What is Umbrella Coverage?

We often get asked what Umbrella Coverage is.

First thing that usually comes to people’s minds is an insurance policy that covers an umbrella.

While it is a good way to explain what it does, that is not actually what it does. An umbrella policy is intended to cover a wide range of policies and exposures you may have.

It provides coverage over the limits of other insurance. Insurance policies provide a specific amount of coverage. For example, the liability portion of your homeowners policy provides coverage for personal liability exposures. If you have auto, home, boat, rental property policies, etc; umbrella policies provide coverage over all of these policies.

Umbrellas pick up where your other policy leaves off. So if you have $300,000 in underlying limits on your homeowners policy and an exposure arises that goes above that, your umbrella policy will pick up from there. Damages that exceed the underlying liability limits is what the Umbrella policy is designed for. Companies will require that you maintain a certain amount of limits on your policies.

You are probably wondering why you should buy umbrella insurance? That goes back to why we all buy insurance in the first place. We buy it to protect our assets.Our insurance policies are there to help protect us (pay money) that we become legally liable to pay. If you didn’t have insurance, you would have to ask yourself, where does that money come from? Most families do not set aside money to pay for these types of instances, hence, insurance.

Contrary to popular belief, you do not need to have to be rich and famous or a big business owner for an umbrella policy. Anyone who has any type of asset that they want to protect should have one. Here’s an example of why you should take an umbrella into account. Say you have a teen driver. They just got their license and are ready to hit the road. Then the unthinkable happens, they get into an accident that causes damage to multiple vehicles, people get hurt or killed. Something like this could exhaust your primary auto policy. Once that is exceeded, the rest just don’t disappear, they have to come from somewhere and as we already established most families do not have money laying around for such things. Yes, I know that situation seems unlikely, but that is exactly what the umbrella is for, it is there to protect you from the unlikely.

Here are a five reasons why you should have one:

1. It’s Not That Expensive.
The amount of protection you are receiving the cost of the policy is minimal. On averag a $1,000,000 policy is around $150-$300 a year!

2. We Live In A Sue Happy World
How often, after something happens, do you hear “I’m gonna sue them for $1,000,000!” Fairly often. Does someone usually get that much, no, but according to statistics 19% of cases are awarded that. However, half of personal injury cases are awarded $100,000 or more.

3. Need To Protect Your Future
Because of the above reason, that is even more why you need to protect your future. Court judgements can follow you for years! They can take not only current assets but also any you may gain in the future.

4. Your Primary Policy Is Just Not Enough
Again, because of reason #2, your primary policy is just not enough. Your underlying auto, home, or boat just does not have enough coverage if someone decides to sue you. Most umbrella claims come from dog bites and boating accidents.

5. Protect Your Assets
Again, you do not have to be rich and famous to have a need for umbrella coverage. If you have a family, savings or any type of property an umbrella will help protect what you are working hard to build.