What Is Umbrella Insurance And What Does It Cover?

All right, I'm going to go over what umbrella insurance is. I'm Hunter with Nelson Insurance. So let's get into it. Umbrella insurance. I get a lot of people who don't have this and are always asking what the heck it even is. This can be used for anybody that's a homeowner, owns an automobile. Really anybody that owns a business should be having this. It really is a universal coverage of use for everybody. So what is umbrella insurance? Umbrella insurance is going to give you extra liability coverage. Liability coverage is if you are being sued by a third party. So it doesn't cover anything that you have personally. So it's not going to give you extra coverage on your auto, it's not going to give extra coverage in your home, not going to give extra coverage on your trucks. If you're a trucking company, anything on those lines, it gives you extra coverage and liability, which is going to be homeowners, for example. If somebody comes over, slips and falls, paralyzed, they're going to come sue you for future earnings that they just lost out on. If they're a contractor or trucker, they're not going to be driving if they're paralyzed anymore. So liability is going to protect the insured. You who buys the umbrella policy from that person suing you. If you have an auto policy, it's going to protect you. In the case of getting into an auto accident and you kill somebody or you injure multiple people and you send them to the hospital, it's going to protect you. Along those lines, I'm going to get into a quick example of this of anybody with an automobile. So it's a truck, a semi truck, an personal auto, a pickup truck, whatever the case is. If there was an accident here where somebody ran a stop sign and they drove out in front of this car and this car T boned them. So the person who ran stop sign was, was a, was obviously at fault there and they, they passed away. But the courts were very lenient and said they were 70% at fault and the person driving was 30% at fault because they had reaction time and did not slow down in that scenario. But you know, they might just been surprised or thought that, you know, whatever the case is, somebody else ran the stop sign there. So they had $300,000 in a payout for the person who was technically not really at fault, but 30% at fault, who had the right of way of everything on those lines. So most people on their personal auto policy have 100,000, 300 or 100, 300, which means you have 100,000 liability per person accident and you have 300,000 per accident. So if you injure three people for $100,000 in an accident, if you're a semi truck driver, this is going to be a huge deal here too because you're driving an 80,000 pound missile down the road, you are a little late on stop sign. I mean those things are, or a red light or anything on those lines. I've seen claims, I've seen, I've seen a claim. My very first claim we had here at the agency was somebody driving a box truck goes down, was slow in a stop sign or wasn't paying attention. I can't remember what the case was. But they end up hitting a lot of people and it was way over a million dollar claim. And yeah, so I mean if they didn't have an umbrella, there would have probably they'd be paying a lot out of pocket here. So that is where the umbrella comes in. It's extra liability for the, for the mistakes that are going to happen. I mean everybody thinks, well I'm not going to have, I'm not going to have a big claim. But that's what insurance is for. It's not a maintenance deal. It's for worst possible scenarios. So for example, if you run a business like a grain elevator, there was a claim where we actually insured the guy. He, he was in the grain elevator. Sparks happened, blue create an explosion because you got all that. There's a lot of flammable pieces in the grain elevator with the, with the corn skin and it's all usually there. The older ones are all framed. So basically it creates a little bomb when there's a spark that happens and he flew out, was paralyzed and he won $5 million in a lawsuit against the grain elevator. So even if their revenue was even though it's a small grain elevator, 70% of fault and the person driving was 30% of fault because they had reaction time and did not slow down in that scenario. But you know, it might just been surprised or thought that multiple people and you send them to the hospital, it's going to protect you. Along those lines, I'm going to get into a quick example of this of anybody with an automobile. So it's a truck, a semi truck and a personal auto, a pickup truck. Whatever the case is. If there was, there was, you know, whatever the case is, somebody else ran the stop sign there. So they had $300,000 in a payout for the person who was technically not really at fault, but an accident. Here where somebody ran a stop sign and they drove out in front of this car, 30% at fault who was had the right of way of everything on those lines. So most people on their personal auto policy have 100,000, 300 or 3, 100 of if you get into an auto accident and you kill somebody or you injure multiple people and you send to the hospital, it's going to protect you. Along those lines, I'm going to get into a quick example of this of anybody with an automobile. So it's a truck, a semi truck, a personal auto, a pickup truck, whatever the case is. If there was, there was 300 which means you have 100,000 liability per person accident and you have 300,000 per, per accident. So if you injure three people for $100,000 in an accident, if you're a sumo truck driver, this is going to be a huge deal here too because you're driving an 80,000 pound missile down the road. You are a little late on an accident here where somebody ran a stop sign and they drove out in front of this car and this car T boned them. So the person who ran the stop sign was, was obviously at fault there and they, they passed away. But the courts were very lenient and said they were stop signing me those things are, or a red light or