Understanding Personal Umbrella Policy

What is an umbrella policy? Do you need an umbrella policy? These are reasonable questions for everyone to ask. This article will go over the basics of an such a policy and what it can provide.

An umbrella policy covers above the limits of liability you have on all your personal policies. It gives extra coverage to others for liability, it does not give any extra coverage to you. It also provides this extra coverage to any and all of your personal policies. It is up to a limit you chose, usually starting around $1 million. This means your home, rental properties, cars, and toys are all able to draw extra coverage from your umbrella policy. One thing to consider is that your insurance company requires higher limits of liability on all your personal policies before they will offer you an umbrella. The limits required are usually around $250,000 of bodily injury protection per person and $500,000 per accident. Each insurance company is a little different, you’ll need to check with them to see what is required.

We’ll use an example to demonstrate how an umbrella can protect you. While driving your car you lose control and cause an accident with many people seriously injured. The total amount for all the medical bills comes to $750,000, but unfortunately you only have insurance to cover $500,000. At this point your umbrella policy will kick in to cover the additional $250,000.

So do you need an umbrella policy? That is a question you’ll have to answer for yourself based on your situation in life. Typically, the average person does not carry such a policy. Those who do have umbrella’s usually have “a lot to lose” or substantial assets.

This policy is extra protection for you so you don’t lose all your assets and wealth to a lawsuit. Remember it provides extra coverage above the liability limits on your personal policies. If you decide to look into getting an umbrella policy, a local insurance agent is a great place to start.

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