HarvestingDollars

You Need an Umbrella Insurance Policy

Yesterday my wife went out to check the mail, and she noticed a huge fire truck outside our home. We went outside to see what was going on, and we watched an ambulance pull up to our next door neighbors house and begin administering aid to someone sitting in my neighbor’s yard.

Although my first guess was that one of their landscapers who were currently working outside had been injured. We spoke with them, and heard quite an odd story. Apparently an older gentleman (~50 in my opinion) in fairly nice business attire had been walking around their house (and in between their house an our house). He was mumbling to himself and saying that he needed to get home. He was trying to get into my neighbors house, thinking that he lived there. How scary is that?

I don’t know what happened next, but his key clearly didn’t work. I don’t know if my neighbor spoke with him or not, but apparently he wandered away from their front door and at some point fell and cut his head.

So as this man was being by medical personnel, I started to think about the value of having an umbrella insurance policy.

An umbrella policy covers you above and beyond your auto and homeowners insurance. Because this insurance is on top of other insurance, it is quite inexpensive for the levels of coverage available. This insurance typically covers personal injury and additional liability coverage for property damage. Some policies will cover a variety of other items too, including defamation and invasion of privacy for example.

Your homeowners and auto insurance cover some of these items, but only to a limited extent. I’m not trying to scare you into purchase too much insurance, but this is a litigious society. And it’s not difficult to cross over your insurance coverage limits.

Think about these situations:

• you are in a car accident, it’s your fault, and injure three people in the other car. It’s not that hard to image medical expenses for three people to surpass your $100M or $250M medical coverage on your auto insurance.
• In the scenario above your insurance would also have to cover the cost of their vehicle repairs. What if you caused two or more cars to crash one icy day on your way to work? Repairing a BMW and a new minivan can be quite pricey.
• an act of nature causes a tree to fall on your neighbor’s house or car
• your neighbor gets bit by your usually friendly dog or scraped by your cat
• you neighbor slips on your sidewalk

Umbrella policies are quite inexpensive given the level of coverage purchased. Most umbrella policies are sold in million dollar increments, starting at $1MM. You can also get $5MM and $20MM policies. The one million dollar policy will probably cost you only $150 to $300 per year.

Getting back to our neighbor’s example, it’s possible that he could be sued by this wandering man because he was hurt on their property. If I was in his situation with the wife in the house, I’m not sure what I would have done. If the man had tried to force his way into my house it’s not a stretch to imagine that I would have resulted to force if necessary to protect my wife and get him out of the house. If an altercation occurred I’d could be liable in a big way depending on the details.

Insurance in my mind, regardless of the type, needs to be evaluate based on both the likelihood of an event occurring and the cost of the proposed insurance. In this case I view the cost as minimal and the likelihood of needing coverage as average to above average. Just the thought of being sued for a car “accident” alone makes this type of insurance a reasonable choice if you ask me.

Please consider purchasing an umbrella policy with one to five million in coverage. The cost is minimal, and it can be a nest-egg saver given today’s litigious society.