You work so that you can support your family and protect your financial future. You save money toward your children’s college education, put cash in investments, and stash away funds for retirement, all with the hope that you will become even more financially secure in the future. Then in the blink of an eye, it could all disappear – all because you didn’t have enough insurance to cover your liability in a lawsuit. With umbrella insurance, you have extra insulation against expensive litigation that might otherwise threaten everything you’ve worked so hard to attain.
What is Umbrella Insurance?
Umbrella insurance is supplemental liability coverage with high limits – usually $1 million or more. It does not take the place of your homeowners or auto insurance liability coverage; rather, umbrella insurance offers ‘back-up’ protection that kicks in when you have used up all of the available liability coverage from your primary insurance policy.
In addition to extending the limits of your existing liability coverage, umbrella insurance can also provide additional protections that may not be available from your other insurance policies. Examples include coverage for:
- Liability incurred while traveling in other countries
- Liability incurred while renting a watercraft
- Liability incurred as a result of owning a rental property
- Accusations of slander, libel, or defamation of character
How Umbrella Insurance Works
To better understand how umbrella insurance coverage would apply to an actual real-world situation, consider the following example:
Your 17-year old teenage daughter is driving her best friend home from school one afternoon when their car leaves the roadway and strikes a tree on the passenger’s side. The best friend’s injuries leave her with internal injuries and fractures, requiring months of hospitalization and rehabilitation. She loses her full-ride volleyball scholarship and will be forced to repeat her senior year of high school. The victim’s family sues your family for medical bills and the lost college scholarship, all of which total more than $1 million. Your $250,000 in auto insurance bodily injury liability coverage does not come close to covering the bill – especially accounting for your legal fees and court costs. Fortunately, you have umbrella insurance, which covers the entire balance left unpaid by your auto insurance policy.
If you did not have umbrella insurance in the scenario above, things could have been much uglier. You may have been required to liquidate your own daughter’s college savings, as well as any savings and investments you have to satisfy the remaining $750,000 judgment. If that still weren’t enough, you might have to make payments from your future wages for years to come, potentially derailing your plans for retirement.
If this type of scenario seems far-fetched, it is not. Six and seven-figure personal injury settlements and judgments happen all the time. Even if you have high liability limits on your homeowners and auto insurance, it will not be enough to protect you against a major lawsuit. Don’t risk your financial future when a simple umbrella policy could protect everything you’ve worked so hard to attain.
What Umbrella Insurance Covers
Umbrella insurance does not cover your personal losses and injuries, but it does cover accidental damages to third-parties. This includes bodily injuries, funeral expenses, and property damages so long as they are not the result of acts that are intentional or criminal in nature. In addition, umbrella coverage sometimes protects you against other defense costs and damages, such as when you are accused of slandering someone or injuring someone while operating a rented boat. Talk with your independent agent if you have questions about what types of scenarios are and are not covered by umbrella insurance.
Should You Purchase Umbrella Insurance?
How do you know if umbrella insurance is right for you and your family? The answer is simple. Ask yourself how much you stand to lose in a lawsuit both now and in the future. Then consider what your risks are of actually being sued. You may find that your risk of facing financial ruin is much higher than you may have thought and that an umbrella policy is long overdue. That is why there is no better time than now to get a quote on this important coverage. Don’t wait until it is too late.
We typically recommend umbrella insurance if you:
- Have significant income or assets to protect
- Have many more working years
- Are living on your retirement nest egg
- Are currently saving for retirement, college, or another major expense
- Own secondary properties, including rental homes
- Will receive an inheritance
- Own a swimming pool, trampoline, or dog
- And more
Don’t make the mistake of assuming that umbrella insurance is only for the wealthy. Everyday people need million-dollar policies, too. Don’t risk losing everything when you can take steps to protect your lifestyle and future now.
Choosing Your Coverage
As an independent agency, we here at Jarosch Insurance are happy to help you shop around and compare umbrella coverage from multiple insurers. Most umbrella policies are similar to each other, although there are variations from insurers. Generally, coverage starts at $1 million, with additional protection available in million-dollar increments. Depending on the insurer, you may be able to purchase as much as $5 million or more in coverage. Umbrella insurance is also very affordable. A million-dollar policy usually costs just $150 to $300 per year, with each additional million costing between $50 and $75 each.
Keep in mind that insurers often require that you carry a minimum amount of primary liability protection on your other policies before you can qualify for an umbrella policy. If your homeowners, auto insurance, and boat insurance policies do not have high enough limits, you may need to raise them before you can purchase supplemental liability insurance.
As always, we here at Jarosch Insurance are happy to help. Give us a call if you need more information about umbrella insurance or would like a free quote. We look forward to serving you soon.