A personal umbrella policy is probably the most underutilized and yet most important insurance policies someone can purchase.
In today’s litigious society the common limits on a home or auto policy are often times inadequate. The best way to remedy that exposure is with a personal umbrella policy. Many people don’t know what an umbrella is or why you would need one. Let me offer a short explanation.
Let’s say you’re driving down I96 and you are involved in an accident in which you are at fault and the other person is seriously injured. In this situation you could be sued for things like pain and suffering and lost wages, but also for the injured party’s uncovered medical bills. It’s very possible that the settlement could be more than your auto policy liability limits (what if you hit a doctor and he’s no longer able to work?). In that situation your personal umbrella would pick up the amount above and beyond your auto policy limits (up to your umbrella policy limit, of course).
The same goes for your home insurance. If someone is injured on your property and they sue you for more than your policy limits, without an umbrella you could be stuck holding the bag (think: assets, future wages, etc).
While on the topic of future wages, let me mention something. It’s not just your current assets/net worth you’re trying to protect. Michigan law allows for income garnishment of up to 25% of your wages for a 10 year period. And that 10 year period can be renewed 10 times until the judgement is satisfied (that’s 100 years!). Think about that. What if you lost 25% of your income tomorrow?!
With a $1,000,000 umbrella policy starting at around $150 per year in Michigan its really amazing that most people don’t carry this policy. It’s almost inexcusable!
I came across a great umbrella article that explains the coverage much more elegantly than I can: The New York Times There’s a lot of really great information in the article. Take a look!