Why do you need umbrella insurance?   Who buys umbrella insurance policies? 

An umbrella insurance policy provides you with extra protection on top of the protection your auto and homeowners insurance policies provide.  So if you own property, a home, a few cars and maybe a boat, you might want to talk with your insurance agent about an umbrella policy.   Property ownership comes with responsibility and sometimes liability…an umbrella policy helps protect you from the additional liability.

If your insurance agent has not explained umbrella insurance to you, read on for a closer look at the advantages of an umbrella insurance policy.

The Basics of Umbrella Policies

The Value of owning an Umbrella Policy

Example of why an Umbrella Policy is Good

• Let’s say your primary auto insurance policy limits are $300,000 but the damages from an accident that was your fault were $750,000.   The injured party in this example would want their damages of $750,000 to be paid “in full”.  The injured party usually does not settle for “whatever you can afford to pay” – no, they want to be made “whole”.   So to make them “whole” you would have to pay some of the money out of your pocket because the insurance policy would only pay for the first $300,000.  In this example you would have to pay $450,000 – do you have that much extra money?
• Of course accidents or incidents that result in very high amounts of damage used to be rare; but they are occurring more because of the high cost of labor and materials.
• A large loss with no coverage only needs to happen to you once for you to be in financial ruin.

Claims with Umbrella Insurance

• An umbrella insurance policy kicks in after your auto insurance and home insurance policy limits have been met.
• If the liability limits on your auto or home insurance policy are $300,000 and your umbrella policy limit is $1 million, you would have liability limits of $1,300,000.

Umbrella Insurance in a hard economy

• During hard economic times extra protection is especially valuable because of the possibility of a fraudulent claim.
• Fraudulent claims do increase in a tough economy.
• So you could easily have a fraudulent claim filed against you, that you would be forecd to defend.
• Even if a lawsuit against you is found to be “without merit”, you still would have to defend yourself against it.
• Defense can get expensive – umbrella insurance pays for those expenses.

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