What Is a Personal Umbrella Policy and Do I Need One?

What Is a Personal Umbrella Policy and Do I Need One?I had just graduated from college and money was very tight. Yet, when it came time to select limits for my auto insurance policy I did what I thought was the right thing and bought the highest set of limits my agent quoted. They were $100,000 per person bodily injury / $300,000 per occurrence bodily injury and $100,000 per occurrence property damage.

I felt very secure with those limits of liability and probably should have because that was in 1970 and inflation would make those numbers six to seven times higher in today’s dollars.

However, I made my decision based on wanting to be excessively prudent. Yet, when I consider how much personal income I’ve generated in my lifetime I should have purchased more. My actual “exposure” was several million dollars.

That agent should have recommended that I buy an umbrella policy. What is an umbrella policy, you might ask? And do I need one?

An umbrella is a liability policy that comes into play once your primary insurance limits are “exhausted” or used. It can be a true umbrella that sets over your current limits and raises them to a set limit. Our it could be a following form excess policy that adds coverage to your primary layer.

In my case, years ago with 100/300/100 limits had I purchased a $1 million umbrella I would have been purchasing 900/700/900 excess of the 100/300/100. Had an individual sued me for bodily injury and received an award $1.1 million, my primary policy would have paid $100,000, my umbrella would have paid $900,000 and I would have been on the hook for the other $100,000.

Had I purchased a following form excess policy and faced the same award the primary would have paid $100,000, and the umbrella would have paid the next $1,000,000.

The average premium for a personal umbrella ranges from around $200 on up depending on the number of cars, homes, etc. you own.

Do I require an umbrella policy?

It is very hard to walk away from a court award. Most wage earners have a need, therefore to protect their lifetime income.

Also, umbrellas often will provide some coverage that in;t normally provided in the primary policy. In that regard it is a fail safe.

The average person should have at least a $1 million dollar umbrella. Most should have a $2 million. Many should have as much as $10 million limits.

Other Enhanced Insurance articles related to Umbrella Insurance:

Whether to Buy an Umbrella Insurance Policy

Do You Need an Umbrella Insurance Policy

What Is Umbrella Insurance

Always Compare Coverage before Buying an Umbrella Policy

What Are Umbrella Insurance Coverage Discounts

What Coverage Claims Occur under Umbrella Insurance

What is the Normal Umbrella Coverage Rate Cost

Enhanced Insurance is not written by attorneys. If you’re looking for legal advice, you need to contact a lawyer. Further, insurance practices and forms change constantly and are varied from state to state. For definitive answers in your area, contact a local agent.

While the majority of people want an agent involved in their purchase of insurance, many people want to see if they can save money by buying direct from the insurance company. Others want to try a direct quote to make sure the premium they’re now paying through their local agent is fair. If you want a quote for your coverage, click on the competitive quote button on the right side of this page.

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Jim operates an insurance agent network called Insurance Partners, aggregating agents in the Midwest for over 25 years. He was National Agent of the Year for Metropolitan in 1993 and Midwest Agent of the Year for Travelers in 2011. He served as a founding board member of the Surplus Lines Association of Minnesota.

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