Umbrella Insurance: Added Protection for Your Auto or Home
You’ve worked hard to build a home, provide for your family, and set some money aside for retirement. But, in an instant, everything you have accumulated could be in jeopardy. Accidents happen. And, if a major accident or an unfortunate event occurs, your automobile or homeowners’ policy may not be enough to protect your assets.
Providing extra layers of financial protection can be accomplished in many different ways. Families can establish trusts and financial accounts reassigned. However, there is no more cost-effective or simpler way to protect your assets from large lawsuits than by purchasing umbrella insurance.
What Does Umbrella Insurance Cover?
When the limits of your automobile or homeowners’ policy have been exhausted due to a claim or lawsuit, the umbrella policy is there to protect you and your assets. Just like your automobile and homeowners’ policy, umbrella policies cover bodily injury, personal injury, and property damage including:
- Injuries to others.
- Damage to another person’s property.
- Loss of income suffered by someone else.
- Lawsuits alleging libel, slander, or defamation of character.
Your legal costs are also covered under an umbrella policy if your automobile or homeowners policy limits have been used up. Keep in mind. However, there are specific costs an umbrella policy won’t pay for such as:
- Your own
- Damage to your property.
- Injury or damage caused intentionally.
- Injury or damage caused by your business.
- Injury or damage resulting from a criminal act.
- Specifically named activities (such as boating, snowmobiling, etc.)
Umbrella insurance is there for the unthinkable. Accidents happen, and sometimes the result may be catastrophic to someone else or their family. An umbrella policy helps ensure such situations do not result in a personal financial catastrophe of your own.
How Does an Umbrella Policy Work?
Often it isn’t a single injury or damaged piece of property which would require your umbrella policy to jump into action, but rather a combination of losses claimed against you. Insurance agents see first-hand how expenses quickly add up.
For example, let’s say you were the at-fault party in an automobile accident. The driver of the other vehicle was an engineer on his way home from the office. His sedan was totaled requiring your automobile policy to pay out $50,000 to replace it. Further, the engineer suffered injuries resulting in medical bills equaling $200,000.
Luckily, your automobile policy had a $300,000 limit, more than enough to cover the $250,000 to replace the engineer’s vehicle and cover his medical costs. But, he then sues you for the $300,000 in income he will lose for not being able to work for the next eight months.
This is where an umbrella policy can save your assets. While the remaining $50,000 of automobile liability coverage will go towards the engineer’s lost income, the umbrella policy will contribute the remaining $250,000 needed to make him whole again. All without relinquishing any of your hard earn assets.
Who Buys Umbrella Insurance?
Nearly anyone could benefit from owning an umbrella policy. After all, it could take just a single large lawsuit to wipe out your family’s assets. Furthermore, if you do not have the assets to pay for a settlement today, you could be on the hook for payments lasting years.
It is also worth noting that owning certain assets may increase your risk of injuring someone else or causing significant property damage. You should absolutely consider umbrella insurance if you own:
- A pool.
- A Trampoline.
- Rental property.
- An aggressive breed of dog.
- Recreational vehicles (ATVs, boats, motorbikes, etc.)
The items listed above present unique exposures and have historically represented higher than average claims payments. However, what you own isn’t the only consideration to be made when considering umbrella insurance.
The activities you participate in also present an increased risk of facing a large lawsuit. Being active in your community means the chance exists you could damage someone else’s property, or participate in a decision which results in injury. Think about purchasing umbrella insurance if you:
- Coach children’s sports.
- Serve on nonprofit boards.
- Participate in sports (where injury could occur to others.)
From owning fun recreational vehicles to volunteering for the local PTA, umbrella insurance is there to protect you and your family from the most devastating of circumstances. Working with an experienced insurance agent will help uncover exposures you may not have thought of before.
How Much Umbrella Insurance Should You Buy?
There isn’t an exact formula to determine the right amount of umbrella insurance you should purchase. Worst-case lawsuits can cost hundreds of thousands of dollars, even millions in some cases. Fortunately, most umbrella policies start at a $1 million in coverage.
A starting point to determine whether a $1 million umbrella insurance policy is sufficient is to add up all of your assets. Your home, automobiles, savings accounts, and other assets make up the amount you have at-risk. It is recommended to carry a limit at least equal to the sum of your assets.
A consideration often overlooked when selecting a limit of umbrella coverage is your future earnings potential. Court verdicts may impose ongoing settlement payments. Such settlements are more likely for young professionals such as physicians, engineers, and attorneys. Look to purchase higher umbrella limits if your earnings are expected to increase in the future.
How Much Does Umbrella Insurance Cost?
The cost associated with owning an umbrella policy is well worth the peace of mind provided. Premiums for $1 million umbrella policy range between $150 and $250 a year. Higher limits are available too. The cost per $1 million of insurance drops for each additional $1 million limit you add, making higher limits affordable to those who desire the added protection.
Protecting you, your family, and your assets from the unfathomable is much easier than you may think. To learn more about umbrella insurance, contact the experts at Demont Insurance Agency at (850) 942-7760. Our licensed insurance experts will be happy to answer any questions you have.