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Responsible for a Car Accident? Can an Umbrella Policy Protect You?

Updated: Jul 24, 2021

There are many kinds of insurance policies under which you can protect yourself and your property following a car, motorcycle or trucking accident, regardless of who is at fault or responsible for damages stemming from the accident. In a previous blog post, we discussed various types of car insurance coverages and how each one is important following an accident. (see Car Accident? What Kind of Insurance Do You Have/Need?) This personal injury blog post will discuss how an umbrella policy might provide you with the additional coverage you need should you be responsible for injuring someone in an accident and your underlying car insurance policy is not sufficient to cover all of the victim’s injuries. So, what is an umbrella policy? An umbrella policy is a type of insurance that provides additional coverage (in situations such as an auto accident when you are at fault) once all underlying insurance policy limits have been exhausted. For example, you are driving your car and negligently collide into another vehicle and the other driver sustains substantial, permanent injuries. You have a $500,000 policy with your carrier. You also have substantial liquid assets that would be easily obtainable should a lawsuit be filed against you to satisfy a judgment that reflected the true value of the personal injury victim’s claim. However, you also purchased an umbrella policy of an additional million dollars that will be triggered once the underlying $500,000 has been tendered to the victim. Here, what could have turned into a long, drawn out lawsuit against you, will now likely be settled for the umbrella policy. Obtaining an umbrella policy is not for everyone and one very important prerequisite must be met. This requirement is that any underlying policies must be maxed out before an umbrella policy can be obtained. What this means is that if you think you can buy a $50,000 car insurance policy, then buy a $1,000,000 umbrella, you are mistaken. Typically, to max out a car insurance policy, the buyer must opt for the $500,000 limit (as this amount is the typical maximum amount a car insurance company will offer – there are always exceptions to this, of course). What’s more, an umbrella policy also is triggered if an underlying homeowner’s policy is likewise exhausted. Umbrella policies are very specific as to what they cover, as every policy is different. But if you were responsible for a car, truck or motorcycle accident and have exhausted your car insurance policy and your homeowner’s policy, the likelihood that your umbrella policy will not cover the injuries of the accident victim is slim to none. Indeed, one of the major reasons people choose to purchase an umbrella policy is to protect them in case they cause an accident and the victim is substantially injured and the responsible party does not want to lose their personal assets. Typically, an individual will add-up all of their assets and will then purchase an umbrella policy amount that is greater than their assets. This makes sense, because if the umbrella policy is less than the available assets of the at-fault party, those assets will likely be subject to collection if the umbrella policy does not satisfy the entire value of the car, truck, or motorcycle accident, slip or trip and fall accident, or other personal injury accident victim’s claim. If you have been injured in an accident and need advice, contact the Steven Dhillon Law Firm for a free consultation.

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