Do You Need an Umbrella Insurance Policy?
When you buy insurance for your car and home, you might think you’re done. You are insured if something goes wrong, right?
But you may find that in a dire event, you may need more coverage than one of these policies can provide. This is when an umbrella policy can come in handy.
And while not everyone needs it, it’s not just for the rich and famous.
Who Should Consider Umbrella Policy
Several situations that might prompt you to consider additional liability coverage:
- Having a pool, hot tub or trampoline on your property
- Owning a boat, jet ski or SUV.
- Owning a breed of dog that can be considered “dangerous”.
- Rental property ownership
- Be visible for your job or activity
“You can estimate the need for an umbrella policy based on your assets,” said Fabio Fasci, head of the property and accident group at Policygenius, an insurance comparison website . “But the truth is, you could be sued for much more than the value of your assets.” He said that a more useful metric for determining the coverage you need is your exposure.
If you tend to be liable because you own a business, it will be covered by business-specific liability insurance. But you may find personal umbrella coverage useful if you have a notable day job or if your video blog goes viral, for example.
“I always advise clients to get an umbrella if they can afford it,” said Chris Monge, owner of Affordable Insurance Solutions in Wounakee, Wisconsin.
Monge presented a scenario in which someone drove through a red light and hit a car with four people. Everyone in this car is injured. If your auto insurance liability limit for personal injury is $ 250,000 per person and $ 500,000 for an accident, you are likely to reach the limit of what your insurance company will pay these other passengers and still be dealing with medical expenses or legal action from injured passengers.
Two ways to get umbrella protection
There are two ways to get umbrella-style coverage. The first is excess liability insurance, which is more common. You buy coverage over your existing home or car in case you exceed your coverage under these policies.
Or you can get a real umbrella policy that stands alone and doesn’t require you to have home or car coverage already. You can do this if you do not have a car and renter insurance. (Imagine for a moment that you retired early, travel the world and do not keep an apartment in the US for insurance)
Offline umbrella insurance is likely to be more expensive, but this may be your best option if for some reason you cannot get your policy through your existing carrier. For example, if you had three car accidents last year, your insurance company may not be happy to expand coverage for you.
How much is it?
The cost of your umbrella insurance will depend on where you live, what you insure (or cover existing insurance), and your insurance history. Coverage starts at $ 1 million and typically increases in increments of a million. You can pay between $ 80 and $ 300 a year to cover a $ 1 million umbrella.
The best place to buy umbrella cover is home or car insurance. Make sure you don’t have to pay “self-insurance,” which is a deductible, Monge said. While this condition is more common in business policies, it can also show up in personal ones. And it is more likely that for individual policies you get outside of your existing insurance company.
If you have a unique asset, such as a jet ski or other adventure item, make sure the quotes you receive reflect the appropriate coverage amount for that particular item. An insurance agent can help you figure this out.
But do you really need it?
While there are many factors that go into determining what risk you personally want to take, one thing is for sure: if you haven’t reached the maximum level of coverage for your home or car policy, there is no point in trying to gain additional liability. coverage on top of these policies. “If your auto insurance company offers maximum liability coverage of $ 500,000 per accident, but you only pay for $ 300,000 per accident, many carriers will not allow you to buy additional coverage until you increase the standard coverage to the highest level.” – said Fashi. …
So if you are looking for wider coverage but have not yet exhausted all the possibilities of existing policy, Fachey and Monge agreed to start with it to increase coverage. If you have a good reputation with your carrier, the higher amount you pay for extra coverage on a standard policy will still be less than paying for extra umbrella coverage of $ 1 million.