Umbrella Policy / Excess Liability
PROTECTION FOR THE UNEXPECTED
You work hard...
You work hard to get ahead. You consider yourself to be financially responsible, have saved money for the retirement/future, and purchased insurance to help protect your family from financial hardship. Still, for all of your efforts, there is the chance that an unexpected event could jeopardize those plans.
Imagine the unthinkable happens...
You (or a family member) get into a car accident while talking on your cell phone – you are clearly at fault. The people you hit sustain serious neck and back injuries and decide to sue. Suddenly you are facing a $750,000 lawsuit (or even more today) for their medical care and pain and suffering. What would you do? Are your assets really protected?
Your auto or home insurance may cover a small portion of the damages, but there might still be a significant amount of money that you would have to pay out of your own pocket for a large claim. The potential financial loss could be staggering – retirement fund(s) wiped out, home levied (or re-mortgaged to the hilt), personal assets seized and sold, future income garnished, and the list goes on.
Court Judgments rendered must be paid … whether or not by insurance …
Some people wrongly believe that all they need to do protect themselves is file a declaration of homestead. While we highly recommend everyone owning a home (in Massachusetts) should file a declaration of homestead, the problem is that an estate of homestead does NOT keep you from being sued. If you negligently cause injury to another person or their property, then a court of law can find against you – and sometimes these judgments can be HUGE (see Real Life Cases below). Granted, the Homestead Act could protect your principal residence, but not any SECONDARY residence, your retirement money and other investments or savings accounts, nor your Mercedes, motorcycle, sail or motor boats. If a large judgement is filed against you, they can all be gone!
Also, your wages could be GARNISHED (levied or attached)! Massachusetts General Law (MGL) 246 (most other states have similar laws) describes how property, cash and WAGES can be attached. MGL 246 s.28 only protects (exempts from levy or attachment) $125.00 of your wages from attachment (so the judge can take all but $500 per month). According to MGL 246 s.28A a whopping $500 of your savings accounts are exempt … that means anymore than $500 IS “attachable” – meaning your Retirement, Investments, Savings, 401K, IRA, HSA, and other Investments are all gone!
According to MGL 260 s.20 a money judgment entered in the State of Massachusetts is generally enforceable for a period of 20 years. That’s a LONG, LONG time … to try to put off your earning power to avoid your judgment obligations!
Did you know?
• Talking on a cell phone while driving quadruples the chances of getting into a motor vehicle accident1.
• One person dies in a traffic crash every thirteen minutes2.
• The economic cost of the average crash death was $977,208 and costs associated with critically injured crash victims were $1.1 million3 (for year 2000 – imagine the numbers 4 years later!)
• Approximately 4.7 million people are bitten by dogs annually, resulting in an estimated 800,000 injuries, seventy percent of which occur on the dog owner's property4. Dog bites now account for one-third of ALL homeowner's claims costing roughly $310 million.
You may not be able to prevent most accidents from happening (that is why they call them “accidents”), but you can prepare financially by purchasing an Umbrella Policy.
What is an Umbrella Policy?
An Umbrella Policy, also referred to as an "excess liability", provides more advanced and broader liability coverage above and far beyond your home, auto or other underlying policy(s) (such as your Auto, Home, Boat, Motorcycle, Second Home, Rental Property, etc).
Who should purchase an Umbrella policy?
EVERYONE! You may think only the wealthy need excess liability insurance, but this assumption could not be farther from the truth. EVERYONE is at risk for a catastrophic lawsuit! Severity, NOT FREQUENCY, is the critical point, but tragically most people don’t realize how important Umbrella/Excess Liability is until they have a massive financial loss. Umbrella policies exist to cover costly “over time” injuries/items such as rehabilitation, present & future medical, out-of-court settlements, defense costs, personal injury, property damage, etc. These settlements often result in SEVEN TO EIGHT FIGURE DOLLAR AMOUNTS, placing you and your family's financial future at risk! Contact your family attorney and ask their opinion on the need for an Umbrella/Excess Liability policy – we guarantee they will say “absolutely” you need an Umbrella Policy!
How much umbrella/excess liability coverage do you need?
The personal umbrella/excess liability coverage needed depends on your individual requirements, assets needing protection, and your risk tolerance. Umbrella policies usually range from $1,000,000 up to $5,000,000 (higher limits available). Standard $1 Million Umbrella is affordable, approximately $180/year for 1 house, 2 cars (it depends on underlying policy limits, # of autos and drivers, dwellings, boats, etc.).
So take a few minutes to think - are you, your family and your hard earned assets really protected against these types of risks/losses? Is your financial future at risk from a potential lawsuit? There is no magic formula for coverage – it is your decision as to what level of liability insurance you and your family need, but we recommend that EVERYONE have at least a $1 Million Umbrella Policy!
