Umbrella Insurance That Is.
It's often overlooked, and in my experience, rarely even mentioned by insurance providers. But umbrella insurance is incredibly important to protecting your financial life in the event of a major legal liability or accident.
What umbrella insurance actually does is to increase your liability coverage over and above what your auto and homowners insurance provides, and extends it to cover a broader range of calamities. For instance, lets say you are driving one day, spill hot coffee in your lap, and briefly lose control of your car. In doing so, you unintentionally cause a serious accident in which another driver is injured. Are you covered by your auto liability insurance? Maybe, but remember that you have liability limits - like 250/500/250. Those limits mean the insurance will only pay up to 250,000 per person, and 500,000 per incident. But suppose in your accident you seriously injured a successful surgeon, and he sues you for two years wages at $750,000 per year. His lawyer is unlikely to stop because your liability insurance is capped. He will want your home, your savings, whatever he can get.
Or lets say its not even you. You go away for the weekend and leave the home in the trusted care of your teenage son and daughter. No parties - honest. They decide to "just invite a few friends over". Alcohol is consumed, and one of the friends has a serious accident on the way home. The lawyer comes after you for negligence.
We could make up all kinds of "what ifs" - none of which are likely to happen. But they might. And a cardinal rule of insurance says "Don't risk a lot to save a little". Umbrella insurance is usually very inexpensive, just a few hundred dollars a year for $1-2 million in additional liability protection.
Who needs umbrella insurance? You may need umbrella insurance if any of the following apply to you:
- You own assets in excess of the liability coverage on either your home or car insurance policies
- You have teenagers or young adults living with you (teens are prone to making bad decisions for which you may be liable)
- You often have guests or workers in your house or on your property
- You have a dog, swimming pool, or other identifiable risk exposures
- You just want the peace of mind from knowing that you are protected from the worst case liability scenario
To purchase an umbrella policy, the company will usually require you have both home and auto insurance with them, and that those policies meet a certain minimum liability threshold.
Give us a call if you would like to know more about whether umbrella insurance should be part of YOUR financial plan. We will be happy as always to share our knowledge with you.