Cover your assets

Though many people say they’ve heard of “umbrella insurance,” not many can tell you what it is, or how it works. And that lack of understanding could cost some of them a lot of money.

For example: You’re hosting a barbeque for a few neighbors and close friends. As the adults converse over drinks and burgers, the kids play an intensely competitive game of volleyball. One of the kids does an ill-timed dive for the ball, severely injuring his neck. Your first concern is for his well-being, but once the emergency passes, the boy’s parents may hold you liable for his care.

If the parents’ claim exceeds your homeowners insurance policy limit for liability, an umbrella policy would provide additional coverage to help pay the claim.

But many people don’t think to purchase an umbrella policy as an extension of their auto, home, or watercraft insurance. While auto accidents come to mind when most people hear the word “lawsuit,” there are numerous other ways a person can be charged with negligence toward another party. The worst part is that injuries or damages often occur under the most mundane of circumstances, when we are feeling our safest. Liability claims are more common than you might expect.

It isn’t necessary to spell out all the possible expenses a person might incur from the volleyball scenario. The main thing to remember is that an umbrella policy would take effect after all your regular liability coverage has been exhausted. The umbrella policy is typically inexpensive, especially when calculating the level of coverage provided, but each policy involves a detailed approval process.

Once you decide to buy a policy, you may be surprised by the information requested during the application process. Some of the factors that help insurers measure the degree to which you are vulnerable to liability on a daily basis include the number of vehicles or homes you own and if you have high-risk items such as a trampoline or pool.

Jim Rookard, director of Insurance Services for AAA Colorado, points out “Umbrella policies are sold in increments of $1,000,000 and provide an extremely cost effective way to protect your valuable assets in the event of large liability claims.” Rookard also notes, “As part of the underwriting process, you may be required to carry somewhat higher limits of liability on your other policies. Again, though, the cost is minimal, especially in comparison to the much higher protection provided.”

A high-profile career with a lot of public exposure obviously increases your risk, as does having teenage drivers living within your household. Unlike a regular auto or home policy, insurers calculate rates and assess risk strictly from a liability perspective, which helps to keep the cost of an umbrella policy low.

The point of discussing umbrella policies isn’t to go through life in fear of lawsuits; the point is to be better prepared if you’re held liable.

For questions about your coverage, talk to your insurance agent.

AAA Connection

AAA Colorado is a full-service insurance agency. If you’re thinking of adding an umbrella policy or would like to see what other coverages we offer, visit AAA Insurance for more information and a quote.

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