How Umbrella Insurance Can Protect Your Children

Umbrella insurance provides extra liability coverage for you and your family. Your auto insurance protects your teenage daughter if she gets in an at-fault accident while texting. Homeowner’s insurance would cover you if the neighbor’s son tripped over your sprinkler and broke his arm. But what about the times you or your family are away from your home or car? Umbrella insurance extends liability protection to all other circumstances – like when your child is at school.

Liability insurance kicks in when you’re liable – or at fault – for causing injury or damage. It can apply in situations where auto or homeowners insurance isn’t applicable, or cover costs accrued once the limits on those policies have been reached. If you’re responsible for someone else’s medical and legal bills, an umbrella policy could cover those costs.

• Personal injury
• Bodily injury
• Property damage

Personal liability insurance, or an umbrella policy, would cover yourself, your spouse, and your children. However, your umbrella policy may not cover someone in your household who has auto or property coverage in their name or through another insurer. For example, your daughter may be excluded from your umbrella policy if she has renters insurance on her off-campus apartment. Your grandma, who lives in your spare bedroom upstairs, may not be covered on your policy if she has her own auto insurance policy.

If you have any questions about who your policy covers, talk to your insurance broker.

Let’s face it – we live in a world where civil lawsuits are more often the first resort rather than the last. It’s no coincidence that personal injury litigation has grown into a $36 billion annual industry. In many states that lack legal protections from frivolous lawsuits, it is often far less expensive to settle a lawsuit than to fight and win in court – even if you’ve done nothing wrong.

The fact is that everyone is at risk of being sued. Every time you step into your car and potentially get into an accident, every time to post something critical on social media or make a mistake at work, you put yourself at risk of a lawsuit.

For families that employ household staff, own rental property, or have teenagers living at home (who are known to have a house party or two while the parents are away), this risk is accelerated. Rather than live in fear of a civil lawsuit that can have an enormous financial and emotional drain on you and your family, oftentimes it makes sense to have an umbrella policy to give your family peace of mind.

So you decide to take a mini-vacation with your spouse and leave your teenage son at home for a few days. He says he’ll take good care of the house, but as soon as you leave the invites dozens of his classmates over the house for a party, which includes some drinking.

Several of these classmates are under the legal drinking age. And one of them drinks way, way too much. After rushing to the hospital to see their child treated for alcohol poisoning, the parents of this student decide to sue you, even though you had no idea any of this was going on.

In this example, your homeowner’s insurance has a personal liability limit of $400,000. However, after a court trial, the jury sides with the parent of your son’s classmate and awards damages of $1 million – $600,000 more than your homeowner’s liability limit. Which means a whopping $600,000 has to come out of your pocket. An amount that’s likely more than your home is worth.

This could potentially wipe out your retirement savings, force you to postpone retirement for decades. Maybe even force you to find a second job.

However, if you have an umbrella policy that provides an additional $1 million in coverage, it would cover the $600,000 you owe, plus attorney fees and other expenses. So the only out of pocket expense you incur on the $1 million judgment against you would be whatever the deductible is on your homeowner’s policy

You can go on with your life, although granted, you may not be leaving your teenage son at home again anytime soon.

If you have kids heading back to a college campus and leaving the comforts of home this fall, it may be time to think about how your umbrella insurance could protect them. Teenage drivers can be a menace and are far more likely to get into an accident than adults. If you bought umbrella insurance, you would be protected from liability if your child is at fault in an accident, protects you from paying repairs out of pocket, would cover an out-of-court financial settlement if need be, and cover any medical expenses of those injured in the accident.

Without an umbrella policy, if your teenager causes a serious accident, you could face enormous legal and medical costs – threatening your entire financial future and the financial future of your children.

Children in college may or may not still be included in your umbrella policy. Buying their own renter’s insurance could void their coverage under your policy, so you should coordinate their insurance needs with your broker. Forbes recommends considering purchasing them their umbrella policy.

Your teenager leaves a rude comment in an online chatroom alleging that a classmate did something terrible. That classmate’s mother is a lawyer and decides to sue for libel. Unfortunately, a momentary lapse in judgment brought on by teenage hormones could cost you a lot of money. Unless you have umbrella insurance. The additional liability coverage provided by an umbrella insurance policy would pay legal fees, court costs, and possibly pay out the legal settlement.

With children moving more of their lives online, there are more opportunities for lawsuits like this to arise. It is important to note that an umbrella policy might not help with the costs of a defamation lawsuit if your teenager knew the statement was false and intentionally lied.

As parents, we start thinking about protecting our children’s future before they’re born. Umbrella insurance ensures that a careless mistake as a child or teenager won’t haunt them for the rest of their lives. If you have any questions about your current or existing coverage, reach out to talk to someone at Insurance Professionals of Arizona today!

Traditional liability insurance policies can be very limited in how much coverage you receive

Umbrella insurance may help you when the costs of the loss caused by your family member exceed the coverage limit of your existing liability insurance plan. In nearly all cases, a simple mistake, such as a car accident or a significant injury from a dog bite, can lead to costly insurance losses. With the help of an umbrella insurance policy, you can minimize these risks significantly and know that your insurance provider is there to cover the losses for you.