When it Rains, it Pours: An Overview of the Umbrella Policy

Before getting into whether or not an umbrella policy is right for you, let’s first discuss what an umbrella policy actually is. Think of it as extra protection beyond what your homeowners and/or automobile policy liability coverage will handle.

Suppose you severely injure someone in an automobile accident and the medical expenses exceed your policy limit. Or a guest who gets injured at your home sues you and the expenses exceed your policy limit. This is when the umbrella policy kicks in. Let’s go over some of the things to consider and help you decide if this type of policy is appropriate for you.

We live in a litigious society. You can breathe on someone the wrong way and be slapped with a lawsuit. Frivolous lawsuits aside, even at the highest limits, your policy may not be enough. Consider this: you strike a pedestrian with your vehicle causing bodily injury requiring $200,000 dollars in medical expenses. If you have a $250,000 liability limit, you’re covered, right? Now what if this person then sues you for 1 million dollars and you are found liable? Having an umbrella policy will give you the peace of mind in knowing it will be there to take over when you exhaust the coverage on your other policies.

Keeping the previous example in mind, say you have a high net worth household. Having high value assets with insufficient coverage is needlessly putting them at risk. An umbrella policy provides the additional protection. Typically, the coverage amount for an umbrella policy is in one million dollars increments. Usually the limit ranges from one million to five million.

What type of lifestyle do you have? Are you at a higher risk for accidents? Do you own rental properties? Own a dog? Do you travel frequently (umbrella policies provide worldwide coverage)? Think about the aspects of your life that would warrant having additional liability coverage.

So whom exactly does an umbrella policy cover? Typically it will cover you and your spouse, anyone on your policy declarations page, and relatives and dependents living with you.

If you are think you are in need of an umbrella policy and are considering purchasing one, get a more comprehensive look by contacting your licensed insurance agent. He/she can review your information and make recommendations based on you life situation.