Why should you have an umbrella policy?


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Is an Umbrella Policy worth it?


An umbrella policy also called excess liability insurance, provides additional coverage beyond the limits of your home and auto policies. If you have any particularly valuable items, such as jewelry or art, it’s a good idea to have extra coverage in the event that these items are damaged, lost or stolen. Umbrella policies can also help cover legal costs if you are ever involved in an accident that results in injury or damage to property that exceeds your auto policy limit. However, they can be fairly expensive, so they might not be worth it if you don’t have significant assets or savings at risk.


Why do you need an umbrella policy?


An umbrella policy is a secondary source of liability insurance in excess of your existing coverage. Without any type of umbrella policy, you can find yourself extremely limited if you're sued for a high-dollar amount. For example, let's say you're sued for $100,000 over a car accident and you only have $100,000 in liability coverage. If you don't have an umbrella policy and are sued, your home's mortgage will be at risk because it is considered excess coverage. With just one or two lawsuits that exceed your $100,000 limit (either by judgment or settlement), you'll quickly exhaust your homeowner's insurance coverage limits. With an umbrella policy, however, you could add another million dollars to your liability protection so that if someone hits you with multiple claims they would need to total more than two million dollars before they took down your assets. This protects both you and those who are financially dependent on you—such as family members living under one roof. Of course, there isn't any guarantee that even millions of dollars' worth of additional protection will prevent foreclosure; but we think it's better to fight than to give up without a fight!




How much does an umbrella policy cost?


An umbrella policy is similar to regular liability coverage in that it kicks in after you've met your primary coverage limits. An umbrella policy, however, covers you against liability claims beyond those involving just one incident. For example, if someone sues and they're awarded a multi-million dollar judgment, your primary insurance won't cover all of that; that's where your umbrella comes in. Since these policies can only be issued to homeowners or renters with sufficient property insurance, they generally come with higher premiums than a standard auto or home insurance policy. The premium will be on top of what you're already paying for your home or car so make sure you are getting sufficient coverage before signing up for a more comprehensive coverage plan.



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When to buy an umbrella policy?


If you’re currently carrying homeowner’s insurance, but don’t have enough coverage to cover all your assets, or if your current policy is becoming too expensive, umbrella insurance might be a good idea. An umbrella policy provides extra liability coverage over and above that provided by a standard homeowner’s policy. You should consider purchasing one if you own valuable items such as jewelry or collectibles that aren’t covered by your homeowner's insurance. A standard homeowner's policy typically limits coverage to $100,000 for personal possessions and $300,000 for liabilities resulting from bodily injury or property damage.


Things you can claim with your umbrella policy?


Your umbrella insurance policy kicks in if you make a claim against any auto, home or personal property insurance policies you may have. The amount of coverage your umbrella policy provides will be determined by its limits, which are set by state law and chosen when you apply for your policy. In most states, umbrella policies start at $1 million. If you have a $1 million umbrella policy with $300,000 worth of underlying coverage on each type of insurance, then your maximum payout would be $900,000 (the difference between what your car insurer would payout and what your umbrella insurer pays out). Each state sets its own parameters on how much protection an umbrella insurance policy can provide. That means there isn't one blanket rule about whether or not it makes sense to purchase one.


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