Unlike most Americans and many of my clients, I rarely complain about the insurance products that surround my daily life. Frankly, when it comes to insurance as an investment, I am way ahead of the game. Seems as though Atkinson gets hit with a hail storm every other year, giving me a recovery of 10 years of premiums in one fell swoop. Had a catastrophic health insurance claim in my family nearly 5 years ago. I will never pay enough Blue Cross/Blue Shield premiums to even put a dent in the insurance proceeds our family has benefited from. What a blessing it has been, truly.

We all get it. You need to insure your house and your health. Sure cars, life and other things too. As you go through the motions of buying and shopping insurance, we are all asking the wrong question: How much will this cost? This question comes up especially in the car insurance world. Time to set that question aside.

The No. 1 question that you should be asking your insurance agent is this : does that umbrella insurance policy provide excess uninsured / underinsured motorist coverage?

That question won’t exactly roll right off the tongue.  You may need to print this out and take it to your next insurance meeting. Here’s the a quick hypothetical, to understand the question, and its importance.

HYPO: Joe Husker is driving down the road. He just bought new car insurance for his new car. He bought the cheapest insurance he could find. He has $50,000 of liability coverage and $50,000 of uninsured/underinsured motorist coverage. Sally Texter carries even cheaper insurance, because she has had several tickets and other auto scrapes, because she likes to drive and tweet. Sally has $25,000 of liability coverage. Texting her way along, Sally hits Joe Husker.  Joe breaks his leg and punctures his lung.  He is out of work for 8 weeks. Joe has over $250,000 in medical bills, including the just-in-case life flight which only cost $50,000.

Joe hires a lawyer. The lawyer shares the bad news: your recovery is very limited.  You can collect $25,000 from Sally because she had only $25,000 of coverage.  And, you can collect another $50,000 from your own auto insurance on the underinsured portion of the policy.  But wait–health insurance didn’t cover the whole flight, and the health insurance company which paid $250,000 in medical bills is subrogated to your other recoveries–the health insurance company may get all of the insurance proceeds on the table (subrogation: insurance company’s right to stand in the shoes of the insured to be reimbursed for money they paid out).  Joe Husker might get ZERO. Or even worse, might owe money. There are other factors, but you get the point.

What should Joe Husker have done? Simple.  Not be such a tight wad for starters. Joe should have maxed out his auto liability insurance portions to $250,000/$500,000 which would have given him $250,000 of underinsured coverage.  That is a good step one.  Then, he should have had an umbrella policy which provided at least $1,000,000 of excess coverage above his uninsured / underinsured motorist coverage.  Joe Husker would have then had at least $1,250,000 of coverage to protect himself against injury, even though Sally Texter only had $25,000 of coverage.

When we think of an umbrella, we think of protection in case we cause an accident.  Most farmers, ranchers and small business owners want an umbrella for the liability protection.  If one of their employees hurts someone, they want the excess coverage.  Kudos.  However, you haven’t asked the No. 1 question if you stop there–does that umbrella insurance policy serve as excess above the uninsured / underinsured coverages on my auto insurance? The answer may surprise you.  Fewer and fewer insurance companies are carrying this critically important coverage.  Some do. Some don’t.  Find one that does.

I have seen the lack of this coverage end in a catastrophic result for many families. Time and time again it happens.

By becoming an educated, proactive insurance consumer, you can save your family from financial devastation in the event of a serious auto accident.  You should insist on  maximum protection if you’re in an accident with an at-fault driver that either doesn’t have insurance, or doesn’t have enough insurance.  In too many cases, neither have enough insurance.  You can control the one, but not the other.  It’s up to you.

When working with and serving families, we spend a lot of time educating clients about their insurance needs. Take the time to educate yourself and ask the No. 1 question.