Often referred to as “rich man’s insurance,” nothing could be further from the truth. A Personal Umbrella Policy offers an additional layer of liability coverage that kicks in when the limits of the underlying policies have been reached. This umbrella or excess coverage should be seriously considered by more than just the wealthy.
Since most homeowner, auto, boat, motorcycle and RV policies have maximum limits of $300,000 or $500,000, an umbrella policy should be considered if your total assets are more than the limits of your policies. For most families, this limit can be easily reached when considering physical assets, savings accounts and even some retirement accounts.
If you are in an at-fault automobile accident, it is not difficult for the injury expenses of the other driver and passengers to amount to more than the limits of your policy; especially if you take into consideration resulting lawsuits if one or more passengers in the other vehicle die. In this worst-case scenario, an Umbrella policy may be the only thing that can save the at-fault driver from financial devastation.
How Much Umbrella Insurance Should You Purchase?
The amount of Umbrella Insurance you purchase is an important decision that can be based on three simple questions:
1. Consider your risks. If you drive a car, boat, motorcycle or RV, you are at risk. If you own a home or rental property, you are at risk. If you are a renter, you are at risk.
2. Consider the value of your assets against the liability limits of your insurance policies. If your assets exceed your liability limits for your auto, home, renters or other property insurance, you are at risk for that amount.
3. Consider the loss of future income. A liability lawsuit may result in the loss of assets and future income, so even if your assets are minimal, an Umbrella could provide the needed protection for loss of future income.
One of the best things about the Umbrella Policy is that it provides excess coverage for all of your property and vehicles. Many people own a residence, vacation home, rental properties, automobiles and many other toys that might cause that worse-case scenario. The pricing for what it provides is usually moderate. For an investment starting at about $300 a year, you will be rewarded with the peace of mind that comes with knowing you have protected yourself and your family from financial devastation that can result from an unintended accident.