When It Rains, It Pours
Financial Protection from catastrophic legal events
As a financial professional, my goal is to help our clients plan, build, and protect their wealth. Protection from catastrophic financial loss should be a big focus for both our insurance and our investment clients, and one form of specific coverage accomplishes this.
One of the best ways clients can be sure that their assets are protected is by acquiring an Umbrella Policy. Simply put, an umbrella policy covers you in the event that something catastrophic happens, and you are sued or found financially liable for a loss. Like flood insurance protects property in the event of an unlikely yet catastrophic weather situation, umbrella insurance protects assets by providing a pool of cash in an unlikely but catastrophic litigation situation. Furthermore, umbrella policies may even cover your legal expenses if you are sued and not found liable. According to RLI, a leading umbrella insurance carrier, “You might need a personal umbrella policy if you own a home, own a car, want to protect your future earnings, or want to protect your assets against a lawsuit or judgment.”
In the event of an accident where there are no witnesses, where parties’ accounts of the accident differ, or where multiple factors contributed to a damage, you may be found partially liable even if the accident is not totally your fault. Louisiana law employs a doctrine known as “comparative fault” in negligence cases. This means that liability will be spread to everyone who contributed to accident, in equal proportion to their proven fault. An extreme yet possible example may occur something like this: You are driving down a road, and another car veers into your lane and a head-on collision occurs. Both cars suffer horrific damages and are thrown off the road. If the other driver is killed, and no one can determine fault, both parties may be found equally liable. IF the lost wages of that individual over their lifetime amounts to $2,000,000, you would be liable for a $1,00,000 loss!
Louisiana also recognizes term called attractive nuisance. According to Cornell University, this is “a doctrine in tort law under which a landowner may be liable for injuries to children who trespass on land if the injury results from a hazardous object or condition on the land that is likely to attract children who are unable to appreciate the risk posed by the object or condition.” For instance, if you have a pond or creek (or in some cases even a swimming pool) on your property, and a neighbor’s child enters your property and drowns, it is possible you may be sued under attractive nuisance doctrine.
While we all hope to avoid situations where anything tragic happens, we know that not all risk can be prevented. Umbrella policies are usually fairly inexpensive (sometimes as inexpensive as a few hundred dollars a year), but they can provide financial protection of $5,000,000 or more. We all know the old saying, “an ounce of prevention is worth a pound of cure.” In the case of umbrella policies, an ounce of prevention may be worth a million dollars of cure!
According to the New York Times, many people (not just the wealthy ones), find this type of coverage extremely valuable. However, very few actually carry this coverage. Why? Simply put, many people don’t even know that this coverage exists. If you haven’t talked with your agent about the value of Umbrella coverage, perhaps we should talk.