Dear Insurance Adviser,
I had an accident a year ago and didn’t have umbrella insurance at that time, and nobody sued me. A year later, I decided to buy an umbrella policy and paid the premium. Now, this month, I received an email informing me that the lady who was involved in the accident last year is suing me for the damage. Will the umbrella policy that I bought this year cover the lawsuit?
Personal car insurance and umbrella policies cover car accidents that occur during the policy period — not when the claim is made. In this case, the accident happened during a time frame prior to your purchasing the umbrella policy. So no, it would not cover this accident.
On the other hand, your car insurance was in force at the time of the accident and will cover this lawsuit. It will defend you and pay any judgment against you up to your policy limit. Once the policy limit has been paid to a person you injured, all further defense and settlement costs will be at your expense.
If the lawsuit amount exceeds the amount of bodily injury liability coverage that you were carrying, you will receive a registered letter warning that the amount of the lawsuit exceeds your coverage amount and that you may want to hire your own attorney.
One of the best things about a personal umbrella policy is that when you are sued for more than your policy limits on your underlying insurance (auto, home, boat, etc.), your umbrella policy will step in and defend you, even if the suit is settled within your primary automobile liability coverage limits.
Here’s hoping the car insurance liability limit you had at the time of the accident is greater than the amount you are being sued for.
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