An umbrella insurance policy provides you with added protection for your home and auto policies. It is designed to come into play if an incident exceeds your normal policy limits.
It is not an everyday situation that you would need excess limits but if an incident of this proportion would happen, it could cost your family their savings, retirement and even your home.
We know you do not want to waste your money on something you do not need but we also know you want to ensure your family, assets and future well being is property protected. This blog will answer the necessary questions for you to determine whether umbrella insurance is right or not.
Why there is a need for personal umbrella insurance
Think of umbrella insurance as an extension of your current liability insurance policies. If you are not familiar with liability insurance, it is basically protection from lawsuits and financial costs of accidents you cause. If someone is injured, their property is damaged, or they suffer any financial loss because of an accident caused by you, then liability insurance will protect you and pay for damages up to your limits.
Your auto policy has liability protection. Your homeowners policy has liability protection. If you own a boat even this has liability protection on it. However all of these policies have limits.
So you have protection, what is the big deal? Well, here is an example of what can happen:
Lets say your auto insurance liability limits max out at $100,000 per accident. What if on your way home from work you glance down at your phone for a split second and accidentally side swipe a mother carpooling children home from a school event. This woman then slides and hits another car.
Because you caused this accident you will be legally responsible for the costs of vehicle damages, medical costs for all parties involved, compensation for estimated time off work for any individuals who are too injured to work, and there is always the potential of a lawsuit which includes punitive damages that go above and beyond the other costs.
Lets say the total cost of the accident came to $350,000. Your auto insurance would only cover the first $100,000 leaving you to come up with $250,000. If you do not have that type of money, then you may be at risk of losing your assets until the $250,000 is paid.
Umbrella insurance is there to cover these above and beyond incident that would put your savings, home and other assets at risk.
How much does umbrella insurance cost
One of the biggest deterrents for umbrella insurance (and most insurance policies) is price. People think it is going to cost them an arm and a leg to add extra limits. But the costs of umbrella insurance are actually insignificant.
The average cost of umbrella insurance is less than $20 a month. Most people can get $1-2 million worth of umbrella coverage for less than $400 a year. Many insurance companies will even offer you a discount on your homeowner policy for adding an umbrella policy.
Often time people do not go above the $2 million dollar umbrella limit because they do not feel they will ever be in a lawsuit of that proportion. But for those who want the extra limits, it actually is not very expensive. Costs are usually about $50-$75 for each additional $1 million worth of coverage.
So let’s say your initial quote is $450 for $1million worth of coverage. But you want $3 million total. It may cost you $550 for the year or around $50 a month (less than taking your spouse out to dinner).
Who needs umbrella insurance
Realistically everyone should at least take a look at what umbrella insurance can do for them. If you own a home, a car, have children, have a swimming pool, drive ATVs, own a boat, or anything of that nature it is worth a shot. Even if you rent, you are still liable for things that happen in your apartment.
Umbrella insurance has a number of pros:
- It is low cost
- Adds liability coverage everywhere in your personal life (and family’s lives)
- It covers a long list of possible liability risks
- Covers many costs even if you do not go to court
There really is no reason to not consider umbrella insurance unless you live on an island by yourself or have the savings (and don’t mind paying out of pocket) for a million dollar lawsuit.
We do still however encourage you to know what you are buying and to ask questions if you do not understand. Talk to a Colonial agent about your umbrella insurance options, we’ll be happy to help!
Read more at Divinsurance.com.