Financial Tune-Up - Part 8b More on Home and Auto Insurance Check-Up

Umbrella coverage is an excellent way to cover excess liability coverage.  This does not happen often, but an event could ruin anyone financially.  Here is an example.  One driver’s car skidded and crashed into a Mercedes with a business executive who earned a lot of money and now can no longer work.

He was awarded millions of dollars and the court took the car owner’s savings and his home and for years he had to give up part of his salary.  He was financially ruined.  This would not have happened if he had an excess liability insurance or umbrella coverage.

What is umbrella coverage?  It is an excess liability coverage which takes care of the auto accident victim’s medical bills and lawsuit.  This is not just for the auto accident victims but for other accidents as well around the house, like if a news paper boy trips on something at your doorstep.

Many people do not know anything about this umbrella coverage even those with major assets.  And if some do know about this, they either do not buy the extra coverage or do not buy enough to cover any eventuality.  What they do not know is that it costs just a fraction of the full auto and home insurance.

Banks make it mandatory for those who get mortgages to have home insurance and drivers are required by some states to have auto insurance but no one is making the insurance buyer to purchase the most important part of the insurance which is the umbrella coverage.

No one thinks it is going to affect them but lawyers who specialize in personal injury make money by suing people.  Anyone who does not have adequate insurance is personally liable.  To think that the extra coverage is only a fraction of the total cost, not buying the extra protection is beyond one’s understanding.   

It is scary to think that if you are sued you will have to defend yourself and you don’t know how high an amount you will end up paying.  You could literally lose everything.  This is especially important when you have teenagers in the family.

The question as to whether you are adequately insured or not should be evaluated once or twice a year.  To lower the premiums, you could raise your deductible.  A financial planner said that buying an umbrella policy could bring down the cost further by lowering the liability coverage to the minimum required by the umbrella policy.

While we are at this, have a record of all your possessions so that it will be easier to file a claim when your house burns down.  Videotape everything you own and upload it free at a website called Vimeo so that can serve a copy when the one you have at home gets burned down with the house.

The spreadsheet you have with all your possessions can be uploaded in your account with Google Docs.  This will help get you a copy when your own spreadsheet gets burned down as well.  It is always better to make sure you are ready for any eventuality.  Renters should also adequately insure the contents of their apartment.

You should not have any problem if you follow the suggestions in this article.  You are covered no matter what fate throws at you.  Not only are you covered with the basic losses but also from the damages that come out of accidents and lawsuits.  That’s because you have umbrella coverage.

By Roger Guzman, M.D. and Evelyn Guzman

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