What is a Personal Umbrella Policy?
The Reason for an Umbrella Policy
Umbrella policies are an important tool to help protect your financial security. Unfortunately, we live in a very litigious society as people can find just about any reason to sue someone. Having an umbrella policy provides an extra layer of protection above and beyond your regular insurance liability limits.
Umbrella Policies Provide Additional Auto Coverage
How does an umbrella policy work? Let’s say that the liability limit on your auto insurance is $100,000, which is actually the minimum for the majority of umbrella policies. If you were to get in an auto accident, once that $100,000 is exhausted, your insurance company no longer has a duty to defend you. So, if you were found liable for damages over that amount, you could be found personally responsible. By having an umbrella policy, the umbrella policy would then drop down and provide you additional protection up to the limits of the umbrella. This is normally set at $1,000,000, but we can go as high as $10,000,000 or higher depending on your circumstances.
Why You Should Carry an Umbrella Policy for Your Home
I gave an example on auto insurance, but where would an umbrella policy come into play on homeowner’s insurance? This could help if you have a swimming pool and someone leaves the gate unlocked. If someone outside of your family was to then gain access to the pool and something unfortunate happens, this would help protect you in that instance.
How Much Umbrella Coverage Do You Need?
Most financial planners would recommend that you carry enough umbrella insurance to cover your assets. If your net worth is around around $1,000,000, you should carry at least that in an umbrella policy. If your net worth is more than that, you should look into carrying more than that in an umbrella.
How Much Does an Umbrella Policy Cost?
An umbrella policy typically costs between $200-$300 per year to cover a single home and two autos. However, if you have more assets, such as boats, ATVs, secondary homes, multiple vehicles or classic vehicles, and teenage drivers, the cost of the umbrella policy can go up. We see most umbrella policies run at that $300-$500 range, but we would love to give you a quote so can learn more about why you should carry an umbrella policy.
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