Umbrella, not just for rain
You're driving down the road. Normally, you never look at your phone while you're driving but this is a particularly hard day and you're trying to damage control between you and your spouse. As you look down at a particularly angry text, as your eyes raise from the phone you panic because the road is turning but your vehicle is not. To compensate, you over-correct your turn and....
BAM!!!!!!
You cream the vehicle next to you. Luckily for you, no one in the other car perished, but they did suffer some serious injury. Mom suffered a bruised back and had severe back pain for 6 months after the accident. The children each suffered several lacerations on their bodies and the child on the left side of the vehicle suffered a broken arm. The dad, suffered the most. He suffered a broken leg and back. He required 3 surgeries and had to take 2 years off of work while he was being rehabilitated.
You think you're covered. You have $100,000/$300,000 for Bodily Injury. Your insurance broker said you're fine and that's plenty of coverage. Guess what? HE WAS WRONG!
$100,000/$300,000 means that in an accident, the most that the insurance company would pay for a person's injuries is $100,000. For the entire accident, the company will pay no more than $300,000 for the entirety of the accident. In regards to the dad, several back surgeries and not to mention the lost wages, can add up quite significantly higher than $100,000. Even though you have coverage for $300,000, the most the insurance company would pay for the dad's injuries is $100,000. Meaning YOUR ASSETS are at risk!
What an Umbrella does is provide an additional amount above and beyond the lower policies. Usually, Umbrella policies come in increments of a million. If you purchased a $1,000,000 Umbrella and kept your limits for your auto policy at $100,000/$300,000, in an accident, the per person limit would be raised to $1,100,000 ($100,000 + $1,000,000) and $1,300,000 ($300,000 + $1,000,000) for the entire accident.
I equate liability coverage like a moat that is around your assets. The larger your liability coverage is, the larger the moat gets and the harder it is for an individual/business to have their assets depleted because the size of the moat makes it harder to get to the assets.
If you have any questions or concerns, I'd love to hear them.
-Dwight Bentz