Umbrella Insurance — Beyond the Basics

Many people are under the assumption that you don’t need an umbrella policy unless you have a lot of money and assets. That is a misconception. Read further for a basic primer on umbrella insurance, so you can decide for yourself whether it’s a good choice for you.

What Is Umbrella Insurance?
In a nutshell, if you consider your liability insurance policy as coverage for the basics, you might consider your umbrella policy as coverage for what goes beyond the basics. An umbrella policy provides liability insurance coverage in excess of other policies or for losses that are not covered by other policies.

For example, suppose you cause an accident and a judgment is filed against you. When the costs exceed the coverage provided by your liability insurance, you will still be held responsible for the remaining costs. If you don’t have enough money to cover the expenses, your savings, assets, and even your future earnings could be at risk. That’s where an umbrella policy steps in. This additional coverage can really come to the rescue when your other coverage is exhausted. It can be used to cover expenses for property damage, personal injury, or even legal defense.

How Expensive Is Umbrella Insurance?
Umbrella policies are surprisingly inexpensive. A typical policy usually begins at around $1 million and in general averages only about $1 per day, anywhere from $150-350 per year. That’s a pretty good deal considering how much coverage you’re getting. According to Safer America, the annual economic cost of car accidents in the US is about $242 billion, and the average automobile liability claim for property damage is more than $3,000. It’s not difficult to imagine how extra coverage may become necessary in the event of an unforeseen incident.

Who Benefits from Umbrella Insurance?
Umbrella insurance is not required by law, and you’re required to carry liability coverage before you can expand to an additional umbrella policy. It’s a great security net, especially for people who might be at high risk for certain legal action. You’ll want to consider how likely you are to require more coverage than what your general liability coverage provides. It’s particularly important for (and most often carried by) landlords, property owners, and those who may be at higher risk for injury or lawsuits because of their jobs or hobbies. If you travel often outside the US or own property or animals that could put you at risk for legal action, you might want to look into this kind of additional insurance.