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Have you ever needed someone to spot you at the gym? Or have you seen someone lifting some heavy iron that required a spotter to come in and help them recover? Umbrella coverage is just that. It's there to recover for you when your other policies run out of gas. It's something you hope is never needed, but if the need arises, you want to make sure your policy is robust and strong enough to carry the weight. Keeping your umbrella fit can be done by paying attention to both outside coverage that could jeopardize the strength of the umbrella coverage and inside features of the umbrella policy that could augment it. Here are three aspects to umbrella coverage that, when optimized, can greatly strengthen the coverage.
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1). Make sure it coordinates with the underlying policy. If the underlying limits of the homeowners or auto are not met, the umbrella will not take effect. Most umbrella policies want to see a minimum of $300,000-500,000 of liability coverage on the homeowners policy and $250,000/500,000 of liability or better on auto policies. This goes for boat and ATV policies as well. If this isn't set up correctly from the start, you will have issues. It is also good practice to make sure policy changes to the home and auto insurance policies are not done without the umbrella on the table staring at you. You don't want to tweak coverage down the road, forget about your umbrella coverage, and make changes that no longer satisfy the umbrella's underlying liability requirements. Alternately, if you change umbrella policies, the newer requirements may be higher than your previous coverage. The main point here: any time you change or review your home or auto, make sure the umbrella is part of that conversation.
2). Check that personal injury is covered under the definition of liability. Liability coverage on homeowners covers bodily injury - trip and falls, tree branch to head, etc. So does your umbrella coverage. But do either cover personal injury (like libel)? Let me use a magical word that should cause concern: Facebook. Ever said anything nasty to someone online? Ever wanted to? All social media, not just Facebook, is becoming a breeding ground for instances of libel and subsequent lawsuits. Bullying, name calling, insults, and harming a reputation may all be grounds for litigation. Think of the costs if everyone that "liked" or "commented" on a 54-comment Facebook thread was subpoenaed in a lawsuit? The billable hours would easily start in the tens of thousands of dollars.
Could these instances be covered? They could if the liability coverage in a homeowners policy included personal injury. With regard to the umbrella coverage, you want to know if the umbrella follows-form on the homeowners policy. Does the umbrella's definition of liability copy the homeowners? Does it follow-form but exclude personal injury? This inconspicuous but important aspect of liability coverage needs to be reviewed, especially with the growing exposure one has to personal injury online.
3). Add uninsured/underinsured motorist coverage to your umbrella policy. You have the option to carry uninsured/underinsured motorist coverage (UM/UIM) on your personal auto insurance policy. If someone without coverage or with low liability limits were to cause you bodily injury, this provision allows you a source to dip into when you've exhausted the funds for that other driver (or couldn't access any because they were uninsured. Consider these two scenarios:
The first is a hit-and-run. Your spouse is rear ended on the highway and sustains serious neck and back injuries from the whiplash, resulting in large hospital bills, rehab, and a few years of lost income - $650,000 in total damages. The other driver fled the scene. Your auto insurance policy has a UM/UIM limit of $500,000. Where would you go for the other $150,000?
In a second scenario, a drunk driver has just swerved lanes, hitting head-on your child driving in their car. They're airlifted to the Hospital. $1.5M later in medical bills and lost wages, you make a claim of $100,000 against the drunk driver's policy (which only has $100,000 of liability coverage) and $500,000 under the UM/UIM portion of your auto policy, but the cap is $250,000. Where do you go for the other $1,150,000?
In both these situations, an umbrella with UM/UIM could provide a strategic financial solution to a catastrophic event that leaves a family both financially and emotionally drained. However, not all out-of-the-box umbrella policies come with UM/UIM coverage and many companies do not offer that coverage as part of their umbrella protection. This is additional coverage you need to ask your advisor to procure.
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