Don't Push Your Luck! Why You Need Umbrella Coverage

If you think about it, luck is a big part of our everyday lives. And it’s not all life-changing, lottery-winning kinds of luck—it’s little things.  Scoring a parking spot right near your destination when you’re running late? Luck. Finding a dollar in your pocket when you come up short when paying for your morning coffee? Luck.  Sure, we might push that luck a now and then and buy a lottery ticket or play the slot machines, but sometimes, those lucky little things happen just when we need them most. Unfortunately, many of us push our luck when it comes to our insurance.  We might just purchase the minimum coverage for our home, auto, or toys such as a boat or motorcycle and hope for the best, but in some instances, more protection is better. This is the purpose of an umbrella policy.

Umbrella coverage is meant to protect you from major claims and lawsuits. It takes effect when the liability limits on your homeowners or auto insurance policies have been reached.

For example:

• Your dog bites your neighbor, a housepainter, requiring a trip to the ER and several stitches. Your neighbor sues you for costs related to the injury and lost wages. His medical bills alone are more than $20,000; lost wages, $10,000. He sues for $100,000; your homeowners’ policy only covers up to $50,000, leaving you responsible for the remaining $50,000.

• While driving to work you skid on a slick road and T-bone another car.  The other driver and his passenger are injured, and there is extensive damage to the car (well over $50,000). You are sued for $300,000 (which includes car repairs, $50,000 in medical bills from the other driver and passenger, and $100,000 in lost wages for each), but your auto policy only has liability coverage up to $200,000, which means you must pay the other $100,000 out of your own pocket.

Lawsuits are extremely common in our society, and judges have granted huge rewards for damages—rewards that can have devastating financial consequences for the responsible party.

Although umbrella coverage is not required for a home or auto policy, it’s worth purchasing if you do any of the following: 

•          Own a pool, trampoline, or dog
•          Are a landlord
•          Have significant savings or financial assets
•          Coach youth sports
•          Participate in extreme sports that could injure someone else

Any of the above could increase your chances of being sued.  Don’t push your luck—consider an umbrella policy so you have the additional protection you need.

Have you ever purchased an umbrella policy? What was your experience? We’d love to hear from you in the comments below!