What is an umbrella insurance policy?
An umbrella insurance policy is extra liability coverage that goes on top of your current home, auto, and other insurance policies. Just as it’s called, you can think of it like an umbrella — your standard policies are individual rain jackets or boots, and your umbrella insurance provides another layer of protection by covering all your assets.
Basically, if all of your liability coverage on your base policies is used after a severe accident or lawsuit, your umbrella policy will step in to help cover the damages. This can save you from needing to pay exorbitant amounts of money out of your own pocket in the case of a major liability event.
How do I know if I need an umbrella insurance policy?
Many people think an umbrella policy is unnecessary because they believe the chances of experiencing a major liability event are very small. And this is true — one of the reasons that annual umbrella insurance premiums are generally so low in comparison to other forms of insurance is that the probability of needing to use the policy is low.
So how do you know if you really need extra insurance on top of your existing policies? Here are a few steps to follow:
- Evaluate your current assets
Think about your home, car, savings account, future income stream, and any other significant assets. Do a little math and try to add up the approximate value of everything you own.
- Evaluate your risks
Consider your risks. This is harder to gauge than the value of your assets because it’s so subjective, but try to be as honest as possible. Here are some questions you can ask yourself: Do you engage in a lot of dangerous activities like skiing, surfing, or hunting? Do you own an attractive nuisance like a swimming pool or trampoline? Is your work commute long, therefore increasing the chances of getting into an accident on the road? Are there other factors about your lifestyle that raise your incident risk?
- Find out if you have enough coverage
With the value of your assets in mind, go to your current insurance policies and see what their coverage limits are. Your individual insurance policies should cover your assets completely; if not, you’re left partially unprotected.
If you don’t have enough liability coverage currently, it’s a good idea to think about getting an umbrella policy. This is especially true if your lifestyle or property puts you at high risk for major liability events.
How much does umbrella insurance cost?
Umbrella insurance is usually sold in million-dollar increments. If your current liability coverage has a $500k limit, a $1 million umbrella insurance policy would increase that overall coverage to $1.5 million. In general, most policyholders invest in a $1 or $2 million umbrella policy, but the amount you need depends on the total value of your assets and an honest assessment of your individual risk.
On average, $1 million in extra liability protection will cost you between $150 and $300 per year. As the legal and medical costs following severe accidents continue to rise, many policyholders find umbrella insurance reasonably priced for the protection it offers.
How do I get an umbrella insurance policy?
You can get an umbrella insurance policy the same way you’d get any other policy: talk to your insurance agent! The only requirement is that you must already have either auto or property insurance (like a homeowners policy) because umbrella policies aren’t stand-alone — they are considered secondary forms of insurance that must go “on top” of your other liability coverage.
At Lindow, we’ll help you figure out exactly how much extra liability coverage you need, and we’ll shop our 40+ carriers to make sure you’re getting the best deal. Get in touch for your no-obligation quote today!