Personal Umbrella Policies: The Best Defense Against the Ambiguous and Unknown

By Lauren Dallas, Personal Lines Manager

Recent developments in an ongoing legal battle in Macomb County provide a useful, though tragic, reminder about the dangers of leaving personal assets at risk. The news also underscores just how easy and affordable it can be to protect you and your family against the worst-case scenario.

At dispute is who is liable for damages in a case in which underage drivers under the influence of alcohol got behind the wheel of an automobile they weren’t authorized to drive, with sadly fatal consequences: 

The estate for a teenage boy killed in a triple-fatal crash at Stony Creek Metropark is asking the state Supreme Court to restore its case against an insurance company to try to collect a $475,000 judgment.

The plaintiff in a separate lawsuit gained a $475,000 consent judgment from Gregory Bobchick Sr. and Dawn Bobchick related to the couple furnishing alcohol to minors at their Shelby Township home prior to the crash.

The insurance company is denying liability. The policyholders believe their homeowner’s and/or auto insurance should cover them. The case remains in dispute, and the plaintiffs aren’t giving up.

To add to the confusion about who is ultimately responsible for the damages, the story contains quotes such as “Homeowners policies don’t cover auto accidents; that’s what auto policies are for,” and “The motor vehicle exclusion applies [only] to those vehicles that are owned and driven in the household.”

With all of this ambiguity and uncertainty, it remains unclear who will ultimately pay the financial price for this tragedy, but it seems as though the parents of the victims won’t rest until someone does.

What if that someone were you?

The Danger of the "It Will Never Happen to Me” Fallacy

There are two common fallacies that often arise in resistance to exploring all available protections against risk, lawsuits, damages and financial hardship: 1.) “It will never happen to me,” and 2.) “If I don’t have insurance, I’m not collectable, so nobody will sue me.”

We all know the first objection is false confidence. Indeed, tragedies happen every day, to real people in the real world, none of whom expect to be at the center of a catastrophe. But they do occur, and when they do, they can be truly life-altering.

The second fallacy is simply misguided deflection. The case cited above is just one such example: the plaintiff has already sued the parents of the individual they suspect drove the car, but they are also suing the parents’ insurance company. If the insurance company’s defense holds up in court, there is no doubt in my mind that the plaintiffs will continue in their attempts to recover from the parents. 

How can a plaintiff collect a half-million dollars that you don’t have and that you aren’t insured for? There are plenty of options: garnishing wages, seizure of assets, a lien against the defendant’s home—to name only a few. Should a plaintiff persist in trying to recover damages, and a court agree with their claim, one seconds-long incident can become a lifelong burden, an ongoing strain on finances, and a constant reminder of a tragedy.

This is why more and more policyholders are turning to a surprisingly affordable and far-reaching protection against the unknown and ambiguous—the personal umbrella policy.

The Personal Umbrella: Maximizing Coverage, Minimizing Risk

We recommend personal umbrella policies to the majority of homeowners, but especially those with young drivers in the home, for reasons that become obvious when you read cases like the one cited above.

Not only does a personal umbrella protect you from damages that aren’t covered through your homeowner’s or auto policies—either through exclusions or policy limits—but they do so at cost-effective premiums. In most cases, a million dollars in coverage can be secured for only a few dollars per month in premium. Considering what the worst-case scenario can look like, imagine such a low price to put on invaluable peace of mind!

And a little bit of premium goes a long way toward protecting you and your family, even for things you might not expect. Example: Let’s say you’re staying at a rental property and you inadvertently flood the property. The rental company will most likely come after you for damages, which the personal umbrella would protect you against. Or, to cite another example, the mailman slips on your icy Michigan sidewalk, has hefty medical bills, and seeks further punitive legal damages, the extent of which your homeowner’s insurance won’t cover. That’s where the personal umbrella policy kicks in and protects you, your family and your assets.

Here’s the best part: When bundled with homeowner’s and auto policies, the discounts that come as a result of that bundling often result in savings that are greater than the cost of the umbrella policy in total, thereby allowing the umbrella policy to pay for itself. Think of it as three policies for the price of two!

The arrival of no-fault insurance reform in Michigan makes the case for securing a personal umbrella policy more important than ever before. Among other things, the law allows you to choose your Personal Injury Protection (PIP) medical limit on your auto policy. Depending upon who is involved in an auto accident and how they are insured (both through their auto policies and their medical insurance), coverages and limits can widely vary, and both you and the other party could be insufficiently insured. 

Whenever that potential arises—the risk of you or someone else being underinsured—we always recommend that people err on the side of protection.