Do You Need an Umbrella Insurance Policy?


Do You Need an Umbrella Insurance Policy?

“A billion here, a billion there, pretty soon you’re talking real money.”

Interestingly enough Everett Dirksen never really said that. He supposedly told a friend that a newspaper incorrectly quoted him and he thought it sounded so good he never denied it.

Do you need an umbrella insurance policy? Whether or not you need an umbrella policy comes down to your believe that you will ever be held accountable to pay a loss that goes beyond the limits of your current auto or home policy limits.

Very few claims exceed $500,000 per occurrence bodily injury limits, which is what most umbrella carriers require you to have in your “primary” insurance before they will provide coverage.

So why bother buying coverage beyond the basic limits?

There are altruistic reasons for purchasing insurance, but most of us do it because the law or our mortgagee requires it, and more importantly, to protect our assets. The Wall Street Journal stated in January of 2014 that one in twenty households in the United States have investable assets in excess of $1,000,000.

Even if your assets are currently less than $1,000,000 you have expected future earnings to consider.

If you are faced with a court award you could have your wages garnished for years to come.

The other day I was driving to lunch when a Ferrari pulled out in front of me. The average Ferrari costs between $200,000 and $300,000. If I were to cause an accident in which that Ferrari and a dozen other cars were totaled, the property damage liability could easily exceed the $250,000 property damage limits many companies demand as necessary primary limits for “underlying” coverage.

The average annual cost for nursing home care topped $80,000 in 2013. If you injured someone in that crash that required lifetime care it wouldn’t take long for your $500,000 auto policy limits to dwindle to nothing.

A lot of people in the United States . . . over 16% don’t carry auto liability insurance even though it is mandatory in all states. Mortgage carriers demand that you carry insurance, but the most common liability limits sold in my agency are $300,000.

Umbrella liability policies provide protection if you’re found liable for someone’s bodily injury or property damage. It provides increased policy limits to protect you from catastrophic losses. Umbrellas are sold for $1,000,000, $2,000,000 . . . all the way up to $50,000,000 or more.

Further, these policies might provide coverage that isn’t covered in the primary with a relatively small self-insured retention.

Full Coverage

It is always best to have your home or auto coverage cover as much as possible. For example, most home policies can be endorsed to provide coverage for libel or slander. (Some companies include these coverages in the primary policy.)  In that rare event that your primary policy didn’t cover libel, it is possible your umbrella might.

Some “umbrella” policies are “following-form” which means they cover only what is covered in the primary policy. These policies might be called “excess liability” policies.

While most umbrellas cover over your home and auto policies, they can be extended to also cover over your boat insurance, ATV insurance, and other policies.

It is estimated that about 10% of people in the United States carry an umbrella. If you don’t have one, you should have a discussion with your independent insurance agent. We happen to have one we can recommend at the top right of this page!

Other Enhanced Insurance articles related to Umbrella Insurance:

Whether to Buy 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.

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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