Are You Actually in Good Hands? Risk and Umbrella Liability Insurance

People often think that their car insurance and/or the liability insurance policy on their home will protect them from personal liability or if they get really hurt. The thing is, these policies can provide protection, but may not provide enough protection. Most of my clients do not have sufficient insurance. Are you one of them? As a personal injury attorney, I look at hundreds of policies every year for my clients and the people who injured them.

If you or someone driving your car fails to follow the road safety rules and causes a collision, your car insurance policy will cover that person’s injuries up to the limits you have purchased. But how much is that really? Have you ever wondered if you have a large enough car policy and/or appropriate insurance for your house? Often, when you engage the usual suspects of insurance companies for the masses for any type of insurance policy, instead of asking questions about your assets to know how much coverage you actually need, they are focused closing the sale, which often means cutting coverage to get you the lowest price. Simply stated, the agent may not know you need extra protection because of your assets.

While it’s unlikely you have a minimum Maryland car insurance policy of $30,000 per person and $60,000 per collision, or the Virginia or D.C. minimum policy of $25,000 per person and $50,000 total per collision, do you know how much more you have? Did your insurance agent sell you a policy high enough to cover all of your assets? Did they sell you an Umbrella Liability Insurance policy to cover you above the individual auto policy limits?

Let’s say you bought what they think is a “good” car insurance policy for you. It could cover liability for injuries from a car crash up to $250,000 per person and $500,000 per collision. Let’s also say that you or someone else driving your car (your child, spouse, or friend) hurt someone badly in a car crash. The hurt person’s medical bills are $100,000 and they have lost wages. Your car insurance will cover that personal injury claim up to the $250,000 car insurance coverage you bought. If more than one person was hurt in that crash, no one person will receive more than $250,000 and all the people hurt in the car would have to split the $500,000 in coverage per collision. If you have assets with a value above your car insurance limits, a personal injury attorney will look to you personally for contribution beyond your car insurance limits. This scenario will also be the case if you have a $250,000 homeowners liability policy and someone gets hurt in your home due to negligence. If the attorney for the injured person files a lawsuit and the injured person receives an award above your insurance limits, you may be personally responsible for the award in excess of your insurance coverage. That may mean you need to speak to your financial advisor on how to liquidate some assets to cover the personal injury claim – so adding insult to injury, you could have to pay capital gains to access those funds you’re giving away.

Thankfully, this horrible scenario can easily be avoided if you invest a little more money in your insurance coverage instead of going with the cheapest option the law requires. I think a large part of the blame lies with national insurance companies who do their clients a disservice by not fully educating them. Some carriers  just want you to sign up for a plan — any plan. They don’t take the time to discuss the benefits of having better coverage. If this sounds all too familiar, send your declaration pages for home, auto and other property/casualty insurance to your advisor at AFM to see if it aligns with your net worth. If not, they can give you guidance on what to say to your agent or connect you with an agent who can help. At a minimum, you’ll want to ask about an Umbrella Liability Policy that goes above your car and homeowner’s highest available coverages to further protect your assets. 15 minutes of education can save you a lot more than 15% of your assets!

When you look at your car insurance policy, besides being worried about protecting your assets from personal liability, you should also be worried about protecting your most important asset, you and your family. A benefit to higher car insurance coverage typically means you have higher uninsured/underinsured motorist coverage. Your uninsured/underinsured motorist coverage covers YOU! This means that if you, your family, or anyone else in your car is hurt in a collision that was not their fault, you and everyone in your car can make a claim on your insurance policy under your uninsured/underinsured motorist coverage once the careless driver’s insurance policy has been exhausted. That means you can have peace of mind knowing that a collision won’t bankrupt you, even if the other driver doesn’t have enough insurance coverage themselves.

Do you understand your car or homeowner’s insurance policies? I am not an insurance agent, but I am happy to provide you some insight on the coverage you have purchased and some questions you may want to ask your insurance agent.

Meliha Pérez Halpern is a personal injury attorney at CHASENBOSCOLO, a trial litigation firm practicing in personal injury law since 1986.