With our last several cases involving unsafe drivers with limited insurance and assets, I am reaching out to all of our clients to review their personal insurance coverages and to make sure that they, and their loved ones, are protected this holiday season. In several cases, the harms were many hundreds of thousands of dollars, but the cases had to settle for $50-100,000, because that’s all the insurance available, an there was no ability to collect any additional money to pay for the losses caused by the unsafe drivers. And it’s not just car crash cases. In slip and fall, dog bite, bicycle accident and animal attack cases has all resulted in reduced compensation because the Defendants (and sometimes the innocent victims themselves) have minimal insurance coverage. Unlike shopping for presents, shopping for and purchasing insurance can be a daunting task. Insurance by its very definition is intended to provide you security when the unknown and unexpected happens. So when you are purchasing insurance, it is often very difficult to know what type of coverage, and how much coverage you need. In the midst of the confusion surround insurance, one type of insurance that often gets thrown around is “umbrella insurance”. What exactly is it? And who needs it?

Umbrella insurance is really nothing more than extra insurance that can be used to fill gaps in your existing insurance policies, and to cover steep liabilities that arise out of being sued. The umbrella coverage kicks in once you’ve reached your policy limits on other insurance, like auto insurance or homeowners insurance. If you end up as a defendant in a personal injury case, medical bills, attorney fees, and property damage expenses can quickly add up and surpass your normal policy limits. After that happens, your personal assets—your house, your car, your savings accounts—might be at risk in order to pay your liabilities. Umbrella insurance is intended to protect against these risks.

Because of its connection with liability arising from lawsuits, umbrella insurance is often associated with people who have deep pockets. In other words, the wealthier you are, and the more assets you have, the more attractive you are to being sued, thus placing your assets at risk. So one thing to consider in assessing whether you need an umbrella policy is how much your assets are worth; this means actually taking an inventory of everything you own.

Of course, umbrella insurance is not just for the rich and famous. Anyone can potentially benefit from umbrella insurance, and it usually comes at a relatively low price. For example, a $1 million umbrella insurance policy might cost somewhere between $150 to $300 per year. And most companies that sell umbrella insurance will require you to carry a certain amount of liability insurance on your underlying homeowners or auto policies. In other words, you may have to have a car insurance policy that covers you up to $500,000 before your “umbrella coverage” kicks in to pay the next $500,000. If you own your own business or have several cars you and your family members drive, you should strongly consider purchasing an umbrella insurance policy. Speak to your insurance agent and see if it is a good idea for you and what discounts you can get by having several policies (i.e., homeowners, auto, valuables, etc.) with the same company.