Insurance is like a seatbelt. Hopefully, you’ll never need it, but if you do it could save your financial life. Umbrella liability insurance is the seatbelt that will prevent someone from draining your bank accounts and taking your future paychecks. Do you need umbrella liability insurance?
Why do you need umbrella liability insurance?
The following are a few scenarios where an umbrella liability policy can save your financial life.
The Dinner Party
Have you ever hosted a dinner party where someone got a little tipsy? Did anyone spill some food or drink? Did your kids forget to put all their toys away?
Would it be possible that your tipsy coworker falls? Or a neighbor slips on spilled food? Or your friend’s guest trips over your kids’ toys?
If they injure themselves enough to incur medical bills or worse – a trip to the emergency room or worst – if they miss work while they recover – they can sue you and they will win.
The Daily Commute
Have you ever driven during rush hour in a city like San Francisco?
There are bike messengers flying through intersections, jaywalkers crossing against signals and cars – so many cars – trying to beat the next red light.
I’m sure you’re a great driver, but would it be possible to hit a bike messenger, jaywalker or another car?
(It’s a miracle it doesn’t happen more often.)
And if you injure them enough to incur medical bills or worse – a trip to the emergency room or worst– if they miss work while they recover – they can sue you and they will win.
The Dog Park
Have you ever taken your dog to the dog park? Did another dog ever get a little too playful?
Would it be possible in trying to it break up your dog accidentally bites your neighbor?
And if your dog injures them enough to incur medical bills or worse – a trip to the emergency or worst– if they miss work while they recover – they can sue you and they will win.
The reason for an Umbrella Liability Policy
Insurance, like a seatbelt, is there to save you from the worst-case scenario. The examples described are scenarios where someone else gets injured and you were at fault. Whether it was intentional or not won’t matter in the court’s eyes.
And if the injuries are bad enough, they can sue you for all the money you’ve got AND future earnings. Imagine paying a chunk of your paycheck to some litigious fiend for 10 years, but only after they’ve taken everything else.
An umbrella liability policy protects your current assets and future earnings. If you get sued and they win the insurance company will pay them not you.
How much should you get?
Standard recommendations are to get enough to cover your current assets or $1M, whichever is larger.
If you’ve got $200k in the bank, get a $1M policy.
If you’ve got $2M in the bank, get a $2M.
This goes without saying, consult your financial planner for the right amount for you.
How much does it cost?
Like all insurance, liability insurance is priced based on the liklihood of the policy paying out.
Since the likelihood is low, a $1M policy usually runs $300-$500 per year.
Just contact your home and auto insurance agent for a quote. They’ll be able to help you.