income of the policyholder above and beyond the standard limits on their primary policies. It can provide you coverage against personal injury claims for some situations that may not be covered by your underlying auto, boat or home policy, such as defamation of character, libel or slander. An umbrella policy is basically lawsuit insurance.
Q: Is this something every person might need?
A: It’s well known that judgments amounting to thousands, even millions are being awarded by juries across the country in ever-increasing numbers. Though underlying policies may provide substantial liability limits, it may not be enough. An umbrella insurance policy gives you added protection against lawsuits that occur after damage to someone else’s property or injuries from an accident. Those who have a lot to lose are more inclined to have an umbrella policy for added protection yet there are other guiding principles to consider.
Q: What guidelines?
A: Many people might think it only applies to those whose net worth reaches well into the high dollars where having an umbrella policy protects their current and future earnings. But there are other things to consider. I like to use these four general rules to get an understanding if an umbrella policy might be needed: high net worth, teenage drivers living at home, a pool in the yard and ownership of multiple properties.
Q: How do teenagers fit under the umbrella?
A: Based on statistics, 16-18 year olds have a higher likelihood of being involved in an accident where they kill or seriously injure someone. Since they are still minors, the parents are liable for any damages or injuries and the auto or other policy probably wouldn’t cover all the costs, so once all other insurances are maxed, the umbrella can cover the rest.
Q: I would think my current homeowner’s insurance takes care of any pool incident.
A: The pool area is a potential for accidents. And though you might have covered your basis in putting in non-slip decks, barriers, locks and basic insurance, its best to understand the worst to keep you protected financially. The potential for slips and falls are always real and even the worst scenario, a drowning are liabilities that can exceed the limits of insurance policies. If you tend to have all the neighborhood kids over, lots of pool parties with friends and families, an umbrella might be something to consider.
Q: So, even if I don’t make a lot of money, it’s good to consider an umbrella policy?
A: As I mentioned, teenage drivers and having a pool are such cases where one doesn’t draw a huge income, but can be at risk for liability. Also if you own multiple properties or income property it doesn’t necessarily mean you are making the big bucks, but nevertheless can still be at risk of losing those properties if the current insurance isn’t enough. You’re paying for peace of mind in knowing you are protected in case of an unexpected liability.
Q: Is having an umbrella policy expensive?
A: Actually, not really. They run in million dollar increments, where $1 million costs about $200 for the whole year. Here in Newport a $20 million policy is not uncommon, but typically most basic umbrellas are for $1 million. It all depends on how much someone has to protect. A basic homeowner’s policy is usually for $100,000. If someone is sued for $1 million and the suing party wins, the homeowner’s insurance only pays to the limit of the policy, leaving the person responsible for the rest. That’s where an umbrella policy can be a lifesaver.
Eric Siess, Agent
State Farm Insurance
and Financial Services
881 Dover Drive, Suite #120
Newport Beach, Ca 92663
P: 949-645-SAVE (7283)