Do I Need An Umbrella Liability Policy?

Do I Need An Umbrella Liability Policy?

If you have a net worth in excess of $500,000 the answer is most likely a resounding, YES! You’ve earned it, now you should protect it.

"Why do I need more coverage? I already have home and auto."

If you are found liable for bodily injury/property damage in an auto accident or someone were be injured on your property, your auto or home insurance will provide you with coverage up to the limit set in your policy. After your policy limit is exhausted you are left on the hook for the remaining damages. For example, you hit a car driven by a young couple with a couple of kids in the backseat. You would owe for lost wages, medical bills, plus pain and suffering. The lost wages could start at $1 million, medical bills could easily be over $500,000. Compensation for pain and suffering alone can exhaust some policy limits.

With an Umbrella Liability Policy you would have an additional $1 million or more of coverage. An umbrella policy kicks in when you reach the limit on the underlying liability coverage in a homeowners or auto policy. It will also cover you for things such as libel and slander.

Umbrella Insurance allows you to extend your auto, boat and homeowner’s insurance policies so that you don’t lose what you’ve worked so hard to achieve. Anyone who owns a home, car or boat is vulnerable to large lawsuits. Even if you have not accumulated a significant amount of wealth, owning a home with a swimming pool, owning a boat or having a young driver on your plan makes your need for protection even greater. Remember -- your future wages are an asset that can be included in a judgement against you.

Because the personal umbrella policy goes into effect after the underlying coverage is exhausted, there are certain limits that usually must be met in order to purchase this coverage. Most insurers require you to have $250,000 of liability insurance on your auto policy and $300,000 of liability insurance on your homeowner’s policy before providing a $1 million Umbrella Liability Policy.

Anyone concerned about losing income or assets in one large lawsuit needs an umbrella policy. An umbrella insurance policy is the absolute best buy in the insurance business. For about $200 to $300 per year you can buy a $1 million personal umbrella liability policy. Each additional million adds $50 - $100 dollars in premium.

Examples of how an umbrella policy works

  1. You have an at Fault Auto Accident
    Judgement & Legal Fees: $600,000
    Your Auto Coverage pays: $500,000
    Remaining Balance: $100,000
    Your $1,000,000 Umbrella kicks in
    Amount left for you to pay: $0
  2. Your guest jumps in pool & injures their neck
    Judgement & Legal Fees: $800,000
    Your Homeowner’s Coverage pays: $300,000
    Remaining Balance $500,000
    Your $1,000,000 Umbrella kicks in
    Amount left for you to pay: $0