Umbrella
A personal umbrella is a liability policy that can significantly increase your liability limits, and is purchased in increments of $1,000,000. In order for an umbrella to work properly, you must have the underlying policies written correctly. By "underlying" we refer to the policy that is primarily responsible for a liability claim. For example:
You might have a homeowner's policy with $500,000 personal liability and an auto policy with $500,000 auto liability. When you purchase a $1,000,000 umbrella, you would then have $1.5 million of personal and auto liability.
A Bowers professional can coordinate these policies for coverage. This is important because in today's legal environment it is extremely it is vital that you carry adequate liability limits. How much is enough? A good rule of thumb is that your liability limits should exceed the value of your assets.
What happens if you don't carry enough liability coverage?
You pay! Here is an example:
A new, 16 year old driver slides his car on the ice. He goes left of center and hits another car. If the passenger he hits is unable to work or function in his former capacity, the parent of the driver could end up owing the injured party for loss of wages, hospital bills, other expenses, and pain and suffering. For an average wage earner, the total expenses can easily be $500,000 or more.
If your auto policy has $300,000 limits, you will pay out of your pocket for any amount of damage in excess of $300,000. If you have an umbrella, that policy will pick up where the auto policy leaves off.
Some younger insureds wrongly assume that since they have no assets yet, they don't need higher limits of liability. However, there have been cases where young drivers owing large settlements have had their future earnings garnished. Someone with a high future earnings potential is as much at risk as someone with accumulated assets.
In addition to liability, some clients elect to add Uninsured/Underinsured Motorists coverage to their umbrella. This too is purchased in $1,000,000 increments. It would pay when a policyholder is injured in an auto accident by someone who is an uninsured or underinsured motorist, as defined by the policy.
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