What is an umbrella policy?

I’ve recently had several clients ask me what an umbrella policy is and if they need one. If you have assets that you’d like to protect from an unexpected lawsuit, you probably need an umbrella!

Imagine that you are driving in an unfamiliar city at night. You stop at an intersection and look both ways.  Traffic is clear so you turn.  Unexpectedly, a drunken pedestrian steps into the street as you’re turning.  You cannot stop in time and hit them.  Will your auto insurance liability limit be enough to cover you?

The pedestrian could ask for you to pay medical bills and lost wages. If they are disabled and can no longer work as a result of their injuries and are the breadwinner, the pedestrian’s family could sue you because they are no longer able to provide the family an income.

If your auto liability limit is the Illinois state minimum, it will pay a maximum of $25,000 to the injured party. This would probably not cover the cost of surgery if they needed that as a result of injury from the accident.

Would you have assets that would be at risk if your auto policy did not have money to pay for the injuries?

Would you be comfortable with a court withholding money from your paycheck to settle a lawsuit? Or possibly forcing you to sell your home to settle with the injured party?

You could add an umbrella liability policy to give you extra liability coverage for a minimal annual cost. This protects your assets from a lawsuit and protects you from the unnecessary stress of an unfortunate situation.