What is an Umbrella Insurance policy?
Contrary to popular belief, umbrella coverage isn’t just for the wealthy. In fact, umbrella coverage makes a lot of sense for almost everyone. It’s that extra layer of coverage that protects you from unexpected situations so you can protect your “rainy day” fund, retirement savings, and everything you’ve worked so hard for.
Umbrella Insurance coverage is good for incidents impacting you over and above the policies you already have. For example, if you’re involved in an auto accident and your liability exceeds your policy limits, having umbrella coverage can help pay the difference. These types of incidents can happen at any time to anyone. Be confident you have the right protection and have your agent review
your insurance liability policy limits with you to see if you could benefit from umbrella coverage.
As a general rule, you might hear you should purchase umbrella insurance if the total value of your assets, including ordinary checking and savings accounts, retirement and college savings and investment accounts, and home equity is greater than the limits of your auto or homeowner’s liability. The idea behind this advice is that you want to have enough liability insurance to fully cover your assets so you can’t lose them in a lawsuit.
This recommendation doesn’t quite make sense, though, because jury awards can easily exceed insurance policy limits. The real question you should ask yourself is, am I at risk of being sued? Everyone is, so in a sense, umbrella insurance makes sense for everyone. It’s a small price to pay for the extra peace of mind.
Having a teenage driver in the family also puts you at increased risk, as does owning a dog or owning a home with a swimming pool. Basically, the more likely you are to be sued, the more strongly you should consider purchasing umbrella insurance. But anyone who is risk adverse will sleep better at night knowing they’re protected by an umbrella policy.