Umbrella Policies

Umbrella Policies: What They Are and Why You Need One

Hello everyone,

Happy fall! I won’t be sending you a message again until after Halloween and Daylight Saving Time, so have a great trick or treat and don’t forget to set the clock back and check your smoke detectors the evening of November 3. In this article, I wanted to take a moment to discuss umbrella policies: what they are and why you need one.

What is an Umbrella Policy:

We get calls from time to time where our client thinks that an umbrella policy is something that is designed to cover all of their property, wherever it is located and whatever it might be. In actuality, an umbrella policy is liability coverage which protects you if all your liability coverage on your base policies is used up.

I’ll go over a couple examples to help explain this coverage further. If you’re in a severe auto accident which is your fault, such as t-boning a school bus, or an incident at your home, such as a bonfire that went out of control and burned down the neighbor’s house. In these situations, you would end up using all the liability on either your auto or home policy. The umbrella is designed to add an additional amount of liability, usually at $1 million or $2 million, above those limits to cover serious events.

The term umbrella comes from the fact that it will “go over” all of your underlying insurance (auto, home, boat, rec vehicle, secondary home, etc.). The carrier will make one charge (Usually about $150 for an extra $1 million in coverage) that allows the coverage to go over all lines of your insurance, hence the name umbrella. It can even cover your exposure for underinsured motorist for an additional charge.

Why You Need an Umbrella Policy:

The umbrella policy is a great way to protect your assets from the major liability event at a very reasonable cost. When you can buy an additional $1 million for around $150, there is really no reason not to. With legal and medical costs increasing every day, $300-500k does not go nearly as far as it used to. By purchasing a $1 million umbrella, you’ll increase your coverage to $1.3-1.5 million and bring your coverage up to an adequate level for many severe circumstances.

If you happen to be the person that needs the coverage, it will pay out greatly. It certainly beats getting a letter from the insurance carrier that says it looks like you might exhaust your $500,000 limit and you should be retaining legal counsel to cover your interest in the event you are sued for the remaining balance.

On a final note unrelated to umbrella, if you have collector cars, a boat or something else that you put away for the winter, don’t forget to give us a call to change your policy.

Thanks again for allowing us to protect your families.

Jon Oaks