by rcstas » Tue Sep 21, 2010 09:44 pm
Suppose, for instance, we have homeowners insurance, and the part of the contract that cover personal liability, each occurrence, is $400,000. Suppose that a tragedy happens to a friend visiting us in our home, has an accident in our home, and suddenly we are being held liable for $1,750,000?
Or, suppose that our auto insurance covers liability for bodily injury, per accident, for $300,000. Suddenly, we are faced with a $2,000,000 claim for which we are held legally liable?
Is there insurance to protect us from such catastrophes? If so, is the cost out of sight? or still affordable?
Or, suppose that our auto insurance covers liability for bodily injury, per accident, for $300,000. Suddenly, we are faced with a $2,000,000 claim for which we are held legally liable?
Is there insurance to protect us from such catastrophes? If so, is the cost out of sight? or still affordable?
Posted: Wed Sep 22, 2010 12:04 am Post Subject:
Yes, it's called a PERSONAL UMBRELLA LIABILITY policy. You purchase increments (units) of $1,000,000 at a cost of about $200-$300 per year per unit.
You are required to carry high liability limits in your underlying policies (300/500 auto, 300 minimum homeowner's), and the umbrella policy is considered EXCESS coverage. It only begins to pay after the underlying liability limits have been exhausted.
However, one side benefit of almost all umbrellas is something known as "retention", which is usually just $1,000. In the event you have a liability claim rejected by your carrier, or the loss is due to an excluded cause, as long as the same exclusion is not listed in the umbrella (there are actually very few, but a common one in a personal umbrella policy is liability from business/professional pursuits), it will be covered to the umbrella limit after your retention (AKA: deductible) is paid.
If you have a business, then you might be interested in a commercial umbrella which can be obtained for the same reasons and for about the same cost.
It's very economical and can provide the extra piece of mind you need for less than $1 per day. The reason the cost is so low . . . there are relatively few claims ever made against the policies. Very profitable line of business.
Posted: Thu Sep 23, 2010 11:05 am Post Subject:
It only begins to pay after the underlying liability limits have been exhausted.
Yes, this is very important for you to understand. Many of us would often miss out on such information and start wondering why we've at all been paying for it. Make sure you read through your policy papers carefully.
Posted: Fri Sep 24, 2010 06:07 am Post Subject:
there are relatively few claims ever made against the policies. Very profitable line of business.
I'd go for such coverage only when I'm sure that I need it. Otherwise, I won't pay for it. You'd really need to weigh your risks or possible causes while signing up!
Posted: Fri Sep 24, 2010 10:20 pm Post Subject:
I'd go for such coverage only when I'm sure that I need it.
The only problem with that approach is the fact that the moment when you're sure you need it . . . it will already be too late to get it.
If the $200 per year for $1,000,000 of protection is too costly, well, it's too costly. You have to be willing to accept the fact that if you other insurance limits are exhausted, the unpaid balance of the judgment is 100% yours. It will most definitely be more than just $200.
Insurance is a trade-off -- a small amount of your money in exchange for a far larger promise on the part of the insurance company. Will you always win the bet? No.
And the fact of the matter is, life is usually better when you have no insurance claims at all. Being able to sleep at night if something does happen is also worth something.
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