anything on those lines. I've seen claims, I've seen, I've seen a claim. My very first claim we had here at the agency was somebody driving a box truck goes down, was slow in a stop sign or wasn't paying attention. I can't remember what the case was but they end up hitting a lot of people and it was way over a million dollar claim. And yeah, so I mean if they didn't have an umbrella there would have probably maybe 70% of fault and the person driving was 30% of fault because they had reaction time and did not slow down in that scenario. But you know, they might just been surprised or thought that ain't a lot out of pocket here. So that is where the umbrella comes in. It's extra liability and this car T boned them. So the person who ran stop sign, you know, whatever the case is, somebody else ran the stop sign there. So they had $300,000 in a payout for the person who was technically not really at fault. But we're looking for the, for the mistakes that are going to happen. I mean everybody thinks well I'm not going to have, I'm not going to have a big claim. But that's what insurance is. For it's not a maintenance deal for war sign was, was a. Was obviously at fault there and they, they passed away. But the courts were very lenient and said they were 70% at fault and the person driving was 30% at fault because they had reaction time. Possible scenarios. For example, if you're in a business like a grain elevator, there was a claim where we actually insured the guy. He, he was in the grain elevator. Sparks happened, blew a crane explosion because you got all that. There's a lot of flammable pieces in the grain elevator with the, with the corn skin and it's all. Usually they're 30% at fault. Who had the right of way of everything on those lines. So most people on their personal auto policy have 100,300 or 100300 which means you have 100,000 liability per person accident and you have 300,000 per accident. So if you injure three people for $100,000 in an accident, the older ones are all framed. So basically it creates a little bomb when there's a spark that happens. And he flew out, was paralyzed and he won $5 million in a lawsuit against the grain elevator. So even if their revenue was even though it's a small grain elevator and their revenue is a million bucks or whatever the case is, they still needed a five million dollar umbrella and did not slow down in that scenario. But you know, it might just been surprised or thought that if you're a semi truck driver this is going to be a huge deal here too because you're driving an £80,000 missile down the road. You are a little late on stop sign. I mean those things are or a red light or anything on those lines. I've seen claims, I've seen, I've seen a claim. My very first claim we had here at the agency was somebody driving a box truck go like that. So that is what extra liability does in the sake of umbrella. That's the most common thing and it's called an umbrella because it's going to stretch over everything that you have in. You're going to have homeowners, you're going to have auto, you have your toys, all type of stuff where it's going to stretch over all that. If you are a business like a trucking company because that was down was slow on a stop sign or wasn't paying attention. I can't remember what the case was. But they end up hitting a lot of people and it was way over a million dollar claim. And that's what we do a lot with it's going to be the trucks themselves. If you have property it's going to be the premise liability in that sake. If you have workers compared to. Yeah. So I mean if they didn't have an umbrella there would have probably maybe it is going to be the employer's liability which is an extra coverage on workers. Comp is going to be your cyber. If you have cyber you're gonna have that. It could really be anything on those lines. It could add on to your pollution coverage. If you're hauling milk hazmat anything on those lines. That is what an umbrella policy is going to stretch over. It's going to add an extra million dollars adding a lot out of pocket here. So that is where the umbrella comes in. It's extra liability, extra 2 million. They're in increments of a million. So it can go all the way up to really about as high as you want there. But you typically start with a million and then you go up from there. An umbrella policy might actually cover broader coverage than the below the they call them underlying policies. Your trucking policy, your homeowner's policy, your auto policy, your cyber policy. 99% of time those going to come up first. So let's say I'm driving on the road not for the, for the mistakes that are going to happen. I mean everybody thinks well I'm not, I am at fault. I hit somebody and they pass. What can I have? I'm not going to have a big claim. But that's what insurance is for. It's not a maintenance deal. It's for worst possible scenarios. So for example, if you're in a business like a grain elevator, there was a claim where we actually insured the guy. He was in the grain elevator right here. Their spouse is going to come sue me. What's going to happen first is my 500,000. That's what I have for liability limits is going to pay up first in that claim. Well let's say a lawyer finds out and they go, they get a lawyer and they're like life is worth more than 500,000. Which pretty much every court case it is. They're gonna come sue me for $1.5 million. Sparks happen. Blue create an explosion because you got all that. There's a lot of flammable pieces in the granul better with the, with the corn skin and it's all. Usually they're. The older ones are all framed. So basically it creates a little bomb when there's a spark that happens. Now my million dollar umbrella is going to pick up that extra million that my auto policy did not pick up. But how would an umbrella policy cover broader liability coverages? Let's say you're a distributor or a manufacturing company, whatever, and he flew out, was paralyzed and he won $5 million in a loss. And you're pushing this stuff all over