Should You Shelter Under Umbrella Insurance?

For most people, competing financial demands means balancing the different types of insurance coverage they need. You want the best possible auto insurance coverage, but the cost of that could affect how much homeowner’s insurance you can afford. Or an expensive homeowner’s policy could force you to limit your liability coverage. The thing about insurance coverage is that you never know when you may need it. If you knew in advance what the future holds, there would be little need for insurance. 

What an Umbrella Policy Offers

An umbrella policy is what its name says. It is a policy that covers you if you are found liable for injury or damages beyond the coverage of your homeowner’s, renter’s or auto insurance policies. For example, if you are a tenant and are sued by your landlord and your legal costs and judgments are more than the coverage you have under your renter’s insurance policy, an umbrella policy will cover the excess costs. The coverage will, of course, be up to the limits of the umbrella policy itself. The benefits of an umbrella policy are clear, but many people wonder if increasing the coverage on their existing policies is not a better option than taking out another one. The answer to that is an umbrella policy makes sense because it gives you the liability protection you need at a low cost.

Because these policies are rarely used, the costs are low. The cost for the first million dollars of coverage is typically between $150 and $300. The second million could cost just be $75 and the third only $50. These are typical numbers and the cost could vary depending on your location, risk profile and insurance company. Keep in mind that an umbrella policy does not cover damage to your own home, automobile or other personal properties.

Who Needs It?

An umbrella policy is a good idea for anyone with assets of $1 million or more. It is also recommended for those who may be presumed to have more assets than they actually possess, especially if they are public figures. People in this category are easy targets for lawsuits and umbrella insurance can give them the additional coverage they might need at any time. Balancing insurance coverage with premiums costs is not easy. A common solution is to increase deductibles on another policy and use the reduced premium to purchase umbrella coverage. While this will cover any major liabilities, it could leave you vulnerable to paying for fender benders, small damages or loss out of your pocket. An insurance professional will be able to help you weigh the risks, costs and benefits.

An umbrella policy may be right for you, but you need to be sure before investing in it. The right way to make an informed decision is to contact your insurance agent to discuss your specific circumstances and the possible benefits of taking an umbrella policy.


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