Though unlikely, being sued is a real possibility – especially in today’s litigious society. Sometimes, lawsuits are resolved without payment. Other times, a judgment or settlement is small enough that it is fully covered by a home or auto insurance policy. However, there are those occasional cases that result in million-dollar liability claims for which traditional home or auto insurance liability is not enough. Without umbrella insurance, you could stand to lose hundreds of thousands of dollars, and perhaps even millions in the event of a major lawsuit.
Understanding Umbrella Insurance
Umbrella insurance is a wealth management tool used to shield yourself and your assets against lawsuits, both now and in the future. Coverage is secondary to other types of liability, such as auto, boat, homeowners, renters, and condo insurance. However, it is versatile enough to cover a wide range of personal liabilities, including some which are not typically covered by other policies. Examples include coverage for slander, libel, and false arrest. If you are sued, your primary coverage first pays damages up to the limits of your policy, then umbrella insurance kicks in, paying an additional $1 million or more toward the cost of your liability.
Because umbrella insurance is supplemental, insurers generally require you to carry a minimum amount of coverage on your primary policies. These typically include:
- $300,000 or $500,000 homeowners liability
- $250,000/$500,000 auto bodily injury liability OR
- $300,000 combined single limit (CSL)
Do You Need Umbrella Insurance?
Most people can benefit from umbrella insurance considering their risks and assets. To determine if this type of coverage is right for you, consider your personal risk factors for being sued:
- Do you drive to school or work?
- Do you commute long distances?
- Do you have a high-risk driver in your household?
- Do you own a swimming pool or trampoline?
- Do you have a dog?
- Do you ever have house guests?
- Do you host parties, gatherings, or events in your home?
- Do you have tenants who live in a rental property?
Next, talk to an independent agent here at Frydach Insurance about your asset exposure. We can help you evaluate your current net worth and what could be on the line in a lawsuit. We will also help you assess the value of your future income and any inheritance or windfall you might expect to receive. Based on that information, we will recommend an umbrella policy with coverage personalized to meet your needs.
Ultimately, our goal is to protect you against anything that could threaten your assets, future, and lifestyle. For many people, a $1 million policy is enough to provide security against possible litigation. For clients with greater asset accumulation, we may recommend additional coverage, up to $5 million or more. Fortunately, a million-dollar policy for a homeowner with a couple of cars might cost as little as $200 per year. Additional savings may be available for those who purchase their homeowners and umbrella insurance from the same carrier.
What are you doing to protect your current and future assets?