Liability Coverage and the Importance of an Umbrella Policy

Often times when I meet with clients in Lafayette, IN and I ask them what their main concern is with their insurance is, the answer is always the same: price. Although price is an important aspect to consider, I always tell my clients that coverage is a better indicator than price when it comes to the value of an insurance policy. After all, insurance is meant to protect you in the event of a loss. You want to have enough insurance so that when you really need it, it is there. When an individual purchases an auto or home insurance policy, the most important part of their new policy is their liability coverage. Your liability coverage is your lawsuit protection and this is the money that your insurance company will pay out in the event that you are found responsible for someone’s injuries or property damage.

As of 2017, the minimum liability coverage required in Indiana for auto insurance is $25,000 per person for bodily injury, $50,000 per accident for bodily injury, and $25,000 for property damage. This means that the maximum that your insurance company will pay out if you were to injure one person in an accident is $25,000. In the event that you seriously injure someone, and their medical bills exceed 25,000 dollars, you will be responsible for paying the rest. With the cost of healthcare rising so rapidly, it is not very likely that $25,000 will be adequate. Furthermore, in the state of Indiana, you can have your wages garnished up to 25% to pay legal settlements. That can be a scary thought! Luckily, there are other options to ensure that proper precautions are put in place. First, you can, and should, increase your liability coverage to more than state minimum. This is the least expensive coverage to enhance while offering significantly more protection.  Second, by taking it a step further, you can purchase an umbrella policy to boost your lawsuit protection even more.

We all work very hard for the things that we have in life. Maybe you have a nice car, or recently built your dream home. Maybe you saved up money to buy a boat so that you can spend weekends on the lake in the summertime. Would you want to give any of these things up in the event that you were sued? Of course not! If you protect yourself adequately, you should not have to. Umbrella polices offer that extra bit of security to protect all those things that you have worked so hard for. Umbrella policies will pay in addition to your auto or home policy if the damages exceed the coverage that you currently have.

For example: say you are involved in a car accident. It has been determined that you are the at fault driver. The driver that you hit was injured very badly. He had to spend months in the hospital, weeks in physical therapy, and it could be months before he is able to return to work. He is suing your for 1 million dollars in damages. Luckily, you have $500,000 limits for bodily injury and you also purchased a 1-million-dollar umbrella policy earlier in the year after having a review with your agent. This gives you a total of 1.5 million dollars for your auto liability coverage. Your insurance company will first pay $500,000 for her bodily injury from your auto policy and your 1-million-dollar umbrella policy will cover the remaining $500,000 in damages. In this case, you were adequately covered. If you did not have that umbrella policy then you would have been responsible for the financial burden of paying the difference, in this case, 500,000 dollars.

Another possible scenario could be that your high school daughter is having a few friends over on a Friday night. One of their friends sneaks alcohol into your home without your knowledge or consent. That child then drives home later in the evening and is involved in a very serious car accident. Consequently, you could be found legally responsible for the injuries that child sustains. It is important to realize that there are many factors that create the need for an umbrella policy. Some of these factors include, but are not limited to, having a good paying job, not having a mortgage on your home, having savings and investments, having children of driving age, dogs, pools, trampolines, being a teacher, owing a boat or other recreational vehicle, or having rental properties

Sometimes unforeseen events can arise. That’s why we call them accidents. The purpose of an umbrella policy is to protect from the unexpected. We are here to help you preserve the things you have worked so hard for. Call Isch Insurance today so we can help you determine what is right for you! You can also get a free and easy quote started here.