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Umbrella Policy Coverage: Why You Need It With Auto Insurance

August 10, 2020 by Steven M. Gursten

Umbrella Policy Coverage: Why You Need It With Auto Insurance

Umbrella policy coverage protects your personal assets from being taken. If you cause a serious injury car accident, it provides extra protection, often at a very low additional price. 

As a result of the new changes to Michigan’s auto No-Fault insurance law that took effect on July 2, 2020, all drivers now face significantly increased liability risk if they cause a serious car accident. The biggest change is that an “at-fault” driver can now be sued for “excess” medical expenses.  

“Excess” medical expenses are the additional car accident-related medical bills that used to be covered under Michigan’s old unlimited PIP but now will not be covered by an injured person’s No-Fault auto insurance if they choose any amount of PIP besides unlimited. The wrongdoer, “at-fault” driver who causes the car accident is now responsible for these “excess” medical expenses – as in over the PIP cap amount of the injured accident victim.  This raises the liability risk substantially if you or a loved one causes a serious injury car accident.  

This poses a new and substantial financial threat to drivers because in addition to being potentially liable for a significant award for pain and suffering compensation, drivers could now be financially liable for millions of dollars in medical costs over the lifetime of the person or persons injured in the car crash the driver caused.

Umbrella coverage provides incredibly valuable protection against this financial threat. This type of insurance can protect drivers by providing liability coverage that covers the difference between what a driver who causes a car accident may be liable for and what the driver’s liability coverage in his or her auto insurance policy will pay for. The umbrella coverage protects the driver’s personal assets from being used to pay for his or her liability.  

What does an umbrella policy cover?

Umbrella policy coverage covers any financial liability you may have if you cause a car accident and the damages that result are over the bodily injury coverage limits of your  liability insurance.  

For example, if you pay to have an additional $1 million dollars in this type of policy, this $1 million dollars could be used to protect you and your assets from any additional damages you could be sued for that would be over the residual bodily injury limit of your auto policy’s liability coverage limit. This extra umbrella liability coverage is limited contractually to whatever  amount of umbrella coverage you pay to have. 

Umbrella coverage can be any amount, but for individual drivers it is most common to see insurance plans of $1 million and $2 million dollars. This coverage is also inexpensive.  A few hundred dollars can buy you $1 or 2 million dollars of additional liability coverage protection.  As an auto accident attorney, I tell my clients that buying a this additional insurance policy to protect you and your family is one of the last bargains when buying car insurance.  

What is covered under an umbrella insurance policy?

An umbrella insurance policy will cover your car accident-related liability for pain and suffering compensation and “excess” medical expenses that is not covered by your third-party car insurance. It provides protection up to the limit in your auto insurance policy. 

Coverage recommendations

As auto accident attorneys, we recommend that Michigan drivers purchase a this type of coverage with limits of no less than $1 million. Depending on which auto insurance company you have, the limits for this coverage may range from $1 million to $5 million or even $10 million. You can often purchase a $1 million dollar policy for under $200 dollars.

How does personal liability work with this type of policy?

Suppose you cause a car accident and you’re found liable for $700,000 in pain and suffering and for medical bills not covered by No-Fault auto insurance. If you have $250,000 in liability and a $1 million umbrella coverage, the umbrella covers the difference between what you owe and the amount of your financial responsibility that exceeds your residual bodily injury liability limit on your auto insurance plan.

Do I need an umbrella policy?

Yes. Now more than ever, drivers need umbrella policy coverage to supplement the liability coverage they have through their own car insurance. If you cause a car accident that results in medical bills and pain and suffering damages that exceeds what you paid for to protect you on your liability insurance,  this coverage will pay the difference up to the amount of umbrella coverage you paid for.

This is crucially important for Michigan drivers especially with the new auto law. The new changes that took effect in July of 2020 now means that all Michigan drivers face the very real risk of being responsible for hundreds of thousands or millions of dollars in car accident-related medical bills that previously were covered by auto No-Fault insurance.

What personal assets can be protected this type of policy?

This policy can protect a driver’s personal assets such as homes, cars, investments, retirement accounts, college accounts, checking accounts, savings accounts, and future income from being taken to pay for a driver’s liability resulting from a car accident he or she caused.

Who needs umbrella insurance?

Every driver who has collectible assets needs umbrella insurance. It will protect them from being held financially liable for personal injuries and medical bills resulting from a serious car accident they cause. Otherwise a lawsuit could expose these assets and could even force a person to declare bankruptcy. This insurance protects a driver’s personal assets and protects against the risk of bankruptcy if the medical bills, economic losses and pain and suffering they cause exceed the amount of liability coverage they have.

Is an umbrella policy worth it?

An umbrella policy is worth it. It is very inexpensive in comparison to the extra coverage and protection it provides. You can buy several million-dollars worth of umbrella coverage for a few hundred dollars.

Is an umbrella policy a waste of money?

No an umbrella policy is not a waste of money. In fact, with its relatively low cost and extremely high liability coverage limits, this policy – along with uninsured and underinsured motorist coverage – is one of the uses of a driver’s money for protecting the driver, his or her family and the family’s personal assets.

Is there a deductible?

Generally, there is not a deductible for this type of policy. If you have a deductible for your bodily injury liability car insurance (which is exceptionally rare), then you would have to pay that deductible first before your liability coverage begins to pay – but keep in mind that is completely different coverage under a completely different insurance policy. This type of policy is a completely separate coverage that you pay for and that becomes available once the underlying liability coverage has been exhausted or is shown to be inadequate to pay for the economic and non-economic damages and losses that you have caused as an at-fault driver who has caused a serious injury or wrongful death.

What is not covered by an umbrella policy?

An umbrella policy will not cover your own car accident-related medical bills, replacement services, attendant care and lost wages or your own pain and suffering or your own economic losses if you are too injured to work. It also will not pay to repair damage to your car.  

It can, however, cover injuries and economic losses if you are injured by an uninsured or underinsured driver. Talk to an experienced insurance agent to purchase umbrella coverage that can, for an additional premium, be added to cover harms and losses over and above your own uninsured and underinsured insurance coverage.  

Need help? Call the attorneys at Michigan Auto Law

If you were injured in a car accident and would like to speak to an experienced attorney, call toll free anytime 24/7 at (800) 777-0028 for a free consultation with one of our attorneys. You can also get help from an experienced attorney by emailing [email protected] or you can use the chat feature on our website.

Umbrella Policy Coverage: Why You Need It With Auto Insurance

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