Don’t Forget an Umbrella (Policy)Umbrella insurance can be one of the most cost-effective ways to protect your assets but is sometimes overlooked.
How Does Umbrella Insurance Work?
Umbrella insurance is a policy that covers you from a broad range of potential liabilities. It goes beyond other liability coverages you have, including home and auto policies, to cover large legal judgments.
For example, let’s say you were found liable for a multi-car accident and owe $500,000 for damage to the other cars and for the other drivers’ medical bills. If your auto policy had a $300,000 liability limit, you would have to pay the remaining $200,000 on your own. If you had an umbrella policy with a $1 million limit, the insurance company would cover the $200,000 difference.
How Much Does Umbrella Insurance Cost?
According to the Insurance Information Institute, a $1 million personal umbrella policy costs about $150 to $300 per year. An additional million in coverage would cost about $75 per year. It is important to note that the company issuing the umbrella policy will generally require you to have a certain amount of underlying homeowner’s and auto insurance coverage before they will issue the umbrella policy.
Who Needs Umbrella Insurance?
Umbrella policies can be useful for a wide range of individuals because of the potential for different kinds of lawsuits. Injuries or property damage to others on your property or in a car accident, as well as defamation judgments, can all lead to liabilities covered by umbrella insurance. Umbrella insurance does not cover all potential liabilities—business liabilities, damage to your own property, and intentional harm are generally not covered under these policies.
How We Can Help
Here at The Family Firm, we engage in comprehensive financial planning for our clients, which includes analysis of their insurance coverages and potential exposures. As part of our onboarding process with new clients, we hold an asset protection meeting to discuss insurance coverages—including the need for an umbrella policy—and estate planning recommendations. Get in touch with us to learn more about how we can help you reach your financial goals.