Umbrella Insurance: What Is It and Do You Need It?
If you’re like most people, you already have multiple insurance policies. Some of the policies you have may include things like:
- Home insurance
- Auto insurance
- Medical insurance
- Life insurance
- Watercraft or RV insurance
But do you have umbrella insurance?
So, What is Umbrella Insurance?
Here’s a hint.
It’s not about umbrellas at all. In this instance, the term refers to what it does. Umbrella insurance provides additional protection when it’s raining on you, financially speaking, at a rate that outstrips your current liability insurance protection.
In other words, umbrella insurance is a specialized type of liability insurance that handles the overflow when your existing liability coverage is exhausted or used up. It does not come into play until you’ve reached the coverage limits of your existing liability insurance protection. You must have the appropriate type of liability protection for umbrella insurance to come to your financial rescue.
What it does is offer financial relief when the legal fees, settlements, or judgments against you exceed your existing coverage by extending your protection up to the limits of your umbrella insurance policy.
How Does Umbrella Insurance Work?
As a general liability insurance policy, umbrella insurance can help you pay for your legal fees as well as judgments or settlements you reach along the way. In some cases, that can be no small thing.
Legal fees alone for a hard-fought liability defense can be extensive, quickly approaching the limits of your general liability protection. Umbrella insurance only kicks in once you’ve exhausted the limit of your general liability protection, auto liability protection, or boat liability insurance (whatever the case may be) and need the additional protection this policy affords.
If you do not have umbrella insurance in addition to your existing liability insurance coverage, you will be responsible to pay these debts out of pocket. They could force you to liquidate assets, such as:
- Personal possessions
- Retirement funds
- College funds for your kids
- Closing out brokerage accounts
Umbrella insurance provides an additional financial buffer between you and the need to resort to such drastic financial actions.
Far too many people find themselves wholly unprepared when the unthinkable happens, and they are sued for an auto accident or injury that occurred on their property. By the time you account for the medical care of the victim, legal fees, settlements for things like pain and suffering, lost wages, and other legal findings, the costs can become unimaginable quickly.
The more injuries involved, the higher and faster those costs rise. It only takes a second for lives to change. If you do not have an adequate amount of umbrella insurance protection for your personal insurance needs, it could prove to be financially devastating.
Do You Need Umbrella Insurance?
The short answer is that if you earn a living, you need umbrella insurance. The long answer is that if any of the following apply to you, you certainly need umbrella insurance:
- You own a home
- You own a car
- You have a dog
- You have a teenaged driver
- You own a boat
- You own an RV
- You own a home with a swimming pool
- You have a trampoline, swing set, or treehouse on your property
- You own rental properties
- You coach children’s sports
- You operate a business in your home or maintain a home office
- You host parties and events in your home
- You participate in sports where you could injure others
- You are a public figure
- You have retirement savings
The list goes on and on and on. The bottom line is that you need umbrella liability insurance if you have assets you wish to protect. It only takes one bad accident, for instance, to exceed the limits of the average auto liability policy.
Fortunately, umbrella insurance is relatively inexpensive for the amount of financial protection it offers you.
Like most insurance products you purchase, you buy umbrella insurance with the sincerest hope that you will never need to use it. However, if you find yourself in need of umbrella insurance and do not have it, the consequences can be devastating. It’s peace of mind, many view worth having.
How Much Umbrella Insurance Do You Need?
This can be the trickiest question of all. For some people, it comes down to your personal tolerance for risk. Most umbrella insurance policies begin at a minimum of $1 million. People who have more assets or face more significant risks of lawsuits may desire more coverage.
This is why it is so important to work with an independent insurance agency, like The Insurance Center of North Jersey.
We will work with you to assess your risks and decide on an umbrella policy that gives you sufficient financial protection and outstanding peace of mind. We can also help you to bundle policies to achieve multiple policy discounts.