You never think it will happen to you, but it was a reality for celebrity wrestler Hulk Hogan. In 2007, Hulk Hogan’s teenage son crashed his car into a tree, leaving his passenger with permanent brain damage. The Hogans did not have enough liability insurance and were forced to rely on their $250,000 auto liability limit to protect them. Unfortunately their family was severely underinsured and their estimated $30 million fortune was exposed when they were sued by the passenger’s family and had to pay an unknown “large, personal contribution”.
Even if you’re not Hulk Hogan, we all face changing circumstances that cause a need for us to reexamine our insurance policies to make sure that our coverage corresponds with our risks; for example your net worth increases, or your children become teenagers (enough said!). We recommend speaking with your insurance agent at least annually to evaluate your homeowners, auto and liability coverages.
Besides the liability coverage that is included in your homeowners and auto policies, you should strongly consider purchasing an umbrella insurance. This coverage is appropriately named, as it provides a “canopy of protection” above and beyond your existing homeowners and auto policy limits which are typically fairly modest. An umbrella policy is designed to provide protection when your underlying home and auto policy limits have been exhausted (think Hulk Hogan) or for events that may not be covered by those policies, such as slander, libel, discrimination, and perhaps sexual harassment. Some considerations for umbrella policies:
- Generally it’s a good idea to have coverage that is approximately equal to your net worth.
- It’s especially important to have/increase an umbrella policy if you have a high net-worth, rental property, teenage drivers, a swimming pool, or there are any other factors that increase your exposure to liability.
- Your current home and auto insurance carrier will likely be your umbrella provider as well, which will ensure that your liability coverage is coordinated.
- Umbrella coverage can be relatively inexpensive, with a $2 million policy costing as low as $400 annually, depending upon your situation.
HOMEOWNERS & AUTO INSURANCE
Some questions/concerns to discuss with your insurance agent:
- Do you have adequate limits? Does your policy insure based on replacement cost or actual cash value?
- Is everything covered, such as vacant land, other structures including garages, fences, patios & sheds?
- Do you have property owned by a trust (even a revocable trust)? The trust must be listed as an additional insured on your policies to ensure coverage
- Is your home subject to extreme weather events such as flooding or earthquakes?
- Have you notified your carrier that you hire of domestic help?
- Have you notified your carrier of your children living in off-campus housing?
- Are the insured values for your scheduled items (jewelry, fine arts, furs, wine collections) up to date?
- Do you have recent appraisals on file for your scheduled items?
- Has your carrier been advised of any boards where you serve as a director (even not-for-profit)?
This article is meant to be a spring-board for a discussion with your insurance agent and can’t possibly foresee every situation that is unique to you. As Hulk Hogan learned the hard way, you can’t put insurance in place once an event has occurred, so a quick review could give you the peace of mind to know that your risks have been identified and are adequately covered.