What is an umbrella insurance policy and do I need one?

Umbrella policy

It’s a nightmare scenario: you’re at fault in a serious car accident or someone is badly injured in your home, and you’re sued for an amount far above the coverage of your automobile or homeowner’s insurance … and you lose. Any amount over and above your current insurance coverage will have to come out of your pocket, and with legal settlements for injuries and deaths reaching into the millions, for most people, that means liquidating all your assets to pay off the debt.

Losing everything you own in one fell swoop is a horror most people would never be able to recover from financially. Fortunately, there’s a way you can protect yourself from falling victim to this financial nightmare – buying an umbrella insurance policy.

What is an umbrella policy? 

An umbrella insurance policy is a type of personal liability insurance that covers you over and above the regular coverages of your homeowners, watercraft and auto insurance policies. An umbrella policy works like an umbrella that covers your assets in the event of a claim against any of your insurance policies. You only need to buy one umbrella policy, not one for each separate policy.

Who needs to get an umbrella policy? 

In the litigious world we live in, getting sued isn’t as rare as we’d like to believe. And you don’t have to be a mega-millionaire to find yourself on the business end of a lawsuit. That’s why, if you have assets you need to protect to keep your family’s quality of life safe, you should consider purchasing an umbrella policy.

Though anyone with any amount of assets should consider purchasing an umbrella policy, those with more assets are more at risk of being sued, and therefore should more seriously consider buying an umbrella policy.

Why are wealthy people more likely to be sued? Because litigators are more likely to see big payouts from suing the wealthy because wealthy families have more assets to take. While anyone can be sued, lawyers are less likely to go to the trouble to sue someone without significant assets because it’s not worth the time and effort.

The formula we use to help people decide if it’s time to purchase an umbrella policy is this: if the total value of your home(s), properties, businesses, cars, checking and savings accounts and investment accounts is greater than the coverage of your auto, watercraft and homeowners policies, you should purchase an umbrella policy. This formula is based on the idea that you want to have enough insurance to completely protect your assets so you can’t lose them in a lawsuit.

Are you at risk of being sued? 

Some aspects of your lifestyle can cause you to be more at risk of being sued. The more of these factors you have, the more you need an umbrella policy.

  • Having a teen driver in your household
  • Being a public figure
  • Hosting large parties
  • Having a trampoline or swimming pool
  • Owning a dangerous-breed dog
  • Owning rental properties

Umbrella insurance is affordable

The cost of an umbrella policy is surprisingly low considering the coverage it provides. Give us a call today, and we’ll go over your options with you and help you choose an umbrella policy that keeps your family safe from the unknown.