the world. An umbrella coverage could actually give broader liability limits if the underlying policy does not cover it. Common example of this is going to be territories. So if you, your policy is going to be covering only the US which is fairly common, but you're shipping stuff to Canada every once in a while and now you've had a claim coming out of Canada due to the grain elevator. So even if their revenue was, even though it's a small grain elevator and their revenue is a million bucks or whatever the case is, they still need a $5 million umbrella to protect that. So that is what extra liability does in the sake of umbrella. That's the most common thing and it's called an umbrella. Cause it's going to stretch over everything that you have. Well, shoot for one, your underlying policy really should be covering this. It should be noted or whatever the case is there. But if it's a new thing and you forgot to let your insurance company know and they're not going to provide coverage, your umbrella policy might actually drop down and become the primary policy. Now this does not mean if you're a trucking company doing general freight and you decide to pick up some hazmat loads, you got umbrella, it's going to drop down and pick up your hazmat load. It doesn't mean anything like that, but it could be coverage territories, you know, on those lines where this liability policy can come or this umbrella policy can come in and actually play out first. So I will have that. You are going to have what's called an sir, a self insured retention. It's kind of like a deductible, but not quite. But it means that you're going to pay out this money first before anything really does happen. So instead of them deducting it from the payout, they're going to say you got to pay this money first before we do anything. And typically that's around $25,000. Also you're going to have a higher aggregate. So if you have a general liability policy, a lot of truckers do, every contractor does, basically every business has got a general liability policy, right? A general liability policy. If you guys ever looked at that, it's going to be 1 million per occurrence or bit. Like per claim on those lines and you're gonna have an aggregate. So that means it's 1 million, 2 million. And so if I am an insurance agent like I am, somebody comes in here and slips and falls, break the neck, they're paralyzed. I got a million dollars in coverage, Boom, here's a million bucks. Next week same thing happens, Boom, somebody comes in. Alright, here's my other million. What that means I just paid a 1 million per occurrence and I have a 2 million dollar aggregate. So what is that aggregate? It means you have this amount of payout per year, basically. So if I had two people come in and slip and fall just because those are common examples, they both get paid on mailing. I have no coverage until next policy period, which be next year probably. So I am out, I have zero coverage left. Even if there's another person comes in here, slips and falls, probably doing something wrong on my part. Right. But I'm no longer going to have coverage unless I have an umbrella. That umbrella can actually come down and refill that aggregate. So if I have an umbrella policy, it's a million dollar umbrella policy. Now I've got a $3 million aggregate and I have $2 million per occurrence because I have a million per occurrence in my general liability policy and I have a million on my umbrella policy. So I can drop down and actually refill that thing a little bit. When and why do you actually need an umbrella policy? This is a tough thing. I'm not gonna, I'm not, I'm not a lawyer. I have never been in a lawsuit. I. So I'm not going to sit here and tell you guys, I'm not going to give you guys legal advice. I'm sure as heck not giving you guys insurance advice on when and why you should buy an umbrella policy. I think it is recommended for a lot of people. But here's just what I see. And so here's policy. This is a tough thing. I'm not going to, I'm not, I'm not a lawyer. I have never. Here's when you may or may not need one, a liability or been in a lawsuit. So I'm not going to sit here and tell you guys, I'm not going to give you guys legal advice. I'm sure as heck not giving you guys insurance advice on when and why you should buy an umbrella policy. I think it is recommended for a lot of people. But here's just what I see. And so umbrella policy is going to be protecting you in most scenarios. But what a lawyer will Come after you for in a lawsuit is good to know, too. The first thing they're actually going to look at here is what are your liability limits? Here's when you may or may not need one. A liability or an umbrella policy is going to be protecting you in most scenarios. But what a lawyer will come after you for in a lawsuit is good to know, too. So if, for example, let's say my net worth is $10,000, I got $10,000 in the bank, my car is paid off, and it's pretty much a scrapper. And I rent, I live in my mom's basement, I get nothing to my name besides a couple thousand bucks, and I've got an umbrella policy because my insurance agent told me I need one and I go drive. The first thing they're actually going to look at here is what are your liability limits? So if, for example, let's say my net worth is $10,000, I have $10,000 in the bank, my car is paid off, and it's pretty much a scrapper, and I rent and I get into an accident and I kill somebody. Boom. The first thing the lawyer's going to have to is my insurance. Insurance policy, because it's really easy. I got nothing to my name. They're going to find that out. They're going to find out what my net worth is, what assets I got. Well, Hunter's got nothing to his name, so I can't really assume for a whole lot, But I see he's got 1.5 million liability. Let's go sue him for 1.5 million in liability, or let's go sue him for $1.5 million, and my liability limits are going to pay out for my insurance policy. So they can actually pay out more. Is that really going to hurt me? No. But