The Value of a Personal Liability Umbrella Policy

umbrella liability policyProtection for life’s uncertain moments

One of the most certain things in life is, certainly, uncertainty. Your dog could bite the neighbor’s kid. Your teen driver could hit a cyclist. A guest could fall down your stairs. A rainy morning commute on worn-out tires could result in a multi-car accident. And you could be held liable to others for the cost of damages – injuries, property destruction, emotional distress, lost wages and more.

Good thing you have insurance. But, wait, your policy covers $300,000 of liability, and, in a lawsuit, you’re judged liable for $1 million. That leaves $700,000 left to pay. How will you cover it?

If you have umbrella insurance and your policy covers the incident, the additional $700,000 will come from your policy. If not, it will come from the assets you have now, such as your home and savings, and from future assets, such as your wages or inheritance.

The fact is, it only takes one serious accident and a resulting lawsuit to put everything you own – and will own – at risk. And it only takes one umbrella policy to help protect it all.

How an Umbrella Policy Works

An umbrella policy can provide an additional layer of liability protection that can be used with your current policy or a policy from another insurance company, including policies that cover watercraft, motorcycles and recreational vehicles. It kicks in when the underlying or primary policy doesn’t provide sufficient liability protection. A $1 million umbrella policy, in many cases, is less than $200 a year. It also provides all family members of the household with worldwide liability protection.

Here are a few things you should know about a Personal liability umbrella policy:

  • Personal umbrella policies typically offer $1, $2, $3, $4 or $5 million of liability coverage. Consider your net worth when choosing your coverage – you could be sued for everything you have.
  • An umbrella policy is not a stand-alone policy. Your insurance carrier will typically require you to meet certain qualifications, such as having an auto policy with a certain level of liability coverage, in order to purchase umbrella insurance.
  • Even when you have umbrella insurance, your car or home insurance is your first line of defense. For example, if you are liable for $2 million in a car accident and your auto insurance covers $500,000 of liability, your auto policy covers the first $500,000. Your umbrella policy covers the remaining $1.5 million, assuming your policy covers the incident and that you purchased that much coverage. If you are liable for $250,000 in an accident on your property and your homeowners insurance covers $300,000, your umbrella policy won’t be needed.
  • A single umbrella policy typically covers all of your family members who are residents of your household and while traveling anywhere in the world. For example, your auto policy may not cover you while driving in a foreign country, but your umbrella policy will.
  • Legal defense fees, which could add up to thousands of dollars, are also covered, win or lose, for all claims covered by your personal umbrella policy and not covered by your underlying insurance policy.

So again, an umbrella policy gives you excess liability coverage on top of what your other policies provide. If you’re at fault for a serious accident, you’ll need it.

If you’re curious about how umbrella insurance might play a role in protecting the life you’ve built or plan to build, the brokers at Insurance Brokers Group would be happy to help answer any of your questions and guide you to the coverage that’s right for you. You can contact them at: 800-459-6060.

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