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The Rathbun Agency Blog

All You Ever Wanted to Know About Insurance

Should I Have an Umbrella Policy?

Should you have an umbrella policy? Yes. Now, more than ever, having an umbrella policy is critically important.

But what is an umbrella policy? A personal umbrella policy is an additional liability policy that provides coverage beyond the limits of your primary personal insurance policies. Typically, the umbrella is providing liability coverage above an auto, home or boat policy.

Accidents happen. And almost as frequently these days, so do lawsuits. In just the past decade, the number of liability lawsuits has dramatically increased. The average award settlement has skyrocketed, too, often climbing above $1,000,000.

Oftentimes, these awards have nothing to do with the defendant’s ability to pay. Defendants are legally obligated to pay whether they have the resources or not – meaning a judgment could also impact future income. Worse yet, such a judgment may impact assets such as your home, savings and valuables.

With no-fault auto insurance reform recently passing, with an effective date of July 1st, 2020, personal umbrella policies are going to become more important than ever before. Once the new reform law takes effect, claimants will be able to sue for damages above the medical limits they select on their auto policy.

For example: You hit another vehicle, seriously injuring the other driver. The driver in the other vehicle has chosen to forgo carrying unlimited medical benefits and has chosen a limit of $250,000. As a result of the accident, they sustain $1.2 million in medical expenses. Once they have exhausted the $250,000 in medical coverage on their own personal auto policy, they will be able to sue you for the difference. In this case, you would personally be responsible for $950,000. If you carry $500,000 in liability coverage on your own auto policy, you would then personally be on the hook for the additional $450,000 in damages. A $1,000,000 umbrella policy would cover these damages and can oftentimes be purchased for about $15-20 a month.

Give us a call today for an umbrella proposal or complete this simple proposal request form on our website. There you’ll also find an umbrella calculator that will help you determine your exposure.