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Umbrella Insurance is often one of the least understood policies (even by many insurance agents). Yet, it’s potentially one of the most important insurance policies you can purchase to protect your financial future.

Whether you’re single with one vehicle and living in an apartment, or a family of 6 with two teenage drivers living in a half-million dollar home, we’re all in danger of a serious auto accident or liability claim causing financial ruin to our lives.

Consider your existing liability policies; you know, those insurance policies you buy every year but hardly ever give a second thought about. It could be your auto and renters insurance, your homeowners insurance, watercraft, motorcycle or rental dwelling. Regardless of the type of policy, there’s one critical question you should be asking:

How far will my current coverage go to protect me?

You need to understand the answer to this question, and why it’s so important, before you start thinking about an umbrella policy.

Example. Say you’re at fault in an auto accident that causes serious injuries to the driver and/or passenger(s) in the car you hit. Your auto insurance has liability limits of $100,000 per person and $300,000 per accident. (Which are pretty common limits, by the way, even for people with a significant amount of assets.)

How far do you think $100,000 will go, particularly if the person or persons involved suffer injuries that keep he/she/them from working for months, even years?

The accident victim(s) could sue you for his/her/their medical bills, lost income, even pain and suffering. In this scenario, you could be on the hook for well over $100,000.

Guess what happens if, say, you are hit with a judgment in the case of $250,000 for one person involved in the accident?

Your auto liability insurance will cover the first $100,000 – and you’re stuck taking care of the rest. And that doesn’t even include the legal fees you have to pay to your attorney. In addition, in some cases you might have to pay all or part of the legal fees the other party or parties incur.


Why Umbrella Insurance?

Umbrella insurance is for these very rainy days. While it may seem unnecessary, it really isn’t, particularly for people with homes and other significant assets to protect. Do you really want to hand over your house and/or gains in the stock market to someone you injure in an auto accident?

It could happen. But it doesn’t have to.

And since Umbrella Insurance is so versatile, it’s often used to provide extra liability protection over many liability policies, not just your auto policy.

Common underlying policies that an umbrella policy can extend over:

  • Auto
  • Homeowners
  • Renters
  • Condo
  • Motorcycle
  • Watercraft
  • Rental Dwelling

Sound too good to be true?

It’s not. And in fact, it gets even better once you understand the massive amount of coverage you can purchase for literally, pennies a day.

How much does Umbrella Insruance Cost?

Umbrella Insurance policies are available in increments $1,000,000 in coverage, and range from a starting price of $200 to $300 for a $1 million policy.

The higher your risk of a claim, the more expensive your umbrella policy will be. But on average, an umbrella policy that’s extending over an auto policy with 2 vehicles and a homeowners policy will run you about $200 per year.

What’s at stake?

Interested in knowing what you get for that $200 investment? Well in short: a lot!

A $1,000,000 umbrella policy will protect you from losing the following in the event of a covered claim:

  • Your house
  • Your vehicles
  • Your investment properties
  • Your 401(k) plan funds, or other retirement assets
  • Your savings account funds
  • Your future wages

Think you’re too young and you don’t have enough assets to warrant an umbrella policy?

Think again! Check out that last item on our list: your future wages.

Did you know that in the event of a serious claim where you’re at fault, if the coverage you have on your underlying liability policies (your auto, renters, homeowners, motorcycle, etc.) is not enough to satisfy the judgment against you, the court can garnish your wages until the judgment is satisfied?

Let’s go back to our $250,000 auto claim for which you had $100,000 of coverage provided by your auto policy. Once that $100,000 is used up, you’re on your own for the next $150,000. With an umbrella policy, you could have coverage for the entire amount.

Without an umbrella policy, and no other assets available to satisfy the judgment, your wages could be garnished until the entire $150,000 is satisfied (and that assumes the court does not attach an interest rate to your judgment).

So while you may be young with relatively few assets to protect, you arguably have one of the most important assets in need of protection: your future income.

Is it really worth the risk when you could get an extra $1,000,000 of protection for less than $1 a day?

If you’d like to learn more, contact one of our Licensed Advisors . We’re here to help.