Umbrella policies provide good value for those who need liability coverage beyond what other insurance can provide due to it’s low cost and high coverage. Typically you can only get liability from an insurer if you already have insurance through them. Here are some benefits of umbrella insurance:
- A million dollars of lability coverage can cost as little as $150 – $300 a year.
- You can typically get more lability coverage from an umbrella than is allowed on other policies.
- Umbrella policies fill in the exclusion gaps of other policies.
Who Should Get Umbrella Policies?
Primarily umbrella policies make the most sense if you have a lot to lose in a lawsuit. In other words, the more assets (money, cars, houses) you have and the higher value those assets, the more you stand to lose in a lawsuit you are “liable” for. Secondly if you are around people who are worth a lot of money, you may want to consider an umbrella policy as well. Lastly, if you have a number of policies from home and auto and they all include some exclusions, an umbrella policy will let you rest easy knowing those exclusions are covered (although umbrella may have exclusions as well, for instance it doesn’t cover flood damage and instead focuses mainly on your liability).
Examples of instances Where Umbrella Policies are Smart
Below are two examples of how umbrella policies can protect you and your assets.
1. You just move into a beautiful $700,000 home. A woman walking her dog slips and falls in your yard. She sues you for $1 million after seeing the new sports car in your driveway and your beautiful home. Your homeowners insurance will cover $300,000, but between lawyer fees and the settlement you’ll need at least another $800,000. Your $2 million limit umbrella policy kicks in and pays your costs.
2. You are a yoga instructor, you make a respectable $40,000 a year. A B-level football player is in town and wants a yoga session. He throws his back out while trying some crazy yoga pose. He sues you for $1 million as that is the amount of money he will lose for not being able to work. Your business insurance will cover a bit, but the other hundreds of thousands in lawyer fees and lawsuits will come out of pocket. Since you don’t have the money you’d be risking bankruptcy, however your $2 million limit umbrella policy kicks in and pays the costs.