Why I’m Getting Umbrella Insurance

by Sandy L on March 7, 2011

Since it’s been raining for the past 3 days, I thought I’d write a quick post about umbrella insurance and why I’m going to be adding another line item to my annual budget.  I guess I should start by talking about why I’m a little insurance crazy.  You see, about 1/2 of my life now has been pretty darn peachy. I have a good job, a nice family, a wonderful husband and I’m ultra paranoid that the good times will not last forever.  How many of us are lucky enough to go through our entire lives without encountering some hardships along the way?  I know I paid in some karma points as a child with my horrible dad, but I’ve always been one to hope for the best and plan for the worst.

The first thing I did when I had my kids is I maxed out my work life insurance policy.  If you’re new to insurance shopping, you may want to jump over to About Life Insurance.  The site has a good overview of why you’d want insurance and the different types of policies out there.  It is kind of morbid planning for the worst, but I can’t help it. Even as a child I always wondered which of my parents would die first. I think it’s because they were so much older than the other parents I knew. I was paranoid of going into an orphanage. I must have watched Annie one too many times as a child.

The Incident the Prompted My Umbrella Interest

So, back to Umbrella Insurance. What prompted all of this?   Well, as with anything, it was an incident that happened to a friend of mine.  She was celebrating her son’s graduation down south somewhere and she was invited to a party. It was her son’s professor that hosted the party and he had a big gorgeous house with a new 2 story deck that everyone at the party congregated on.  The deck had just been rebuilt by a contractor. Midway through the party, the unthinkable happened. The deck collapsed with 38 people on it, two of them being my friend and her 83 year old mom. Her mom broke a hip, and my friend majorly screwed up her back.  Thankfully no one died, but a lot of people were seriously injured. The only insurance this guy had was $300K in liability on his home owner’s policy and that got wiped out almost immediately.  I’m pretty sure he’ll go bankrupt through no fault of his own.  Not only do I feel bad for the people who got injured, but I also feel bad for the host who just wanted people to have a good time and celebrate. The negligent contractor on the other hand, I have no pity for.  Did this guy not realize his corner cutting could literally put people’s lives at risk? Probably not.

Even though the odds of getting sued are low, it’s worth the piece of mind knowing I’m doing all I can to prepare for the worst.  Although I can do my best to be responsible, I can’t always control the actions of the people around me. Because the likelihood of tapping my policy is low, that will keep my monthly costs to just $13/month.   It’s pretty scary thinking that a lifetime of hard work and savings can be taken away in an instant.

Babci’s Take

Is anyone wondering what Babci would think of  these types of policies?  She never had them and she’s a bit superstitious about it all. Although she has a will, she doesn’t like talking about death at all…unless you’re already dead, then it’s okay. She feels like if you talk about your own death, the grim reaper might hear you and get reminded you’re still out there in the world living happily along.   Perhaps this is why the insurance companies call it life insurance and not death insurance. Whoever thought to call it life insurance was a marketing genius.  In general, Babci feels that these types of policies are wants not needs.  If she died young, I have wonderful  godparents that would have taken care of me, but she also prayed like heck that she’d live long enough to raise me til adulthood. Luckily, it all worked out for us.

I also consider insurance a nice luxury that gives me piece of mind. As far as priorities go, I’d probably pay into life and umbrella insurance before I paid for a nice vacation. To me, it’s that important.  When it was just me, I paid in the minimum, but now that I have other people to think about, my priorities have changed.

Do you have all your financial crisis bases covered?

{ 33 comments… read them below or add one }

101 Centavos March 7, 2011 at 6:10 AM

We all have varying tolerances for risk. Young people, being invincible and indestructible, don’t think much about life and health insurance. For parents and/or heads of household however, it should be a no-brainer. Planning for and being prepared for eventualities is only a want until the moment it turns into a need, then you’ll look brilliant as you turn from a paranoid worrier into a foresighted genius.
The package insurance that I have through my employer includes AD&D, accidental death and dismemberment (which sounds ghastly enough, I would have picked a different definition, but I’m not in insurance sales). It’s good enough for peace of mind.

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Sandy L March 7, 2011 at 5:29 PM

I have a similar package through my employer. Sometimes I wonder if I should get a policy independent of my employer in the case of a job loss or change, but so far I’ve been too lazy to do the work and get the health tests done.

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Invest It Wisely March 7, 2011 at 7:24 AM

Oh my god… we have $1 million in liability but if our balcony collapsed, people would die for sure since we’re 25 floors up. Can the professor collect from the contractor? That is a really unfortunate situation to be in for sure, for your friend and the others that got injured as well as the professor.

