Do You Need an Umbrella Insurance Policy?

An umbrella insurance policy is a type of excess liability coverage that works in addition to and in conjunction with all of your other insurance policies that contain liability protection. This includes your automobile, homeowner’s (or renter’s) insurance as well as your business insurance coverage. The primary purpose of umbrella insurance is to protect your assets. If you are found to be liable in causing bodily injury, death or property damage to another, your umbrella insurance is there to cover the financial costs arising from that liability once your primary insurance policy liability coverage has been exhausted. Here are some examples:

• You’re involved in a vehicle accident for which you are found to be at fault and are held liable. Three other cars are involved and, besides all being damaged, some of the other drivers and passengers are seriously injured. The cost of their medical bills, rehabilitation, loss of income now and in the future, plus the cost of repairing their vehicles far exceeds the liability coverage limits on your auto insurance policy. In this situation, an umbrella policy will take over once your car insurance limits have been reached and will pay up to its policy limits.
• Someone visiting your home trips and falls because of a broken stair step and breaks their neck, causing them to become paralyzed. You’re held responsible for the cost of all their medical bills plus a lifetime of being wheelchair-bound and being unable to work. This far exceeds the liability protection limits on your homeowner’s insurance policy, but an umbrella policy takes over and is able to protect your assets from being taken to pay the settlement.

Who Needs Umbrella Coverage

If you own assets that you’ve taken a lifetime to acquire and their sudden disappearance would cause you hardship, you should consider the protection of umbrella coverage. This includes:

• Cars
• Homes
• Properties
• Personal Possessions
• Stocks and bonds
• Savings and other bank accounts
• Retirement accounts
• Future earnings potential

All of these could conceivably be gone in an instant should you be unfortunate enough to suffer responsibility for a liability scenario such as those described above. Even if your total assets haven't yet become impressively large, some liability lawsuit judgements even penalize your future earning power, which would be financially devastating. A typical umbrella insurance policy with a one-million dollar limit may only cost you a few hundred dollars per year. Consider the risk/reward.