Umbrella Policies – Why you might need it
Updated: Apr 25
Umbrella insurance policies, which offer additional liability insurance for claims exceeding your existing automobile or homeowner’s insurance policies, are most commonly bought by wealthy individuals with substantial assets to protect.
But not-so-wealthy people also can benefit from the extra coverage if they own a home or condominium with a pool or trampoline, if they own a dog or if they have teenage drivers. If you own a home or condominium, it’s definitely worth the time to look into getting one of these policies.
Because a personal umbrella policy goes into effect after the underlying coverage is exhausted, certain limits usually must be met in order to purchase the extra coverage. Most companies want policyholders to have at least $250,000 in liability insurance on an auto policy and $300,000 in liability insurance on a homeowners’ policy before authorizing an umbrella liability policy for $1 million in additional coverage.
You should your personal assets to decide how much insurance you need and whether an umbrella insurance policy could suit you.
Umbrella insurance is sold in $1 million increments and costs on average between $150 to $300 a year for the first $1 million in additional coverage. The next million will typically cost about $75 annually and about $50 for every million after that.
In an increasingly litigious society where juries are awarding judgments in the millions, umbrella insurance policies are increasingly necessary. Due to how circumstances have evolved even a typical family getting into a two-vehicle auto accident with multiple passengers could be faced with a staggering liability.
The same holds true with children drivers. The parent could inherit a liability. In addition, damages could exceed the limits on a homeowners policy if a contractor is hurt on the property or there is a slip and fall from a guest at the home. Consumers are starting to realize that their personal assets are at risk.