This is a very common question! The answer is, yes! Everyone should have an umbrella policy.
A common answer from people is "But I don't own anything. If I get sued, they can just take everything!" Wrong answer. Wage garnishment happens if the "negligent" person doesn't have enough assets to cover a judgment against them. So someone who must pay for a judgment against them, could be paying for it for years to come...
An umbrella policy comes into play if the liability limits on an auto insurance policy, or the liability limit on a homeowners policy, have been exhausted. So if you seriously injure someone, or kill them, in a car accident the most your car insurance will pay is $250,000, or if you're lucky, $500,000. The lawsuit sure to follow will be for a lot more than your car insurance liability limit. This is when you will be happy that you have an umbrella policy!
And, defense costs are included up to the limit of your policy! So the insurance company will pay the attorney fees up to the limit of their policy limit.
Here are some actual claims rom Travelers Insurance on a Personal Umbrella policy. You decide if a Personal Umbrella should be obtained:
- A 28 year old engineer dove into a friend's above ground swimming pool and struck his head on the bottom. As a result, he became a quadriplegic. He sued both the homeowner and the pool manufacturer. The court found the homeowner to be 60% responsible and the pool manufacturer to be 40% responsible. The jury's award: $10,000,000!
- An insured's tenant claims she became ill from carbon monoxide poisoning resulting from a faulty furnace. The tenant claimed permanent brain damage and demanded $750,000.
- The insured's 18 year old son was driving the insured's car on a short trip to the store with his girlfriend. He lost control of the car and struck a tree. The son claimed another car cut him off, but there were no witnesses. His girlfriend, a 19 year old college student, was hospitalized for a month with multiple fractures and internal injuries. She was in a wheelchair but now is able to walk with crutches and continues physical therapy. The umbrella policy limit was paid.
There are many more examples of actual claims paid by an umbrella policy. People aren't always reckless, or negligent, to be found to be so. An umbrella policy is cheap insurance. For a little money, you should have the peace-of-mind that an umbrella policy affords!