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Sandy L March 7, 2011 at 5:31 PM

Invest It – I don’t know what ended up happening in the end but it was enough to scare me into investigating a policy.

Oh and the rain turned to snow this morning.

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Invest It Wisely March 7, 2011 at 7:27 AM

P.S. Re: the weather, there’s a big snowstorm outside my window right now ;)

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Nicole March 7, 2011 at 8:19 AM

We got umbrella insurance this past year too.

Before that I don’t think we really had enough money to do anything other than declare bankruptcy in such an eventuality.

Our decision process was mostly focused on what if someone hit our car and got injured and blamed us and sued for medical. Apparently the insurance company will also investigate the case for you if you have umbrella. We were also able to lower some of our other insurances with the same company because umbrella filled in the gaps.

That sounds really scary with your friend and for the host. How terrible.

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Sandy L March 7, 2011 at 5:32 PM

Nicole – interesting, I guess you’re right that you would get less hassle with an umbrella in a car accident or such thing.

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Aloysa March 7, 2011 at 10:20 AM

Haha… You know it is interesting but I side with Babci on that one. I am somewhat superstitious too! So is my Mom. Funny… Probably because we are not first generation but actually immigrants. :-) However, we do have home insurance.

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Sandy L March 7, 2011 at 5:35 PM

Aloysa – funny, yes, I blame it on your immigrant status. It’s okay to not want to talk about death. What a horrible subject.

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Money Beagle March 7, 2011 at 11:03 AM

That’s one of the things on my ‘I know I need to do this but I haven’t done it yet’ list.

That’s a very scary story about the deck collapse. Not that I’m a professional but I actually inspect mine every season to make sure all the bolts and brackets are snugly fit and that the wood is not rotting anywhere near the footings, and I actually did some measurements when we moved in to make sure that everything was up to proper guidelines in terms of the spacing on the decking and the supports.

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Sandy L March 7, 2011 at 5:35 PM

Money Beagle – I’m right there with you. I’ve been meaning to do this for about 2 years and I’m finally getting around to it.

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retirebyforty March 7, 2011 at 4:29 PM

We just got a 1M umbrella. The main reason is because we have renters and who know what the heck they can do to hurt themselves. If we ever get a 4 plex, I’m upping it to 2M (not much more cost anyway.)
I doubt 2M will cover 38 injured people though. If I ever have a party like that, everyone will need to sign a waiver.

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Sandy L March 7, 2011 at 5:36 PM

Rb40 – yeah, I think upping it another $1MM was only an extra $50/year. I would definitely get more if I had rentals.

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Crystal March 7, 2011 at 4:47 PM

That story scares the bejeezus out of me since we host potlucks at our house all of the time. Granted, a balcony collapse can’t happen (no balcony), but what if a ceiling fan fell on someone or something? Crud…now I’m going to go look at my policy…and make sure the board game tables are centered below the lighting fixtures…

Thanks for mentioning About Life Insurance!!! I appreciate it!!!

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Sandy L March 7, 2011 at 5:38 PM

Crystal – we used to host a lot of parties and are doing more of them again. It’s a scary thought that someone could get hurt.

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Molly On Money March 7, 2011 at 5:29 PM

God that was awful!
We have only a tiny life insurance policy and (gulp!) my husband of almost 8 yrs still has his first wife on his life insurance policy (God, that was hard to write down!). Something is very wrong with the both of us because the house is still under his name and our wills that we drew up three years ago are still unsigned!
The biggest problem with all of this is that we have a blended family. If one of us dies we don’t retain any sort of custody of our step-children, even though we have full custody of one of them. Since I gave birth my goal is to stay alive at least until she is 16 yrs old. The courts will listen to the wants of a 16yr old minor in custody matters.

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Sandy L March 7, 2011 at 5:41 PM

Molly – thanks for the honesty. I don’t know what it is but that type of stuff despite it’s importance is so easy to put on the back burner. Well, I hope you can schedule a little time in to get it settled. Even if you just do one thing on that list, it’ll make you feel better. You have to stick these things up on your chalk board. That seems to work wonders for you.

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Molly On Money March 8, 2011 at 10:21 AM

Your absolutely right- the white board is a great place for these things we are avoiding.
After I wrote this comment I immediately started a post on it.

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Squirrelers March 7, 2011 at 6:46 PM

That’s quite a story, and a really good lesson for people. Accidents can happen, and sometimes the random bad luck can flow our way. Not a happy touchy-feely observation, but it’s true. Best to be prepared, and I see it your way too about protection as a priority over a vacation. Of course, we all have our own risk tolerance.

