A personal umbrella insurance policy or umbrella policy is an extra layer of liability insurance over and above your current policies. It pays when you are legally obligated and financially responsible for damages that exceed your policy limits. It is one of the most underutilized, yet most important insurance policies for a properly structured personal financial plan. And here is why:
One in 12 Americans are sued each year.
Sadly, we live in a society where lawsuits are commonplace. A personal umbrella policy helps pay for legal fees, medical bills, lost wages, pain and suffering, settlement expenses, and much more as a result of a lawsuit.
For example, you get in a car accident, which is your fault. Tragically, people are injured. Not only are you liable for the damages to the property, you are also found liable for any damages to the people involved. For this example, let’s say the property damage combined with the medical, physical, and emotional damages of the other party end up being $1,000,000. And say the maximum amount of coverage on your auto insurance policy is $500,000. This leaves another $500,000 to be paid. The maximum amount of coverage varies per carrier, so check with your agent to review your policy limits.
An umbrella policy can pick up the pieces left behind in situations like this. Without an umbrella policy your savings, income, home, or business could be attacked.
Personal umbrella insurance policies are inexpensive.
Most umbrella insurance policies range from $10 to $30 a month for $1,000,000 to $2,000,000 worth of coverage. That is an extremely low price to pay for coverage that high. This low cost is well worth the assurance of financial preparedness for a liability event.
Consider this example: you have guests at your home. One of these guests injures themselves. You are found negligent and at fault. This injury requires various surgeries and physical therapy. In addition, the injury causes the guest to miss work. You are required to pay $1,000,000 for medical bills, loss of income, and emotional damages. Your homeowner’s insurance policy may only cover up to $300,000 for something like this, leaving another $700,000 to be paid.
A personal umbrella policy would fill the gap left by your homeowner’s policy.
There are countless risks that make an umbrella insurance policy useful. Compare its uses against its low cost, and you can see why we strongly recommend it.
If you would like to know what it would look like for you to have an umbrella policy, click the link below to schedule a time to discuss it with us!