It’s no secret that we live in a lawsuit-crazy culture. It’s especially true if you have substantial wealth, but even people with relatively few assets can end up in court.
If you’re sued, your traditional homeowner’s and/or auto insurance will likely offer you some liability coverage. But those policies only protect you up to certain limits before they max out. So you should consider adding an extra layer of protection by investing in personal liability umbrella insurance.
What is umbrella insurance?
Umbrella insurance offers a backup level of protection against lawsuits above and beyond what’s covered by your homeowners, auto, watercraft, and/or other personal insurance policies. For example, if someone gets hurt at your house, they might sue you for their medical bills and lost wages. Your homeowner’s insurance will cover you up to a certain dollar amount, but you’re personally liable for anything beyond that limit. That’s where the umbrella insurance kicks in.
Once your underlying insurance maxes out, the umbrella policy will help pay for the damages and legal expenses if you lose the case. If you win, it can help cover your lawyer’s fees.
Who should buy it?
Umbrella insurance is very important for people that have a high net worth. But since everyone has the potential to be sued, it’s a good idea even for those without substantial assets to consider umbrella insurance.
If you’re sued and lose, the judgment against you may exceed the value of your current assets. In that case, a court could let the plaintiff go after your future earnings, potentially garnishing your wages for years. So umbrella insurance not only protects your current assets, but your future ones as well.
How much coverage do I need?
Most people will be adequately covered with a $1 million umbrella policy. If you earn more than $100,000 a year or have more than $1 million in assets, you may want to invest in additional coverage.
A good rule of thumb is to buy an umbrella policy with coverage limits that are at least equal to your net worth.
How much does umbrella insurance cost?
Umbrella insurance is fairly inexpensive. You can buy a $1 million umbrella liability policy for between $150 and $300 per year. An additional million in coverage will run you about $1oo and roughly $50 for every million beyond that.
Umbrella policies are inexpensive because they only go into effect after your underlying homeowners or auto policy is exhausted. In light of this, most insurers require you to have at least $250,000 in liability on your auto policy and $300,000 on your homeowner’s policy before they’ll sell you a $1 million umbrella policy.
How can I buy umbrella insurance?
Many times you can buy an umbrella policy from the same insurance company you use for your other policies. And you might even be eligible for a discount for bundling those policies.
Umbrella insurance is one of the many ways that you can protect your family’s current and future wealth. For help in evaluating your family’s situation and for help getting the best plans in place to protect what you’ve worked so hard for, contact our office.
This article is a service of Myrna Serrano Setty, P.A. We don’t just draft documents, we help you make informed and empowered decisions about life and death, for your sake and your loved ones. That’s why we offer a Planning Session, during which you’ll get more financially organized than you’ve ever been before, and make the best choices for the people you love. You can begin by calling our office today to schedule a Planning Session and mention this article to find out how to get this $500 session for FREE.