Do I Need an Umbrella Policy

June 17, 2020
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Is An Umbrella Policy Right for Me?

Many people find themselves asking the question, “why should I pay for an umbrella policy if I already have auto and home insurance?” It does seem that an umbrella policy might be overkill, but that really isn’t the case. They are an inexpensive way to protect you and your assets. A $1 million umbrella insures you at a level that your home and auto insurance never could. In the event that you get sued, an umbrella policy can cover your legal counsel and fees whereas without an umbrella you could lose your current assets and potentially future income as well. They are not particularly expensive. Compared to what you pay for other policies, the cost is insignificant. Considering the level of coverage that the umbrella provides, it brings high value to you as a consumer.

Another benefit to purchasing an umbrella is the protection from unexpected issues that would otherwise come directly out of your savings. Did your vehicle cause damage to someone else’s property? That is covered. It can even cover costs induced by others’ injuries and, in extreme cases, their funeral costs. These are expenses that could easily sink you financially if you do not have the right coverage. A good rule of thumb is to buy a policy that covers you up to at least your net worth. If you think that there is the possibility that you will ever be the target of a lawsuit, umbrella insurance is a must for you. Liability coverage provided by your home and auto policy will likely be significantly less than the costs incurred throughout the legal process. For less than the cost of one dinner date a high-end restaurant per year, you can protect yourself from financial ruin; a worthwhile investment in most people’s eyes.

Imagine yourself cruising home from work just like any other day. There is a lift on the side of the road with a worker fixing a street light. You look down for half a second and clip the side of the lift. It sends the poor worker inside flying, and he crashes to the ground. You don’t know how severe the injuries are yet, but it certainly doesn’t look good. The police arrive on the scene and assess that you were the one at fault. You are written a ticket for reckless driving as the worker is hauled off to the hospital. He is diagnosed with a broken neck that will likely cause permanent damage. You are liable for the insurance because the accident was your fault. You have $100,000 in liability coverage. It is becoming more and more clear by the minute that amount is not going to even come close to covering the total cost. Just the initial medical costs are going to push you over the top. Now he’s going to sue for additional damages as well. By the time all is said and done, there could be upwards of a million dollars in damages. You don’t have a million dollars to spare, so that means garnished wages. You no longer get to keep your hard-earned money because of one accident. All of that could have been avoided with an inexpensive umbrella policy. This is just one example of the many ways an umbrella can benefit you.

One small mistake can lead to years of trouble. Everyone thinks that it won’t happen to them, but we are all susceptible to it. There is a way to eliminate that risk. Proper insurance coverage can make all the difference when a small mistake turns into a big problem. For most people, that means adding an umbrella policy.