Question from Robby H. of West Clay:
My insurance agent is always trying to sell me an umbrella policy. Is this something I should consider adding? It just seems like an extra cost.
Response from Ryan Samuelson:
It sounds like you have a good agent. I always encourage my clients to at least consider adding the extra layer of liability protection an umbrella/catastrophe policy will add. An umbrella policy is really all about having the peace of mind in knowing your family and assets are protected.
There are many ways to end up with an umbrella claim, but the most common umbrella claim is an auto accident involving multiple injuries and very costly medical bills. The other common claim is an incident on your property that results in injury.
This is definitely a topic you should discuss with your independent insurance agent to make sure you are protected by a level of coverage you are comfortable with. Most people should be pretty comfortable with a coverage limit of $1 million, but limits more than $10 million are available if you are looking for higher limits.
There are some things that make a claim more likely, such as having a pool, living on a lake, having a young driver and owning a boat/ATV/snow mobile (basically anything fun). Instead of talking about prevention this week, I want to show a couple of claim scenarios to illustrate how an umbrella policy will work.
Scenario one: The insured’s son was driving his car on a short road trip with a friend, the claimant. The car drifted off the road and into a phone pole when the son fell asleep at the wheel. The passenger was hospitalized for more than a month with broken bones and internal injuries. The hospitalization was followed by some time in a wheelchair, but he was able to walk again after six months of physical therapy. This claim cost $800,000, with $300,000 coming from the auto limits and $500,000 coming from the umbrella limits.
Scenario two: The insured is having a summer barbeque and one of the guests step off the edge of a retaining wall, resulting in a spinal cord injury. He required multiple surgeries, an extended hospital stay and physical therapy. This claim cost $1.8 million, with $1 million coming from the homeowners limits and $800,000 coming from the umbrella limits.
By Ryan Samuelson
Ryan Samuelson is with Shepherd Insurance & Finanacial Services. Have an insurance question you need answered? Send it to firstname.lastname@example.org.