June 2012
Why your Summer BBQ requires an Umbrella
Summer is the season of sunshine, pool time, BBQs, and friends suing you because they fell off your trampoline.
It's impossible to predict when you or a family member may have a really bad day. One unforeseen accident can unravel decades of careful financial planning and saving. By planning ahead, it's possible to lessen an accident's impact on your life and finances.
We tend to associate the word accident with car accidents, but many other types of mishaps can jeopardize your financial security. You may be having a party at your home when someone slips and falls, seriously injuring himself. Or you may be out walking your dog when he unexpectedly bites someone. An umbrella policy is one of the easiest and least expensive ways to prepare for accidents like these.
What is an umbrella policy?
An umbrella policy provides coverage beyond your automobile, homeowner's, watercraft, or other insurance policies, protecting you against the possibility of a devastating financial loss. This type of policy covers both your existing and future personal assets against the cost of losing a lawsuit, which can be significant.
What benefits does it offer?
An umbrella policy typically provides the following benefits:
· Protects you where other policies leave off. An umbrella policy covers you if you're successfully sued for an amount that exceeds the liability coverage of your other policies.
· Protects you from liability issues not covered by your other policies. Homeowner's insurance, for instance, typically covers your liability for medical costs incurred by guests who are injured in your home, but not live-in residents. If your live-in nanny injures herself and decides to sue you, an umbrella policy would likely cover your liability.
· Covers legal defense costs. Umbrella policies cover legal expenses on top of the policy amount, including lawyers' fees and associated court costs.
· Protects against non-business-related personal injury claims. These include slander, libel, defamation of character, false arrest, detention or imprisonment, invasion of privacy, and wrongful entry.
· Protects your family. Any accidents caused by your dependents, including car accidents, accidents on your property, and non-business-related personal injury claims, are typically covered.
How much does it cost?
Before you can purchase an umbrella policy, your insurer will require you to have a certain amount of basic liability coverage. Umbrella policy coverage limits start at $1 million and can run as high as $10 million for qualified applicants. The price varies by risk, with the first $1 million in coverage usually starting between $150 and $300 annually. Each additional million dollars in coverage could cost around $100 to $125 annually. The rates per million decline as coverage increases.
Is an umbrella policy right for you?
When considering any type of insurance, it's important to evaluate which assets you would like covered and your chances of being sued. It may be more cost effective to raise the liability limit on your homeowner's or auto insurance than to buy an umbrella policy. (Your premium may be less if you also raise the deductible.)
Either way, you should think about factors that increase your risk of being sued. For example:
· A long commute
· Driving during rush hour, when accidents are more likely to occur
· Owning a swimming pool, hot tub, trampoline, or swing set
· Owning a pet
· Frequently having guests over
As careful as you may be, it's wise to acknowledge that accidents do happen. Though you may not feel that you're at risk of being sued, the safest course of action is to be properly insured, adjusting your coverage as your financial situation changes.
It's impossible to predict when you or a family member may have a really bad day. One unforeseen accident can unravel decades of careful financial planning and saving. By planning ahead, it's possible to lessen an accident's impact on your life and finances.
We tend to associate the word accident with car accidents, but many other types of mishaps can jeopardize your financial security. You may be having a party at your home when someone slips and falls, seriously injuring himself. Or you may be out walking your dog when he unexpectedly bites someone. An umbrella policy is one of the easiest and least expensive ways to prepare for accidents like these.
What is an umbrella policy?
An umbrella policy provides coverage beyond your automobile, homeowner's, watercraft, or other insurance policies, protecting you against the possibility of a devastating financial loss. This type of policy covers both your existing and future personal assets against the cost of losing a lawsuit, which can be significant.
What benefits does it offer?
An umbrella policy typically provides the following benefits:
· Protects you where other policies leave off. An umbrella policy covers you if you're successfully sued for an amount that exceeds the liability coverage of your other policies.
· Protects you from liability issues not covered by your other policies. Homeowner's insurance, for instance, typically covers your liability for medical costs incurred by guests who are injured in your home, but not live-in residents. If your live-in nanny injures herself and decides to sue you, an umbrella policy would likely cover your liability.
· Covers legal defense costs. Umbrella policies cover legal expenses on top of the policy amount, including lawyers' fees and associated court costs.
· Protects against non-business-related personal injury claims. These include slander, libel, defamation of character, false arrest, detention or imprisonment, invasion of privacy, and wrongful entry.
· Protects your family. Any accidents caused by your dependents, including car accidents, accidents on your property, and non-business-related personal injury claims, are typically covered.
How much does it cost?
Before you can purchase an umbrella policy, your insurer will require you to have a certain amount of basic liability coverage. Umbrella policy coverage limits start at $1 million and can run as high as $10 million for qualified applicants. The price varies by risk, with the first $1 million in coverage usually starting between $150 and $300 annually. Each additional million dollars in coverage could cost around $100 to $125 annually. The rates per million decline as coverage increases.
Is an umbrella policy right for you?
When considering any type of insurance, it's important to evaluate which assets you would like covered and your chances of being sued. It may be more cost effective to raise the liability limit on your homeowner's or auto insurance than to buy an umbrella policy. (Your premium may be less if you also raise the deductible.)
Either way, you should think about factors that increase your risk of being sued. For example:
· A long commute
· Driving during rush hour, when accidents are more likely to occur
· Owning a swimming pool, hot tub, trampoline, or swing set
· Owning a pet
· Frequently having guests over
As careful as you may be, it's wise to acknowledge that accidents do happen. Though you may not feel that you're at risk of being sued, the safest course of action is to be properly insured, adjusting your coverage as your financial situation changes.