If you cause a car accident (if you’re “at fault” in insurance lingo) and the damages and injuries exceed your auto insurance policy’s liability limits, you could be held personally responsible for the remaining amount.
This means you could be sued for the difference between your policy limit and the actual damages, which could be significant and potentially exhaust your savings and assets.
In this situation, you could be on the hook for a significant amount of money, including medical expenses, property damage, lost wages, and pain and suffering. If you don’t have enough money to pay the damages, the court may order you to sell your assets or garnish your wages to satisfy the judgment. Say hello to umbrella insurance.
In addition to the financial impact, being involved in a lawsuit can be emotionally draining and time-consuming. Remember, even if you win the case, you may still have to pay legal fees and spend a significant amount of time and energy defending yourself.
This is where personal umbrella insurance comes in. If you have umbrella insurance, it can provide additional coverage beyond the limits of your auto insurance policy.
For example, let’s say you have Mississippi’s state minimum auto liability limits of $25,000 per person in an accident and $50,000 total bodily injury liability per accident. Now let’s say you cause a car accident in which the medical expenses for the injuries total $75,000. Your auto insurance will cover up to your total limit of $50,000, and you’ll be responsible for the remaining $25,000. Most of us don’t have an extra $25,000 lying around.
However, if you have an umbrella insurance policly with a $1 million limit, it will cover that remaining $25,000, and you won’t be responsible for paying it out of your own pocket.
Could it get worse? Easily!
What if you cause a wreck involving multiple vehicles and multiple people? Bodily injury costs could be astronomical when several people are seriously injured. It happens every day.
It’s important to note that personal umbrella insurance will only kick in after your primary insurance policy limits have been exhausted. Therefore, it’s crucial to have sufficient coverage on your primary insurance policies to avoid having to pay out of pocket for damages and injuries.
You’ll also probably need to raise your auto insurance liability limits to their maximum before an insurance company will cover you with an umbrella policy.
Get in touch with any of our insurance specialists about how umbrella insurance might help manage your financial risks.