REAL LIFE CASES
Auto Accidents cause most of the personal injuries that result in huge monetary settlements paid by umbrella liability insurance. But there are plenty of other calamities that can put your assets at serious risk. Consider these recent real-life cases: HOW WOULD YOU AND YOUR FAMILY FAIR?
• Host Driver’s Negligence: 16 year old driver attempted to make abrupt turn on exit ramp and vehicle crashed at 60 MP causing other teenager in vehicle to suffer closed head injury resulting in cognitive disorders, memory loss, pelvic fractures and internal injures. Jury awarded $9,500,000 (pain & suffering $4,735,000, future medical $3,665,000, and future wages $1,100,000).
• Rear End Collision: SUV rear ended family sedan causing 2 year old to suffer brain damage, epilepsy, personality changes, fractured skull and severe mood swings. Jury awarded $10,352,796 (original “Demand” prior to court was ONLY $300,000)
• Pedestrian Hit: 38 year old male fell asleep at wheel and lost control of vehicle. 42 year old pedestrian hit had bilateral leg amputation (both legs amputated). Because of the loss of “quality of life”. Jury awarded $10,000,000!
• Broadside Collision (vehicular): 49 yr old suffered quadriplegia, moderate brain damage, clavicle fracture and internal injures when his vehicle hit by other driver failing to obey posted traffic signal. Jury awarded $50,000,000 (pain & suffering $16,000,000, past medical $883,000, past wages $211,000, future medical $19,500,000, future wages $1,500,000, loss of services $11,906,000)
• A window washer broke his heel in a fall after a downspout he was holding onto broke away from the house on which he was working. Although the worker was found partially responsible, the fall cost the homeowner $1.2 MILLION.
• A 22-year old suffered permanent eye and brain damage when he was struck by a golf ball. He sued claiming that the golfer who hit the ball had failed to look out for other players. The errant shot cost the golfer $1.6 MILLION.
• A professional dancer suffered permanent knee damage --- an end to her career---when she was knocked down on a beginner’s ski slope. She offered to settle for the $300,000 covered by the defendant’s insurance, but was rebuffed. The case went to trial, where it cost the defendant $2.2 MILLION (YES, that is 2.2 Million)!
• A woman suffered severe cuts when her leg was hit by the propeller of a boat she was attempting to board. She sued, claiming that the boat began to move before she was safely aboard. The injury cost the boat owner $800,000.
• At an end-of-school swim party, a 16-year old dove and hit his head on the bottom of the pool. He became a quadriplegic, and the case resulted in a $1.5 MILLION settlement against the homeowner.
(From Kiplinger’s Personal Finance Magazine – Article by Ronaleen R. Roha & LPR Publications 2003)
Any of the above verdicts would mean TOTAL FINANCIAL DISASTER for most families! The amazing fact is that these awards would be COVERED with an Umbrella Policy with the correct limits! Some of these limits are very high, but imagine having your wages garnished or losing all your existing retirement funds trying to meet these jury awards.
Insurance is about PROTECTION - NOT ABOUT MONEY….until the end,
after you have reviewed all your options and make an informed decision.
PROTECT YOURSELF – READ YOUR POLICIES in detail each year and ask for a review annually/as needed to make an INFORMED DECISION on coverage!
1. New England Journal of Medicine study, 1997.
2. U.S. Department of Transportation Fatal Analysis Reporting System, 2001.
3. National Highway Traffic Safety Administration, June 2002.
4. National Center for Injury Prevention and Control, 1998
Outstanding agent I have been purchasing insurance all my life, but never have I had such a detailed review to discover coverage and discounts that I may not have known about or may not have coverage for - and the agent didn't tell me what coverage I needed to have, I selected my coverage based on the detail review and issues I am trying to protect against. The agent even met with me on Saturday outside of their normal business hours! Not many agents do that today. They even reviewed some important non insurance issues that I had forgotten to take care of, like updating my will and adding a healthcare proxy. The last issue we reviewed was my financial investments and changes that I need to make since I am getting older and need to better protect myself against changes in the market. In one trip I received the best insurance review I have ever had, updated my financial investment ... I have been purchasing insurance all my life, but never have I had such a detailed review to discover coverage and discounts that I may not have known about or may not have coverage for - and the agent didn't tell me what coverage I needed to have, I selected my coverage based on the detail review and issues I am trying to protect against. The agent even met with me on Saturday outside of their normal business hours! Not many agents do that today. They even reviewed some important non insurance issues that I had forgotten to take care of, like updating my will and adding a healthcare proxy. The last issue we reviewed was my financial investments and changes that I need to make since I am getting older and need to better protect myself against changes in the market. In one trip I received the best insurance review I have ever had, updated my financial investment portfolio and even set up life insurance for my grandson. What more can anyone ask from their insurance agent - one stop shopping for everything and a detailed review that showed how all my coverage interacts with each other. What a great experience. I have found the agent I have needed all my life! Fred S.