Umbrella insurance is a low-cost way to obtain a significant amount of extra liability coverage. Your insurance policy would likely cover the cost of a lost lawsuit, but if it doesn’t, you may lose all your savings. This is where umbrella insurance comes in. For many policyholders, umbrella insurance can provide extra liability coverage at an affordable price.
Advantages of carrying umbrella insurance
- Umbrella insurance coverage gives you peace of mind.
- Umbrella insurance coverage typically applies anywhere in the world.
- Umbrella insurance can ensure your retirement nest egg remains secure.
- Umbrella insurance provides coverage for the actions of your family and pets.
- Umbrella insurance is inexpensive for the amount of insurance you are receiving.
- Umbrella insurance covers specific rental items you may not have insurance for, such as a boat.
- Umbrella insurance coverage limits are large, immediately providing you with a decent cushion.
- Umbrella insurance covers incidents that may not be covered by your main insurance, such as slander and libel.
- Umbrella insurance provides additional liability coverage and coverage for any attorney or court costs once you have exhausted the limits of your home insurance, auto insurance or other insurance policies, such as motorcycle or boat coverage.
You can typically break down umbrella insurance coverage into the following categories:
Bodily Injury Liability Coverage: This generally refers to bodily harm, sickness, disease, or death caused to the other party involved due to an accident and that you are legally responsible/liable for.
Property Damage Liability Coverage: This generally means physical damage to, destruction of or loss of use to someone else’s tangible property that you caused and are legally responsible/liable for as a result of some type of accident.
Personal Injury Coverage: This can provide coverage in the event you are sued for libel, slander, defamation of character, false arrest, etc.
Coverage for Legal/Defense Costs: This would provide for court and legal fees and other related costs. While some aspects of a standard property policy can provide liability coverage for incidents that occur away from your home, umbrella coverage may be applicable anywhere in the world for people covered under the policy.
Umbrella insurance can also extend coverage beyond just the policyholder to other members of your household or family.
Who should have umbrella insurance?
When you are sued, your assets are put at risk. A jury could potentially award a massive settlement, which could require you to give up your savings, investments, retirement, or more. Umbrella insurance can be a lifesaver in scenarios like this and help protect what you’ve built over the years.
Generally, the idea is that if the total value of all of your assets (i.e. your home, savings, car, investments) is greater than the limits of your insurance policies, you should have umbrella insurance. This thought process is intended to make sure that you have enough protection to cover your assets in the event of a lawsuit.
But even if your assets don’t exceed your standard insurance policy limits, you can still be sued for an amount greater than those limits. For this reason, looking at the total value of your assets compared to your current insurance is only one part of the equation.
Another consideration you should take into account is your level of risk. If you rent a single apartment, don’t own property, aren’t married with children, or don’t have a pet, your risk is much lower. That doesn’t mean you can’t be sued or that you won’t have use for umbrella, but you have fewer opportunities to be held liable for something.
However, if you’re a landlord with multiple properties you rent out, the chance that someone could get hurt on one of those properties is certainly greater than someone without those risk factors. Similarly, if you have a dog, or a teen driver, the risk of being sued for losses caused by those factors is higher in comparison to someone without them.
So the answer is more complex than a simple assessment or rule of thumb. It’s a combination of your assets, the limits of your current insurance policies, and your general level of risk. If you need help deciding whether or not to purchase umbrella insurance, speak to your insurance agent and/or a financial advisor to help you assess your risk.
Can I Buy Umbrella Insurance Separately?
While you may have underlying insurance policies with one company, you may not want to purchase umbrella insurance with this company. Perhaps the cost of umbrella insurance at this insurer is higher than at other insurance companies, but you want to keep your underlying policies with them. In this case, you can purchase umbrella insurance separately with a different insurance provider. You may also want to purchase umbrella insurance separately if another company covers more risks.
Before purchasing umbrella insurance separately, ensure you understand what the policy covers. You may also want to carefully consider the benefits that may come from carrying your underlying insurance policies and your umbrella insurance with the same company.
For your insurance needs, you may contact or email ONYX Insurance Brokers. We can assist you and provide you the information you need regarding your policy.