is going to put a huge claim on my insurance policy. Second thing they're going to look at is my assets, right? So they're going to see, hey, Hunter's got $10,000 to his name. There's nothing really there. So obviously they're going to sue me for my liability limits. And If I'm making $30,000 a year because I'm, you know, whatever. If I'm making $30,000 a year and I got nothing to my name, they can't really come out to my future income a whole lot. They definitely can, and they definitely are probably going to try if they feel like they should sue me for more than my liability limits. But it depends on the situation you have going on, right? So that's kind of the first situation on if you got not a whole lot to your name and what lawyer is going to come after you for. So let's say now I have a million dollar home that's paid off. I got 500,000 in my investment fund. I've got all my cars that are paid off and they're pretty nice cars. I got a couple hundred thousand there, whatever. Let's just all around, I got a 2 million dollar net worth for my assets. Okay, I'm going to get into home, I'm going to get into business here next. Well then what the heck do I need for my liability limits? I would recommend always having probably 500,000 or a million dollars at very least more than what your net worth is because they can definitely come after your future income still. So let's say I've got $2 million in liability, they're gonna come up through that first. If I, if I go kill two people in ax, let's just say that they're gonna come up to my liability limits here first. All my net worth, I got another 2 million. But my liability limits are gonna protect me from my assets all being taken. And then they can come up to my future income if they want. That's why I recommend a little bit more. Because if I'm making 200,000 a year, they could 100% say, hey Hunter, we're sue for $3 million. I want a hundred thousand a year from you for 10 years, boom. But if I've got 300 mil, if I have 3 million in liability limits, I'm gonna be saying a lot better now the same thing. Even though it's a little bit tougher to kind of you don't have or you don't have future income. And it's not exactly cut and dry like it is a homeowner's and or a personalized client or personal client. The same thing applies for businesses. If you got 10 trucks and you get $100,000 in equity in all of them. So you got a million dollars in assets, you got a building that's paid off, you got all this income coming in because I said I'm trucking markets hot and all sorts of stuff. You want your liability limits on your policy to be the same thing. But again, you want to be careful. If you're a one truck guy, you've got $10,000 in equity on it. I'd be careful on going out and getting a $5 million umbrella because somebody is going to come see for $6 million. Then you got a million dollars in liability on your trucking policy. $5 million umbrella, $6 million where I'm getting that number from. So you want to be careful that. Because not somebody's gonna come after you for $6 million pretty easily, because they go, oh yeah, $6 million liability bill, I'm go see you for that. If you just. Even if you got into an accident and one person passed away, they're gonna go sue for $6 million. You wanna be careful on that. You wanna make sure that your liability limits and your assets and future income all kind of are roughly in the same ballpark there. So I'd be careful. Again, I'm not saying it's a horrible thing to overinsure. I'm not saying I don't recommend it. But be careful on overinsuring what you got there. And I would also be very, very careful on underinsuring, because now you just left all your assets and your future income exposed to a lawyer that comes to you from the worst of what's happening. And there's a thing in insurance called nuclear verdicts. A nuclear verdict is a $10 million plus claim. And they're actually getting more and more and more common, which is why everybody's insurance rates are going up. So these lawyers are really getting their hands on how do I sue these guys for more and how do I crank that picture to have the insurance company pay out as much as possible? So that is what an umbrella is. That is what it covers. That is giving you an idea of, hey, my company, if I were to sell tomorrow, it's probably worth $5 million. I don't have an umbrella policy. My liability limits on my. On my trucking insurance policy is only a million bucks because that's all it's required for me from brokers and the fmcsa. Maybe you should get an umbrella policy. So that way, if one of your new drivers goes out there, hits a family in a van, I mean, there's. That's not. It's not an impossible thing to go hit them hard enough where everybody passes away. Now, that person, let's say there's some survivors of that family or somebody is going to come sue you, right? And if you get a million bucks, they're going to want more than that if that thing was packed with a full family. So again, this is an umbrella policy. This is what it covers. And here's roughly an idea of how much is how much coverage you should have. So if you guys have any questions on it, feel free to reach out to me. I'm Hunter with Nelson Insurance. Again, we're an insurance agency here in Sioux Falls, South Dakota. We specialize in trucking. We still do have homeowners. We still do have home and auto policies around the board here, too. So if you guys have any questions, reach out. But please, umbrella policy. This is what it covers. And here's roughly an idea of like subscribe so I can keep giving out information like this and helping educate people. Thank you. How much is how much coverage you should have? So if you guys have any questions on it, feel free to reach out to me. I'm Hunter with Nelson Insurance. Again, we're an insurance agency here in Sioux Falls, South Dakota. We specialize in trucking. We still do have homeowners. We still do have home and all that type of stuff where it's going to stretch over all that. If you are.