It may not be as well-known as other types of insurance options, but umbrella insurance is actually one of the most important types of coverage for people to get, according to Anthony Sce III. As the CEO and president of Executive Insurance & Financial Services in Bohemia, New York, Sce handles these types of coverage issues for people on a regular basis. Here, he explains what umbrella coverage is and why so many people need it.
Umbrella insurance — also known as Excess Liability Insurance — protects you over and above your liability for both your current homeowner’s and car insurance policies. Not only that, but it protects your personal liability, as well.
It usually starts off in increments of $1 million, but you must have certain underlying limits in order to get a policy like this. In New York State, those underlying limits are usually around $300,000 to $500,000 on an auto liability policy, for example.
How it works is basically like this: If you have a $500,000 auto liability policy and you get sued for $1 million — and you were the negligent party in the case — then even if the plaintiff doesn’t get the full $1 million award, then he still might still awarded $750,000 by the judge, let’s say.
Without an umbrella insurance policy in place, your own automobile insurance company would pay the first $500,000 and you would be on the hook for the remaining $250,000 on the award judgment. There’s no telling what assets you would have to sell in order to pay that. To avoid a situation like that, and to avoid losing it all, you could purchase an umbrella policy. That’s what a lot of people are doing today to protect themselves.
In a situation like the one described above, if you had already had an umbrella insurance policy for $1 million in addition to your automobile policy for $500,000, then in that case you would have been protected for up to $1.5 million in damages. It works the same way with your homeowner’s policy, covering anything over your current limits.
On most homeowner’s policies, you need a minimum of $300,000 on the liability side in order for the umbrella to kick in. So you can’t just get an umbrella policy and neglect everything else.
I will never forget one insurance story, which made me really push umbrella policies and how I advise my clients on these policies. I grew up in Brooklyn, where there are long steps that led to people’s homes. At this time, nobody had umbrella insurance policies or anything like that. One day, a mailman went to the top flight of stairs at one of my neighbor’s homes to deliver his mail, and while the mailman was walking down the stair, he hit an ice patch and fell down all the steps. As a result of the injury, he ended up being crippled for life. Like I said, these individuals — my neighbors — did not have an umbrella policy, and basically because the mailman was a young guy, his attorneys decided to add up all of his potential future earnings and sue the homeowners for that amount. So once they added up all of his future earnings, they determined that he would have made over the course of his lifetime, obviously these people could not afford to pay that and they ended up losing their home because of it. And all of this happened because they were not properly insured. So that sticks with me.
Umbrella insurance policies are definitely growing in popularity now, and people are actually asking for them. Again, this is partially because so many people see these lawyer commercials on TV, and also because of how litigious our society is in general.
One misconception that people — especially business owners — have about umbrella insurance policies is that these policies cover them both at home and at work, business and personal. But that is a myth, and you need two separate policies if you are a business owner in need of insurance. You need a policy to protect yourself personally, and a policy to protect you through the business as one will not extend one to the other.
Luckily, umbrella policies are relatively inexpensive for the amount the amount of coverage they provide. And that is good, because especially in my area they are a definitely necessity for all the people who are avid boaters, motorcyclists, jet skiers, snowmobilers — everyone with all these toys. If you own any of these types of things, especially quads and snowmobiles, then you should definitely have those things listed under and protected by an umbrella policy. You need to advise your insurance agent that you have these or do these outside activities, or else they won’t be covered. Without this coverage, you could be in major trouble if you were riding your quad with a friend and someone got hurt. That’s why these policies are so important.
