Do I Really Need an Umbrella Policy

Do I really need an umbrella policy given I already have liability coverage on my home and auto insurance? This is a question I get asked frequently by many of my clients.

If you have a sizeable amount of family financial assets you might want to consider having an umbrella policy for your household. A quick way to determine if you should have an umbrella policy is to add up all of your assets such as the value of your home, bank accounts, stocks, bonds, retirement funds and other valuable assets. If this total is significantly above your current liability limits you should consider purchasing an umbrella policy.

What an umbrella policy provides:

Additional liability coverage above your current home and auto liability limits
Protection against libel, slander or false arrest
An inexpensive investment against a high-cost lawsuit
Protection against having to use your own assets in a large financial judgment

The cost of adding a typical $1 million personal umbrella is around $175 – $225 annually with each additional $1 million in coverage adding around $50 – $75. Households having teenage drivers and/or a large number of vehicles and properties will pay somewhat higher rates. However, these households might benefit the most by purchasing an umbrella policy.

What if a large tree on your property falls and crushes your neighbor’s home, or you or your teenager rear-ends another car and severely injures many passengers, or a child injures him or herself at a party in your backyard. If you are sued or a court judgment finds you liable for an amount over your base liability amounts, your umbrella policy takes care of the difference. Thus, this small investment can make a great difference in your future financial well-being. Without an affordable umbrella policy your family could experience a devastating financial blow that could impact your children’s education fund and ultimately your retirement fund.