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Sandy L March 8, 2011 at 5:02 PM

Squirreler – bad stuff does happen to good people. Sad but true.

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krantcents March 7, 2011 at 7:55 PM

It shouldn’t take a catastrophe for us to react, but that is what usually happens! I changed my uninsured motorist coverage thanks to an accident I had nearly 10 years ago.

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Sandy L March 8, 2011 at 5:00 PM

Krantcents – so true. I’ll probably be the same way with travel insurance in the future after having to deal with a botched vacation.

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Little House March 8, 2011 at 9:52 AM

What a horrible accident. I’m sure the professor who threw the party is beside himself.

As for insurance, my husband and I took out life insurance a few years back. It’s not a huge policy, but it would cover the funeral arrangements and a small portion of the missed income for a few months while the other one of us got back on our feet. Since we don’t own a home, we have renters insurance. I can’t remember what our liability insurance is, but I think it is around $500k. I’m a proponent of insurance, but I also don’t want to spend too much on over-insuring myself.

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Sandy L March 8, 2011 at 4:57 PM

Little House – there’s no need to go overboard until you have dependents. I was the same way til I had kids.

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everyday tips March 8, 2011 at 12:18 PM

As I was reading your post, I was cringing as I was expecting that deck to collapse. I am so sorry that happened, how awful.

He have a lot of life insurance, but I do not have an umbrella policy. I need to think about this.

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Sandy L March 8, 2011 at 4:59 PM

Everyday Tips – Another reason for umbrella insurance that may be relevant. I do a lot of driving because of my job (I think your family does too) so that’s another risk factor that I considered.

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Sandy @ Journey To Our Home March 11, 2011 at 10:43 PM

A point with the driving aspect- my boss and I talked about this- and once you start transporting other people’s children to events an umbrella policy just helps put your mind at ease, IN CASE something happens.
I don’t like my kids going with other people (it always makes me nervous), and I don’t feel totally comfortable with even my nieces and nephews with me- money can’t solve everything but I know it will help in the case of an accident.

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Deidre March 8, 2011 at 10:14 PM

Ahhhh insurance, a subject near and dear to my heart :) as I am climbing multiple roofs daily inspecting the latest hail storm :)

Umbrella insurance is a very very nice thing to have and in some areas very reasonable in price. I cannot tell you how many countless liability claims I have done and people exclaim ‘why didn’t I think about having umbrella insurance?’ – after the fact of course!

Unfortunately, we live in a very litigous society and unbrella insurance is becoming a ‘must have’ rather than a luxury item. Nice post Sandy!!

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Sandy L March 13, 2011 at 7:17 AM

Deidre – good point about our litigious society. Unfortunately, that is a big reason for having the insurance as well.

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Auto Insurance March 11, 2011 at 8:03 AM

Very good to know!! Thanks for explaining this. I don’t have any kids now but my sympathies go out to those with teens. I can’t imagine how stressful that must be. It’s nice people don’t sue as much in England as the US

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Sandy @ Journey To Our Home March 11, 2011 at 10:40 PM

We do have an umbrella policy. We decided we needed one when my husband was hit by an ambulance that ran a red light. It did NOT have its lights on, it did NOT have its sirens on. It was carrying a patient, and they claimed it was my husbands fault- though they ran a RED light without anything on. My husband’s truck was rolled and he was VERY lucky he did not get hurt.

It was a terrible experience for us. Luckily, his company (since he was in the company truck) took the brunt of everything- though they did bring a lawsuit against us. Thankfully, it was dropped and we didn’t have to pay for their mistake. But it was scary.

We immediately got an umbrella insurance policy. You just never know when you will get into a car accident and need it. I’m thankful we have it, especially with the land we own. Some dumb hunter might ignore the posted ‘do not trespass’ and ‘no hunting ‘ signs and get hurt and sue us.

If you can afford it, I definitely think it is a good investment. Better safe, than sorry!

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Sandy L March 13, 2011 at 7:21 AM

Sandy – or even worse, that Hunter might shoot someone on your property by accident. What a horrible thing to have to go through. I’m glad it ended up ok. My friend was also hit by an ambulance that was driving extremely recklessly and it’s then I learned that no matter what the circumstances if it’s you vs an ambulance, the ambulance always wins. She broke her jaw and had her face wired shut and everything.

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Adam@UmbrellaInsurance.net May 8, 2011 at 12:31 PM

I think you’ve made a good choice in buying an umbrella insurance policy. Considering how inexpensive this added layer of protection is, it’s interesting that more people don’t consider this type of coverage. If you have considerable assets its really a must have.

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