Imagine for a second that you are in a car accident tomorrow, and in a very unfortunate turn of events, someone in the other car is injured badly. This alone is a terrible situation to be in, but making matters worse is the liability you now face. 

In the United States, there are about 5 and a half million car accidents every year, leading to 3 million injuries, according to the National Highway Traffic Safety Administration.

Furthermore, the Department of Justice estimates that over half of all personal injury lawsuits arise from motor vehicle accidents. 

It's safe to say that your biggest exposure to liability happens when you get behind the wheel of a car. Having high limits of liability on your auto insurance policy is a great first step toward minimizing that risk, but is inadequate if you have any assets. A personal umbrella policy is the simple, inexpensive solution to this gap in your coverage.

Umbrellas begin to pay after the underlying limits of liability on your auto policy (in the case of a car accident) have been exhausted. If you have a $300,000 limit for bodily injury, and a settlement or judgement exceeds this, then the umbrella would kick in and begin to pay the difference. Umbrellas can be purchased with $1,000,000, $2,000,000 and higher limits, depending on how much protection you need. Having an umbrella that well exceeds your assets is the smart way to protect your family's financial well being in the event of a tragic accident. 

Let's pause and talk for a minute about limits of liability, because they are frequently overlooked, but are one of the absolute most important aspects of a policy to understand. Limits of liability are the maximum amounts that the insurance company has agreed to pay in the event of a claim. In South Carolina, the minimum limits of liability as allowed by law are $25,000 for personal injury (per person injured) with a $50,000 cap on all total personal injuries in one accident, and  $25,000 in property damage. Let's use an example to clarify that a little more.

You are driving to work on a rainy day, and because the road is a little slicker than normal, you accidentally rear-end a brand new Mercedes SUV. This could easily be a $75,000 vehicle. The three passengers in the car all have some type of injury, and one of them also has a concussion from the airbag. With minimum limits of liability, the maximum personal injury payments that your policy will cover is $25,000 per person, but it totally stops at $50,000, no matter how many people were injured. In this case, with three injured parties, that money will have to be divided up between all three of them. Depending on the severity of the injuries, the costs can add up at an astonishing pace, and could leave you with personal responsibility for additional costs once either of those two (or both) limits have been met.

Let's talk about the property damage. With a maximum of $25,000 in property damage, you might think you'll be alright, but as expensive as cars are now, and with the many electronic sensors and automated features that new cars have, like lane keep assist, proximity warnings, and backup cameras, they can be very costly to work on. It would not be surprising for what looks like a fender bender on the outside to reveal thousands and thousands of dollars in hidden damage. If this equals over $25,000, the rest of that bill comes to you.

The roadways are very unpredictable, and even an experienced, careful driver could make one mistake and end up causing an accident. If you have youthful drivers on your policy, this risk is even greater, which makes the addition of an umbrella to your insurance a prudent decision.

One of the worst conversations an insurance agent can have with a client happens after they've been in an accident in which another party was hurt. It goes something like this: "I'm sorry to tell you that the insurance company has met their full financial obligation to pay for this personal injury claim. The rest of this liability is your obligation alone." 

We have talked about car accidents, but what if something happens off the road?

Although motor vehicle accidents account for most personal injury claims, there are also plenty of accidents that could happen right at home. The big advantage of a personal umbrella is that it goes with you where you go. It protects you from personal liability wherever it occurs, be it on the road, at home, or elsewhere. Someone could slip and fall  on a wet tile floor. A neighbor's child could burn his or her hand on the grill, or get bit by the dog. If you have a swimming pool, there is an obvious source of risk, even with precautions like a fence or cover.

When you take your neighbors out on your boat, or while you're taking your ATVs for ride through the woods with some friends, injuries can happen, which again is why the solution of an umbrella that follows you where you go is such a necessary layer of protection.

The simple fact is, that if you have assets, then you need a personal umbrella. It is a very affordable form of protection to safeguard all that you and your family have worked to build. For more information about personal umbrellas, we have linked to this great article from Forbes.