If you’re reading this, it’s likely the title intruiged you. Maybe you’ve heard of Umbrella insurance but didn’t know what it was. Or, maybe you know what it is, but aren’t really sure you need it. Hopefully this post will help you answer those questions.
What is Umbrella Insurance?
Umbrella insurance is liabilty protection in excess to your auto and homeowners (or renters) policies.
How does it work?
Your umbrella coverage will kick in after your primary insurance policy has been exhausted. It will pay if you are found liable and owe damages, as well as if you are sued to cover legal expenses, even when you are determined not responsible. The insurance company pays the settlement amount and legal fees up to the limit you purchased.
Here’s an example.
You are responsible for a car accident that injures two people. The injured parties sue you and settle for $800,000. You also accumulate $200,000 in legal fees. You carry auto liability limits of $100,000 per person up to $300,000 per accident. And an umbrella policy of $1,000,000. The auto policy will pay out the maximum of $300,000 and the umbrella kicks in to cover the remaining $500,000 plus the $200,000 in legal fees covering the entire $1,000,000 in expenses you owed.
Do only millionaires need an umbrella policy?
This is where most people exclude themselves thinking they don’t own enough or make enough money to be sued, so don’t really need an umbrella policy. But that couldn’t be further from the truth. Your vehicles, home, investments, retirement account, checking, savings, and even future income are all taken into consideration as assets. Without enough liability protection, all of these things are exposed. Buying an umbrella policy lessens the possibility of financial ruin after an accident.
Can I afford it though?
Yes. Most companies offer a discount on your auto and home policies you already have in force when you purchase an umbrella policy. Policies are typically sold in one million, two million, or five million increments and premiums can start as low as $1 a day.
It’s impossible to be over-protected. I suggest taking just a few minutes to get a quote on an umbrella policy and see what it actually cost after you factor in your savings on your other policies. You’ll never regret taking the time to know all your insurance options to help protect you and your loved ones.