Umbrellas do more than protect you from rain. Umbrella insurance policies can protect you in the most catastrophic situations. Ideally, if you injure someone in a car accident, or your dog escapes your house and attacks someone, your auto, homeowners’, or renters’ insurance will cover the cost of your defense and will ultimately pay the injured party for their damages. However, your insurance company will only pay up to their bodily injury policy limits in compensating the injured party for their damages.
Unfortunately, sometimes, in the most catastrophic situations, the injured party’s damages will be greater than the amount of the at-fault party’s policy limits. When this happens, the at-fault party will have personal exposure, meaning their personal assets are at risk. This is where umbrella insurance coverage comes in.
When you’re liable for bodily injuries, umbrella insurance policies provide additional coverage after your vehicle or home insurance is maxed out. The umbrella coverage protects the at-fault party and will limit the at-fault’s party personal exposure.
For example, say your auto insurance has bodily injury liability limits of $250,000/$500,000. This means that if you cause a car accident, your auto insurance will pay up to $250,000 per injured person. Suppose you cause a serious car accident, and the other driver suffers catastrophic injuries where the medical bills alone are over $200,000. In that case, the injured party’s damages will significantly exceed your $250,000 policy limits. This means that the injured party could pursue an excess verdict that leaves you personally responsible for paying any damages above $250,000.
As personal injury lawyers, unfortunately, we have seen several cases where the at-fault party does not have enough insurance coverage and is personally exposed. This is when umbrella coverage comes into play. In the above example, if the negligent party had umbrella coverage, the umbrella coverage would pay any damages above $250,000 up to the umbrella policy limits (which is usually $1,000,000 or more).
Who Needs Umbrella Insurance?
In a perfect world, everyone would have umbrella coverage. Without an umbrella policy, all your assets, including your disposable income, are at risk if you cause a catastrophic injury. With an umbrella policy, you can have peace of mind knowing you will be protected in these unfortunate situations. So, if your net worth exceeds your existing home or auto insurance limits, umbrella insurance is a valuable asset to ensure financial stability against a claim or lawsuit.
Generally speaking, it is recommended that your umbrella insurance cover your net worth. It should protect your savings, such as retirement and college funds, investments, property (cars, homes, boats), and even future income.
If you fall into any of the following categories, it is essential that you purchase an umbrella policy:
- Own a house solely in your name (i.e., your house is not purchased with a spouse)
- Own a business, rental property, or a boat.
- Have a teenage driver or someone with a poor driving record in your household.
- Have a swimming pool, trampoline, or hot tub on your property.
- Drive a lot or long distances.
- Manage a trust.
- Have a dog.
- Own a farm and animals.
- Host large parties or gatherings.
- Employ household and maintenance staff.
- Engage in dangerous activities or sports.
- You are a public figure.
What If You Are Not Worried About Injuring Someone Else?
Many people think they are very careful in life and will never be in a situation where they injure someone else. While you can control your own actions, you cannot control the behavior of others. As such, umbrella coverage can also protect you if you are injured by someone else. An optional add-on to umbrella insurance is excess uninsured (UM) or underinsured (UIM) motorist coverage. Not all insurers offer this, but it’s worth looking into and purchasing if you can.
According to 2019 data from the Insurance Information Institute, it’s estimated that 10.5% of Virginia drivers are uninsured, which is slightly lower than the nationwide average of 12.6%. With about 1 in 10 drivers on Virginia roads and highways without car insurance, getting into an accident caused by an uninsured driver can have serious repercussions and leave you in a financial bind. You could be stuck with costly medical bills and struggle to pay your mortgage and other monthly expenses.
The other consideration is underinsured motorists – those who purchase the minimum car insurance required in Virginia. The minimum insurance can easily and quickly be maxed out, leaving the injured parties with little recourse to have their total damages covered.
A serious car accident can lead to hundreds of thousands of dollars in medical bills, require months off work or prevent you from working again, and cause significant mental and emotional trauma. Adding UM/UIM coverage to an umbrella insurance policy ensures your finances and assets are safe when an uninsured or underinsured motorist causes a devastating accident.
How is Umbrella Insurance Used in Personal Injury Lawsuits?
Around 400,000 personal injury lawsuits are filed annually in the U.S. That’s an average of almost 2,000 per day. Car accidents are the most common by far, accounting for approximately half of all personal injury claims.
As personal injury lawyers, we always consider whether or not the at-fault party has umbrella insurance when we take a case. Sometimes, it’s the only way our clients can be fully and fairly compensated for their damages.
We also always ask our clients if they have excess UM/UIM coverage through an umbrella policy. In addition to purchasing a personal umbrella policy, sometimes employers will afford umbrella coverage to their employees through an umbrella policy. We have seen several cases where our clients could be fully compensated for their injuries due to their own umbrella coverage.
Consider Umbrella Insurance Coverage
Umbrella insurance can protect you from personal exposure if you are at fault in an accident and can protect you by affording additional coverage if someone injures you. Most people do not know about umbrella coverage and should ask an agent or broker about it when purchasing or renewing their insurance policies. Umbrella policies are also relatively inexpensive. At the very least, everyone should get a quote for how much it would cost them.
Not everyone is forthcoming about their insurance policies. Having a personal injury lawyer on your side can help determine if the liable party has umbrella insurance and how much, so we can use our experience to deal directly with insurers to get what you deserve.
It is also important to have experienced personal injury attorneys that will be able to maximize the amount of insurance coverage available to you if you are injured due to another person’s careless behavior. If you or a loved one is injured, the team at Curcio Law can help. Contact us online or call or text 1-703-836-3366 for a free consultation.
Rakin Hamad joined Curcio Law as an associate in August 2018 after graduating from George Mason Law School. During law school, Rakin demonstrated his dedication to client advocacy and was a member of the trial advocacy association, the pro bono society, and the George Mason Law Review. His approach to the law mirrors the firm’s philosophy of treating each client with commitment, compassion and character. Contact Rakin at rhamad@curciolaw.com.
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