How do you know if you need umbrella insurance? After all, with coverage limits starting at $1 million, it might not sound like the protection that is necessary for everyone. However, far more people need a personal umbrella policy to protect themselves against potential lawsuits than you might think.
Unfortunately, most fail to purchase this important coverage, instead leaving themselves and their future finances vulnerable to major liability. Whether you are still in college or preparing to send your kids off to college, umbrella insurance could be exactly what you need to protect yourself and the ones you love against financial ruin.
How Much Could You Lose in a Lawsuit?
In today’s litigious society, it is not uncommon to see lawsuits with judgments that reach hundreds of thousands and even millions of dollars. In many cases, a primary insurance policy, such as homeowners or auto insurance, will pay the bill. If a victim is awarded a high-value judgment, however, primary insurance coverage might not be enough to pay for the damages.
In these situations, you could be held personally liable for paying any unpaid judgments out of pocket, whether by dipping into your savings accounts, liquidating your investments, or making payments from your future wages and inheritance. While you still might be able to make ends meet, any excess money you relied upon for building wealth, taking vacations or putting a child through college could be at risk. Imagine everything you dreamed about and worked so hard to achieve, gone in the blink of an eye.
How Umbrella Insurance Works
Umbrella insurance works in tandem with the liability protection in your home, auto, and sometimes your boat, RV, and ATV insurance. Those policies first pay lawsuits brought against you, and umbrella insurance helps pick up when your primary insurance falls short. In other words, your car insurance might pay the first $500,000 of bodily injury damages caused by a collision, and your umbrella insurance would pick up any remaining damages up to the limits of your policy.
For that reason, carriers typically require that the limits on your primary liability insurance be valued at:
- $300,000 or $500,000 homeowners liability
- $250,000/$500,000 auto bodily injury liability OR
- $300,000 combined single limit (CSL)
In some cases, umbrella insurance may broaden your existing coverage, becoming the primary payer towards a claim if you do not have a particular type of liability coverage through a primary policy. Examples include slander, libel, false arrest, and damages you cause while traveling abroad. This ‘extra’ liability protection is what sets a true umbrella insurance policy apart from ‘extended liability coverage,’ which merely raises the limits on the liability coverage you already have.
Is Umbrella Insurance Right for You?
If you have any assets or future income you wish to protect against a possible lawsuit, it is time to talk to an independent agent about umbrella insurance. The team here at Lillie-Couch Insurance can help answer any questions you may have about asset protection and the amount of excess liability protection that might be right for you.
We can shop around for a policy that fits your needs – all at a very affordable price that fits your budget. Often, $1 million umbrella policies are available for as little as $200 per year. Additional discounts may be available if you purchase your home and umbrella policies from the same carrier. For more information or to request your free quote, contact our office today.
Do you know anyone who has been sued after a collision or other accidental event?