What is Umbrella Insurance and Why Do You Need It?

Table of Contents

• What Exactly is an Umbrella Policy?
• Asset Protection
• Future Earnings
• How Does It Work?
• Who Needs Umbrella Insurance?
• It's Surprisingly Affordable
• Secure Your Financial Future

You have auto insurance. You have home insurance. You might think you're fully protected. But what happens if you're found at fault in a major multi-car accident, or someone suffers a severe injury on your property, and the damages exceed your policy limits? That's where Umbrella Insurance comes in to save the day.

What Exactly is an Umbrella Policy?

Umbrella insurance is extra liability insurance. It is designed to help protect you from major claims and lawsuits, providing coverage above and beyond the limits of your standard homeowners, auto, or boat policies.

How Does It Work?

Imagine you are at fault in a serious car accident, and the medical bills for the injured party total $500,000. If your auto insurance liability limit is $250,000, your auto policy pays that amount, leaving you personally responsible for the remaining $250,000. If you have a $1 million umbrella policy, it kicks in to cover that $250,000 shortfall, protecting your personal assets.

Who Needs Umbrella Insurance?

While it's often thought of as coverage for the wealthy, anyone with assets to protect or future earning potential should consider it. You are at higher risk if you:

• Own property or a swimming pool.
• Have a teenage driver in the household.
• Own a dog (dog bites are a common liability claim).
• Regularly host parties or guests at your home.

It's Surprisingly Affordable

Because the underlying auto or home policy pays out first, the umbrella policy only activates in severe cases. As a result, $1 million in extra coverage typically costs just $150 to $300 a year - a small price for massive peace of mind.