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Rick Shapiro
Rick Shapiro
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Watch For Holes in Your Umbrella Insurance Policy

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Some people purchase a personal “umbrella” insurance policy for, let’s say, $1 million coverage, to ensure they are protected against any type of liability that could jeopardize their financial position if a terrible accident occurs. These broad policies are meant to provide you with peace of mind so if you, or a loved one, is careless or negligent and cause a catastrophic personal injury or death to another, you will not lose everything if a lawsuit is filed against you.

But there is something you need to keep in mind with your umbrella policy – it probably won’t give you any coverage over your auto insurance policy coverage if an uninsured drunk driver harms you or a family member.

Why?  Because most of the insurance policies offering “umbrella coverage” or “personal umbrella coverage” don’t include uninsured/underinsured motorist coverage as part of the umbrella.  That is a leaky, defective umbrella.  Let me tell you about a personal injury case that changed the way I think about umbrella insurance policies. It actually caused me to change my own policy.

I represented a retired RN, who also did some consulting after retiring from full-time work.  On a beautiful summer day in Northern Virginia, she was riding on the back her friend’s Harley Davidson motorcycle when, suddenly, a car turned into the four-lane highway from a median and forced the motorcycle off the road. Both the operator and my client were ejected.  My client’s medical expenses ran close to $400,000, and she suffered a serious abdominal injury.  Soon after, she realized that she had a $1 million personal umbrella coverage with Nationwide. However,  The key issue was whether this  umbrella policy included any  uninsured/underinsured motorist coverage.

What is uninsured/underinsured coverage?

Uninsured/underinsured motorist coverage (a.k.a. UM/UIM coverage) is the most misunderstood car insurance coverage out there.

I’ve written about UM/UIM coverage several times and you can see uninsured motorist articles here.

The motorcycle accident my client was involved in was not her fault, so the issue was whether we could access her personal umbrella coverage of $1 million for additional coverage over the insurance of the at-fault party (who only had a $100,000 insurance policy).

My Norfolk personal injury law firm obtained the entire Nationwide umbrella policy and we found that Nationwide does include uninsured/underinsured motorist coverage (at least in Virginia when this claim arose).  After some back and forth, Nationwide stepped to the plate and provided the additional $1 million in umbrella coverage. This was incredibly important for my client to fully recover from the horrific motorcycle accident. If we had been confined to just the $100,000 in coverage from the at-fault party’s insurance policy, my client would have likely been forced to use the bulk of those funds to simply pay off a portion of her medical expenses, and would not have received much of anything for pain and suffering.

Check Your Umbrella Policy

After this case, I checked with my own auto insurance company (i.e. State Farm) to see whether I would be able to access my coverage if a similar situation occurred.  I had a $2 million umbrella policy with State Farm at the time, over and above my auto insurance policy.  Turns out State Farm does not provide any uninsured/underinsured motorist coverage with the umbrella that I always thought did provide such coverage.

So, the $2 million umbrella policy would financially protect me if it was my fault, but it gave me no refuge or coverage if an uninsured drunk driver harms my covered family members.  Well, this was a revelation, and not a good one!

This is a problem you need to remedy because there are a lot of uninsured drivers out there:

  • According to the Insurance Research Council, on a nationwide basis, 13% of drivers are uninsured. That’s about 1 in 7 drivers.
  • In one Alabama study, it was estimated that 900,000 Alabama residents were uninsured.
  • Going to Florida for your vacation? Be careful! Florida, a densely populated state, estimates 25% of their drivers are uninsured.

There is a work around that I recommend to the folks reading this article. With State Farm, the only way to get the UM/UIM coverage is to increase your regular personal auto liability coverage to $1 million because your uninsured motorist coverage can be equal to, but no higher than, the limit of your regular bodily liability car insurance.  So, basically, if you raise your auto insurance to $1 million for bodily injury coverage, you can get UM/UIM coverage of the same amount. The premium varies, of course, depending on your insurance company, driving history, number of people covered, etc.  So if your child is hit by a drunk driver who has no auto insurance, you have up to $1 million of  uninsured/underinsured motorist coverage at least.

So I recommend both raising your UM/UIM limits to $1 million and keep your $1 million personal umbrella coverage separate to ensure maximum protection.

Bottom line:  take a look at your personal umbrella policy and if it doesn’t include UM/UIM motorist coverage, update your policy and get an adequate amount of this vital coverage.