Umbrella Insurance Costs, Benefits and More: A Complete Guide

male hand holding an umbrella over a family, their home and car

What are your chances of being sued?

If you have a teenage driver, a swimming pool, an active social media user in your home or a dog, your chances could be higher than you think…

Juries have been awarding millions in dollars on lawsuits. In 2018, juries awarded more than $679 million for dog bite lawsuits.

Your homeowners or auto insurance may not be enough to cover you if you are sued.

Umbrella insurance costs are minimal when you compare them to being sued, so let’s look at the benefits of this policy.

What is an Umbrella Insurance Policy?

Umbrella insurance supplements other liability policies that you already have like your auto and homeowner’s insurance.

It kicks in when these other policy limits are met. It is not a standalone policy.

This insurance helps protect you against a major financial impact from scenarios such as swimming pool accidents, a fall on your property, a car accident or any other incident that you can be sued for another’s injuries or property damages.

Benefits of Umbrella Policies

Wondering why you should get an umbrella policy?

Here are some examples where an umbrella policy would be beneficial.

If you write or say something about another person, you could be sued for libel or slander.

This includes social media sites, so if you have a family member that posts often, you may want to consider adding this protection.

When your standard auto policy limits are met, you are still liable to pay the remaining settlements for liability and damage. Your umbrella will kick in after these limits to keep you covered.

If you have a guest injured on your property, you may not have enough medical coverage.

This will help cover medical expenses for events like a dog bite, injury at a party or a child getting hurt while swimming.

You most likely have liability insurance in your standard policies. Umbrella insurance gives you additional protection because medical and legal bills can add up quickly.

If you are sued, you are responsible to pay any remaining settlement amount out of pocket even if your liability limits are reached.

This means liability settlements can affect your home, future earnings and retirement accounts.

If you feel you don’t have a lot of assets to worry about, think about losing your future income and your home.

What Makes Umbrella Insurance Different?

Umbrella insurance also adds additional coverage called personal injury protection.

This differs from bodily injury because it encompasses legal cases like slander, defamation and libel.

With today’s technology and social media, there is a higher risk for something to be taken out of context and into court.

This kind of damage is typically not covered by your standard homeowner’s insurance.

Liability claims can be much higher than property damage claims. Plus, you must pay for legal and attorney fees.

Liability settlements are not determined by your assets, so the amount could be higher than all your assets and insurance policy limits combined.

What is Not Covered

Even though umbrella policies protect you against most lawsuits, there are some types that are excluded such as:

  • Business-related activity damage
  • Malpractice lawsuits
  • Intentional damage to property or to a person
  • Workers’ compensation claims

An umbrella policy only protects you against liability for damage or being sued.

If you are the injured party, your umbrella policy will not cover any medical bills that your insurance will not pay.

Umbrella Insurance Costs

You may think this policy is expensive but think again. You can get a $1 million dollar policy for around $150-200 a year!

These rates can vary based on any recent accident or liability claims. Other factors can affect your rates such as your credit report.

Insurers do require minimum liability coverage on your underlying policies.

This means you will need certain limits on your home and auto in order to get an umbrella policy.

For example, some insurance companies require $300,000 in liability limits on homeowner’s policies.

Who Should Get an Umbrella Policy

You should figure your assets, so you can protect yourself, and you can calculate your net worth to get an idea of how much coverage you need.

Your net worth includes your home, stocks, retirement accounts, money in your bank accounts, along with anything else of value, then you subtract your debts from this amount.

There are also other factors you should consider. If you have any of the following, you may want to consider an umbrella policy:

  • Gun in your home
  • Dog
  • Swimming pool
  • Teenage drivers
  • Rental properties
  • Frequent parties

You may also want to think about how often you drive. If you spend a lot of time on the road, you are at higher risk for an auto accident.

You will then need to determine how much liability coverage you already have.

First, look at your auto policy and check property damage per accident, bodily damage per person and bodily damage per accident.

Then, look at your homeowner’s personal liability per occurrence.

Talk to your agent about coverage. Most people opt for $1 million in coverage, but you may want to opt for more.

It costs about $150 a year for each additional million in coverage, but again, this can vary based on the company and your insurance history.

Protect Yourself

With umbrella insurance costs being relatively low, it’s important to review your policy to see if you should add this coverage.

Your normal homeowners and auto insurance have limits that can easily get exhausted.

If you are worried about the cost of this policy, there are ways you can save on your other policies without jeopardizing your coverage.

For example, you can increase your deductible on both policies, and that may be enough to cover the difference.

You can also shop around different companies, pay the premium annually or bundle your policies with the same carrier.

Reach out to us today to answer any questions you have. We can also make sure you have enough coverage to protect your family and everything else you have worked so hard for.

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