• Harry N. Stout

257- Do You Have Personal Umbrella Insurance? You May Need It More Than You Know


So you have been responsible and have the right insurance coverages in place for your household car, homeowners, boat or renter’s insurance, for example. You think you have protected your household against unexpected events. What if I told you that you have another coverage to consider?


Here is the ah-hah moment. Do you realize that those coverages have limits on what they pay for various injuries or losses? For example, your car coverage might only pay out $300,000 for bodily injuries in an accident if you are determined to be liable for the injuries. But suppose the injured party has $500,000 in adjudicated damages. Who pays for the difference?


To protect your household, you need to add an umbrella policy to your coverages. If you don’t have an umbrella policy the injured party will look to have you directly pay the uncovered damages from your assets or attaching your future wages. The umbrella policy will cover the amount above the coverage limit set in your car insurance policy for a type of loss, up to the limit you choose for your umbrella policy.


I wanted to say that the need for this coverage is real. I have a good friend who did not have an umbrella cover and had to pay out-of-pocket for a car accident involving his teenage son. It cost him a large sum after it was determined his son was at fault for the injuries the other driver suffered.


In this post, I will explain umbrella coverage and why it is important to have. Please consult your general insurance agent for all the necessary information about this form of coverage.


What is Personal Umbrella Insurance?

Umbrella insurance is extra layer of insurance that provides protection beyond the existing coverage limits (e.g., $300,000 in bodily injuries) and coverages of other policies. Umbrella insurance can provide coverage for injuries, property damage, certain lawsuits and personal liability situations. It is a layer of protection that sits above your core policies. That is why it is called an umbrella policy.


An umbrella insurance policy helps protect your assets and your future in two important ways:

  1. Umbrella insurance may provide coverage when the coverage from your homeowners, auto, rental and boat policies limits are exhausted.

  2. Umbrella insurance provides coverage for claims that may be excluded by other liability policies including claims like false arrest, libel, slander, and liability coverage on rental units you own.

An umbrella policy generally does not provide coverage for:

  • Your injuries or damage to your personal property

  • A criminal or intentional action causing damage to someone else

  • Liability you assume under a contract

How Much Does Umbrella Insurance Cost? How to Add this Coverage?

Coverage limits on umbrella policies typically start at $1 million, and in most cases, go as high as $5 million. Basic policies at the lower end of that coverage range can cost between $150 to $300 per year. You can research companies and rates on the internet before calling your agent or insurance company to put coverage in place.


You can usually add this coverage through your general insurance agent. The coverage may come from your existing insurer or through another company. The process is easy, but you will need to provide detailed information about your base coverages (i.e., auto, home, boat), your loss history and other information requested by the proposed insurer.


One important note with respect to umbrella policies is that you must continue to maintain the minimum coverage amounts required by each of your base policies. This is usually a continuing requirement to keep your umbrella in force.

Summary

In life, unplanned events such as accidents happen. If a car accident happens, people are likely to get hurt and have bills for medical costs along with claims for pain and suffering. You need to make sure to understand your base insurance coverages and related coverage limits. As part of a well thought out personal insurance plan, you will likely need umbrella coverage to fill in the gaps to protect your assets and future income. You should take the time to ask your general insurance agent or your general insurance company about adding umbrella coverage to your plan.

Ready to improve the quality of your financial life? Harry is the host of a new podcast from the FinancialVerse where he shares practical ways to relieve money stress and anxiety. Each 7 to 10-minute episode is designed to fit into your busy lifestyle. Subscribe today or just ask Alexa or Siri to play the FinancialVerse podcast.


19 views1 comment