Umbrella Policies

What would happen if you had an insurance claim or were sued for more than your auto insurance, homeowners, or other property casualty policy covers?  Would you have the money to pay the difference out-of-pocket?  Or would this be a financial catastrophe?  Would it derail your goals and dreams that you have saved for?

For most people, this would be a terrible crisis, but there is a way to protect yourself against such situations, and it doesn’t cost as much as you might think.  The solution is an umbrella insurance policy which provides extra coverage over and above the limits provided by your standard home, auto, and other insurance policies. 

We recommend that you obtain one because it is an inexpensive way to protect against major claims and lawsuits.  Let me give an example to illustrate this. 

Suppose you are in a car accident where you are found to be at fault, and another driver is severely injured.  The injured party happens to be a highly skilled musician who is unable to work for six months, and he decides to sue you for $1,000,000 to cover his medical bills and lost wages.  If your automobile policy limit is $300,000, how will you come up with the other $700,000?  If you had an umbrella policy, you would likely be fully covered, which could protect your bank account, home, or other personal property. 

Since most standard insurance policy limits cover most situations, umbrella policies are rarely claimed on and are therefore very inexpensive to obtain.  In fact, I know an insurance broker who has been in the industry for over 30 years and has seen only two umbrella policy claims in his entire career! 

A $1,000,000 umbrella policy usually costs $150-$300 per year; that’s less than a cup of coffee per day.  And while the chances are you will never have to use it, the minimal cost is well worth the peace of mind that comes with knowing you have additional coverage that could save your financial life if you ever need it.