Umbrella Insurance: What It Is and Why You Need It
You're driving home from work one day, and you accidentally rear-end the car in front of you. The driver of the other vehicle is injured and sues you for damages. Your auto insurance policy covers up to $250,000 in liability coverage, but the lawsuit is for $500,000. What happens now?
This is where umbrella insurance comes in. Umbrella insurance provides an extra layer of liability coverage beyond what your other insurance policies, such as auto and homeowners insurance, provide. It can help protect your assets, such as your home, savings, and investments, from lawsuits and other covered claims.
How umbrella insurance works
Umbrella insurance policies typically provide $1 million to $5 million or more in additional coverage. You can choose the amount of coverage that meets your needs and budget.
Umbrella insurance kicks in once your other insurance policies have reached their limits. For example, if you have $250,000 in liability coverage on your auto insurance policy and are sued for $500,000, your umbrella insurance would cover the remaining $250,000.
What does umbrella insurance cover?
Umbrella insurance covers a wide range of liability claims, including:
Bodily injury to others
Property damage to others
Personal and advertising injury, such as libel and slander
Wrongful death
Employment-related claims, such as wrongful termination and sexual harassment
Umbrella insurance can also cover legal fees and other costs of defending yourself against a lawsuit.
Who needs umbrella insurance?
Umbrella insurance is a good idea for anyone with assets to protect. This includes people who:
Own a home or other valuable assets
Have a high net worth
Have children or other family members who live with them
Own a business
Have a dog or other pet that could bite someone
Are involved in activities that pose a high risk of liability, such as coaching sports or volunteering with children
How much does umbrella insurance cost?
The cost of umbrella insurance varies depending on your age, location, assets, and other factors. However, it's generally very affordable, especially considering the potential financial protection it provides.
For example, a $1 million umbrella insurance policy typically costs around $200 annually.
How to get umbrella insurance
You can purchase umbrella insurance through most insurance companies. You can also get it through an independent insurance agent.
When shopping for umbrella insurance, it's important to compare quotes from multiple companies to get the best price. You should also make sure that the policy you choose covers the types of claims that are most important to you.
Benefits of umbrella insurance
There are several benefits to having umbrella insurance, including:
Peace of mind: Umbrella insurance can give you peace of mind, knowing that your assets are protected in the event of a lawsuit.
Financial protection: Umbrella insurance can help you avoid financial ruin if you're sued for a large sum.
Broad coverage: Umbrella insurance covers a wide range of liability claims, including those that may not be covered by your other insurance policies.
Affordability: Umbrella insurance is generally very affordable, especially considering the potential financial protection it provides.
Example of how umbrella insurance works
Here's an example of how umbrella insurance could work in practice:
Let's say you own a home and have a dog. One day, your dog bites a neighbor who sues you for $500,000. Your homeowners insurance policy has $250,000 in liability coverage, so your umbrella insurance would cover the remaining $250,000.
Without umbrella insurance, you would be personally responsible for paying the $250,000 that your homeowners insurance policy didn't cover. This could have a devastating impact on your finances, especially if you don't have a lot of savings or assets.
Umbrella insurance is an important part of a comprehensive financial plan. It can help protect your assets from lawsuits and other covered claims. If you have assets to protect, umbrella insurance is a good investment to consider.
Here are some additional tips for choosing and using umbrella insurance:
When shopping for umbrella insurance, make sure to compare quotes from multiple companies to get the best price.
Make sure that the policy you choose covers the types of claims that are most important to you.
Review your umbrella insurance policy regularly to make sure that it still meets your needs.
If you have any questions about your umbrella insurance policy, call us and see how easily we can build a customized quote for you: 919-443-3300.
