FINANCIAL FOCUS: Be prepared for rainy days with your umbrella

By Robert L. Nistendirk | Jul 29, 2009

CHARLESTON -- What if you were sued for a mishap on your property that resulted in someone being severely injured or killed? What if you were found to be liable for a major traffic accident involving multiple injuries that clearly exceeded your car insurance limits?

In personal financial planning, a personal liability umbrella insurance policy is a safety net that protects your assets and future income against life's unexpected incidents.

A personal umbrella policy is liability insurance with very high limits of protection, typically sold in increments of one million dollars. It is excess insurance beyond the limits of primary homeowners, auto and watercraft personal insurance policies.

Like its name implies, umbrella insurance is designed to add a layer of protection above the other types of personal liability coverage.

Umbrella insurance can also provide coverage for claims that may be excluded by the primary policies including, but not limited to false arrest, libel, slander and invasion of privacy.

Today, lawsuits are everywhere, and juries are awarding larger amounts of money than ever. People are looking at lawsuits as a lottery, and everyone is a target. West Virginia's courts regularly rank among the most litigious in the land. If you regularly read this publication, then you are fully aware of that.

Once a lawsuit is filed, there are two factors working against the defendant.

First, lawsuits are expensive to defend and some people are forced to settle when they have done little or nothing wrong.

Second, juries tend to be emotional and decisions are not always based on the legal instructions given to them by the judge.

Damages are sometimes awarded by juries in amounts that have no bearing to the facts of the case.

Is it worth it to pay $250 to $500 a year for an umbrella policy? Most people could benefit from having more liability coverage. For instance, if you have a swimming pool, a trampoline or an accident-prone driver, you should consider having an umbrella policy. A personal liability umbrella policy can add much greater protection without a large added cost.

It is advisable to purchase an umbrella policy with the same company that has your homeowners and auto insurance, which should make the premiums more affordable as well as making the management of multiple insurance policies much simpler and more effective.

Certain minimum insurance coverage must be in place to be eligible for an umbrella policy. Personally, I find qualifying for umbrella insurance to be the most important exercise in the entire process.

Insurance companies are like Las Vegas oddsmakers in that they have identified all the risks. That's why umbrellas themselves are not expensive. The major risks have been covered by the underlying primary policies.

Remember this: No person should have less insurance than what is required to obtain personal liability umbrella insurance. After that, the additional cost of an umbrella policy is insignificant compared to the added protection.

In Passing: Charleston, West Virginia and Planet Earth lost one of its finest with the July 19 passing of attorney John Rollins. We hope John's family will find comfort in knowing they are in the hearts and prayers of so many who loved John so dearly.

Robert Nistendirk is a partner at Woomer, Nistendirk & Associates PLLC, a CPA firm located in Charleston. Bob has extensive experience in tax accounting, strategic planning and financial/business consulting. He can be contacted at

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