What Is An Umbrella Insurance Policy And Should I Have One?

What Is An Umbrella Insurance Policy And Should I Have One?



What is a Personal Umbrella Insurance Policy and why would someone buy it?


First, we have to understand what an Umbrella Policy is. 


An Umbrella Policy does two things:


Provides Coverage over and above underlying policies such as homeowners and/or auto insurance policies.


It can provide broader primary coverage where coverage is excluded on homeowners or auto insurance policies.


Now, to answer the question above as to why someone should buy an umbrella.


There are several reasons to buy a Personal Umbrella Policy.


1. To Increase the Liability Limits available: Umbrellas can provide significant Liability Limits for less premium. These limits are often called “Catastrophic Limits” and can go up into the millions of dollars. Remember, you always have enough insurance, until you don’t.


2. Asset Protection: We all have assets we would like to protect. Umbrellas are a great way to make sure they are protected. Some people may think that they do not have any assets. Your paycheck is an asset and a portion may be garnered as part of a settlement.


3. Litigious Society: Basically, we live in a “sue happy” society. Civil Lawsuits are becoming more and more common. Even when a suit is groundless, you can rack up significant defense costs in excess of your underlying policies.


4. It can fill gaps in your other personal insurance policies: For example, on a homeowners policy, the coverage territory is limited to the US and Canada. On most Umbrella policies, the coverage is worldwide. 


How do you decide whether you should purchase a Personal Umbrella Insurance Policy?


There are certain questions you can ask to help determine if you should buy one.


What is your current net worth?


What is your potential earning ability?


What kinds of social activities do you participate in?

What kinds of athletic activities do you or your children participate in?


How much would having one contribute to your peace of mind?


All of these are questions to help you determine if an Umbrella policy is right for you.


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