I know it’s kind of mysterious. People tend to overlook it because they don’t understand it or avoid it because more insurance means shelling out more hard-earned cash. There is also a huge misconception that umbrella insurance is only for individuals with assets to protect. And it definitely IS for those people. However, not JUST those people. It’s for everyone.
So, what exactly is Umbrella Insurance?
It’s an additional policy that extends over and above any of your other policy limits. When those limits are met or where exclusions or gaps exist umbrella insurance often comes into play. Essentially, it’s protection for extreme incidents. Extreme incidents that occur all of the time.
- You throw a party for your graduating teen and her friends. You don’t serve alcohol, but one of the friends brings it. Someone drives away intoxicated and causes a serious accident. Your underlying liability coverage for your home is $500,000, but the legal and medical expenses reach over a million dollars. What happens next? Once your home liability limits are met you’re held legally responsible for the rest.
- An ice storm came in over night. You’re on your way to work and your car slides on the ice and into a child waiting for the school bus. The child is severely injured and has several costly surgeries ahead of him as a result. Your auto liability limits are $300,000. The damages are far beyond that amount. Where does that money come from?
In both of these examples umbrella coverage would save the day. And without it? You can imagine how that would go.
Now, who needs Umbrella Insurance?
If you have assets it’s important to protect them because replacing them is inconceivable. The time, energy and investment it took to build those assets are irreplaceable. You’ve saved to send your kids to college or you’ve just hit retirement and anything like those two examples can and do happen.
It’s not just for protecting what you have saved up it’s also protection for your future income. What happens when one of those examples occurs to someone without savings or assets? They may live paycheck to paycheck, but they still owe for the damages. Wage garnishment happens all of the time, too.
I know I sound a bit insurance fear-monger-ish, but let’s face it – it only takes one unforeseen incident to utterly destroy a life. Umbrella insurance is cheap in comparison to the risk involved. Most $1,000,000 polices cost $150-$350 annually.
It’s worth it. You’ll never regret having an umbrella policy in your insurance arsenal, but you very well may regret not having it.