You are a careful driver and a responsible homeowner. You have insurance with ample limits that cover you and your assets against liabilities and personal losses. But is it enough? If one thing in life is certain, it is that nothing is certain. It takes just one major incident to put everything you own – and plan to own in the future – in jeopardy. Fortunately, umbrella insurance can provide a valuable safety net that picks up where your standard liability coverage leaves off.
What would happen if a neighbor’s child wandered into your backyard and fell into your swimming pool? You are sued for medical expenses and other damages totaling more than $1 million. Your homeowner’s insurance liability limits max out at $500,000, leaving you liable for another half million dollars.
If you have an umbrella policy, it will pay the remainder of your liability up to the limits of your policy, which is usually between $1 million and $5 million. Without it, you would be forced to liquidate your assets and savings accounts, and perhaps even continue to pay garnishments from your future wages or inheritance.
Who Needs Umbrella Insurance?
Contrary to popular belief, umbrella insurance is not ‘luxury’ insurance for the wealthy. Anyone with current assets or future income to protect can benefit from this important coverage. An umbrella policy can provide reparation of damages you caused, ultimately protecting years of future income and the assets you have worked so hard to acquire against liquidation, seizure, and garnishment.
Also, you do not have to lose a lawsuit to benefit from your umbrella policy. If you are sued and win your case, umbrella insurance can help cover the cost of your legal fees and defense costs. Also, claims of liability made against your policy may be paid even if no legal action is taken against you.
There are many scenarios in which personal liability may exceed the limits in your auto or homeowners policy. Examples include accidents resulting in:
- Extensive property damage
- Accidental death
Umbrella Insurance vs. Excess Liability: What’s the Difference?
Though the two terms are often used interchangeably, there is a stark difference between excess liability coverage and a true umbrella insurance policy. Excess liability is extra liability protection that simply extends the limits of your existing liability coverage. An umbrella policy also extends the limits of your liability coverage, but it also broadens your coverage to include protection for liabilities that may not be covered under your auto or homeowners policies.
For example, if you are sued for slander, your homeowner’s insurance is unlikely to cover the damages. Umbrella insurance, on the other hand, typically covers personal liabilities like slander, libel, defamation, and false arrest.
Is Umbrella Insurance Right for You?
You should consider purchasing umbrella insurance if the combination of your current assets and your future income potential exceed the value of the limits on your liability policy. To qualify for coverage, most insurers require that you have at least $300,000 or $500,000 in homeowners liability coverage, as well as $250,000/$500,000 or $300,000 combined single limit coverage on your auto insurance policy.
Even if you do not have all of your coverage lines with the same company, an independent agent here at Feivor Insurance may still be able to help you find an insurer that is willing to provide umbrella coverage so long as you have adequate limits on your home and auto liability. However, purchasing your umbrella insurance and homeowners insurance from the same carrier could net an additional savings of $25-$50 on your coverage.
Averaging less than $200 per year, a $1 million umbrella insurance policy is valuable coverage that could shield you against financial ruin. Contact our office to find out more and request your quote.
Have you ever been offered the opportunity to purchase umbrella insurance?