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Umbrella

Umbrella or “excess liability” insurance is extra liability insurance that is purchased in addition to automobile or property insurance policies.  As the name implies, it “sits on top of” your other insurance policies like an umbrella, to provide added financial protection in the event that other policies cannot cover the loss.

Here’s an example of how an umbrella policy would work:  Let’s say that you rear-end a luxury vehicle and the damages to the vehicle and injuries to any passengers total far more than your automobile insurance coverage allows.  If you don’t have an umbrella policy in place, you would be personally responsible for that difference.  If you do have umbrella insurance, then the policy would activate and you would likely pay nothing out of pocket.

Below are common myths about umbrella insurance:

1. MYTH:  It’s just for the wealthy.
   FACT:  Anyone can be sued for any reason at any time and umbrella insurance provides added protection against losses.  How much you own is irrelevant when deciding whether and how much to purchase.  Do you live in wealthy town where you could be an easy target for a big settlement?  Do you travel frequently?  Do you entertain often?  If you answered yes to any of these questions, it is particularly important to have  umbrella liability insurance.
2. MYTH:  It’s too complicated to coordinate with existing insurance like automobile and homeowners policies.
   FACT:  It is very easy to meet the minimum underlying liability requirements.  Typical umbrella policies require you to have homeowners and auto liability insurance equal to the amount of your umbrella deductible, which is usually $300,000.  It’s a good idea to purchase umbrella, homeowners, and automobile policies from the same company as there is usually a substantial premium discount.  Additionally, you eliminate potential gaps in coverage by having all policies in one place.
3. The premium is too expensive.
   FACT:  With America’s preoccupation with lawsuits, you can’t afford to not have umbrella liability insurance.  Umbrella policies pay $1 million, $2 million and even $5 million or more on top of what an underlying auto or property policy will pay.  For the protection provided, umbrella liability coverage is not very expensive.  Premiums are usually $200 to $300 annually for $1 million worth of coverage.
   
   To decide if you need personal umbrella liability insurance, you should add the value of your assets (bank accounts, stocks, bonds, home, available retirement funds, etc.) and compare that dollar amount to the coverage offered under your home and auto insurance policies.  If the value of your assets is more than the policy liability limits, then you may need to consider a personal umbrella liability insurance policy.