July 29, 2021

Here’s why you need an umbrella policy

An umbrella policy provides coverage over and above what your regular insurance will cover.

As you drive along on the highway, glancing at all the injury-lawyer billboards you pass, have you ever considered how a lawsuit against you would turn out? Probably not well — unless you have an umbrella policy. While a lawsuit is by no means a given, accidents do happen, at home and on the road, and can result in large claims. People sue other people. If the unthinkable should occur, there is good reason to believe your homeowner or auto policy will not provide enough coverage to protect all your assets. Let’s take a closer look at why you probably need an umbrella policy.

First, what is an umbrella policy? An umbrella policy is a type of personal liability insurance. As the name suggests, umbrella coverage goes over your regular coverage, providing extra protection. You still need to start with regular homeowner and auto insurance. Umbrella coverage goes above and beyond the usual policy coverage limits. The goal is to protect your income and assets from large claims and lawsuits that could eat up precious financial resources or even wipe out your savings, potentially jeopardizing your family’s financial security.

How it works

Who needs an umbrella policy? Pretty much anyone who has a home, possessions and a source of income needs one. Your homeowner and auto policies are designed to cover a lot. But what happens when these max out? When a claim or lawsuit amount exceeds your homeowner or auto policy coverage, that’s when an umbrella takes over. It provides a critical booster shot of protection for your assets.

Neighbors sue neighbors for dog bites or falling on slippery sidewalks; in-home employees and home contractors can experience on-site injuries; and drivers file claims and sue other drivers for injuries caused in car collisions. These are but a few examples that can result in massive medical claims, lawsuits and payouts by everyday people across the country.

An umbrella policy covers all of the above claims related to your home or auto, as well as rental property and other types of vehicles such as a motorcycle or boat. It covers liability risks related to having teen drivers, babysitting other people’s children, hosting large parties, or having a trampoline. (See more examples here.) It also covers legal expenses arising from lawsuits and liability claims including slander, libel, invasion of privacy, and wrongful eviction.

Why it’s worth it

People wonder whether they should spend the money for an umbrella policy. They wonder if it’s worth it. The answer is yes. A policy covering $1 million typically costs only a little more than $200 per year. An umbrella is an inexpensive way to get a big boost of liability coverage.

Some people believe umbrella coverage is only for rich people. It turns out that is not true. Are you investing in your kids’ college funds? Saving for your retirement? Do you own a small business? If you have any assets that you want to protect, you need umbrella coverage. If you need to hold onto your money for your family’s future, it’s a good idea to have an umbrella policy. An umbrella policy provides a serious amount of protection and an even greater amount of peace of mind.

by Kris A. Mainellis