A Night to Remember
Ed and June Griswald are fairly affluent. They are conscientious parents of two teenage children, Bianca, age 17 and Carl, 18. One evening, Ed and June come into possession of two tickets to watch Duke and Carolina play a basketball game. The game is two hours from home. They decide to attend, and on a Friday evening, they travel to the stadium to watch the game. It promises to be a great game, and they intend to get a hotel room for the night after the game, and return home the next morning. They have no concerns about their two angelic children. They know that they'll probably watch a movie on TV and go to bed by 10.
Twenty minutes after they leave for the game, the friends of Carl and Bianca begin arriving. There is a well-stocked liquor cabinet at the Griswald home, which the angelic kids soon locate. The next few hours are spent in great fellowship and revelry, and a good time is had by all.
After the game (where Carolina handily trounced Duke using only their third string players, 105 to 40), Ed decides to cancel the hotel and travel on home. About an hour away, June calls her two little angels just to make sure they aren't worried about them, and tells them they'll be there soon.
Panic ensues at the home of Griswald as the ne're-do-wells leave the scene. Unfortunately, one of the teenage drivers, having had way too much to drink, loses control of his car on the way home, and crashes into a telephone pole. He ends up with a broken spine, and is paralyzed from the neck down. Local attorneys go into a frenzy.
By the time they have finished with the Griswald family, and after their homeowners and car insurance policies have paid off, they are still on the hook for over $1.5 million dollars!
It was a night to remember.
The Personal Umbrella
The situation above is not uncommon. These types of things happen everyday, and any financial plan must consider this scenario, or something like it as part of it's asset protection risk.
One of the great risk management solutions for this type of scenario is the personal umbrella liability policy. Without this coverage, which is very affordable, you run the risk of losing a lifetime's worth of asset accumulation because of a legal judgment. At one time these kinds of policies were only for the wealthy, but in our litigious environment today, anyone with assets needs to have one. These policies protect clients in two ways:
1. There are high limits over underlying insurance.
Umbrella policies provide high limits of "excess" liability coverage. For example, for a person whose homeowners policy has a single coverage liability limit of $300,000; that policy and an umbrella combined could provide up to $1.3 million for the liability losses covered by the homeowners policy.
2. There is broadened coverage for other things not covered in other policies
Many umbrella policies also provide broader coverage for other types of claims not covered by the other casualty policies, such as claims for slander and personal injury offenses.
These two provisions inside the umbrella policy are excellent ways to inexpensively protect your assets from loss due to litigation. (They are not the only way: see Asset Protection).
Has Your Advisor Talked to You About This?
If not, why on earth not?
It behooves any advisor worth his salt to have this discussion with every client! Personal umbrella insurance is relatively inexpensive - it can be purchased in amounts from $1 million to $5 typically, and a million dollar policy can be had for only a few hundred dollars a year, in most states. Your advisor should be not only recommending an umbrella policy, but also taking steps to ensure that the policy meets your specific exposures.
Until next time,
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