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<< Previous   of   Next >>   ADVERTISEMENT   CONTACT THE HERALD Mike Benbow, Business Editor benbow@heraldnet.com   Published: Sunday, August 3, 2008 Insurance: Why you should consider an umbrella policy Associated Press CHICAGO -- Most Americans have auto insurance, health insurance, dental insurance, homeowners or renters insurance, life insurance, maybe disability insurance. Enough insurance already, right? Why shell out for umbrella liability insurance, especially in an economic crunch when every little payment stings more than usual? It may make sense, especially if you have significant assets. Experts call this umbrella a savvy, inexpensive investment against a high-cost lawsuit that could result from anything from a car wreck to your job to to a neighbor's fall on your front steps. Umbrella liability insurance is so dubbed because it acts like an umbrella, poised above a buyer's auto and homeowners liability policies to provide extra protection. It kicks in when the liability limit is reached on the underlying coverage, paying for judgments against you as well as attorneys' fees, all up to a stated limit. Say you have $300,000 in liability insurance on your homeowners and auto policies and disaster strikes: A tree on your property falls and crushes a neighbor's home or you or your teenager rear-end a car, severely injuring or even killing someone. If you are sued and a settlement or court judgment finds you liable for $500,000 or $1 million or more, the umbrella takes care of the difference. As insurance tabs go, this one isn't steep. A typical $1 million personal umbrella liability policy might cost $150 to $200 annually, with each additional $1 million in coverage going for $50 to $75 more. "It's not necessarily for everybody, but it's not a bad investment," said Sally Greenberg, executive director of the National Consumers League. "It does provide the consumer with some peace of mind that they wouldn't have otherwise." That was the case with Pat Gillespie of Bay Village, Ohio, who got umbrella liability coverage last year after hearing years ago about fellow teachers and athletic coaches who had it. "It just gives you that feeling of comfort in case something catastrophic does come up and bounce you in the face," said Gillespie, 63, recently retired from teaching. "It's not something I think about every day -- 'Wow, I have it!' But like a lot of insurance, you do things that you know you need to do." Experts differ on who exactly needs it. Etti Baranoff, associate professor of insurance and finance at Virginia Commonwealth University, considers it a basic building block for a sound financial plan. "I think it's for everybody -- at least anybody who owns any kind of property and has any money in the bank," said Baranoff, a former state insurance regulator in Texas. The Insurance Information Institute calls it essential for almost anyone. "Umbrella policies used to be viewed as something needed only by the wealthy," said Loretta Worters, spokeswoman for the New York-based industry group. "But with changing economics and the fact we have become such a litigious society, it makes sense for all homeowners to buy some umbrella coverage." Greenberg and some other experts, though, say it's only critical for those with substantial net worth -- perhaps $500,000 or more -- or those in professions that might make them targets of lawsuits, such as physicians, lawyers, financial planners or teachers. "If you don't have much in the way of assets, there's not much reason to have it," said Gary Lanzen, a director of the Society of Financial Service Professionals and vice president of the Brooks & Stafford Co. in Cleveland. "An individual with a $200,000 home and $100,000 in investments or less probably doesn't need it." In that situation, some experts recommend instead increasing the liability level in basic homeowners and automobile policies. While the odds of a huge judgment against any particular individual are very low, the amount could be devastating. The Pennsylvania-based research firm Jury Verdict Research says the average verdict in U.S. personal injury cases from 2000-06 was $928,151 and the average award from personal negligence lawsuits exceeded $1.4 million.

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