Most people think they don’t own much so why would they need a million dollar, or more, umbrella policy?
Even if you don’t have much in the way of assets, you can still have your future earnings garnished for life.
Imagine how that would affect your lifestyle if that happened.
An umbrella policy usually only costs $200-$300 per year to provide you with $1 million in liability coverage.
An umbrella policy picks up where your homeowner’s or auto policy leaves off.
So if you have a bad auto accident and the lawsuit settles for $800,000 the umbrella would pay for the difference between what the auto policy limits are and what the settlement is. ($800,00 – $500,000(auto limit) = $300,000 paid out by umbrella policy).
The umbrella will also pay for legal expenses in addition to the limit of the policy being paid out. Legal expenses alone could bankrupt you in a lawsuit.
What are some things that could increase your risk of a lawsuit?
1. Long commute
2. Commuting regularly during rush hour
3. Having a pool on your property
4. Entertaining guests frequently on your property
5. Owning a dog
Depending on the policy the umbrella may provide coverage for events your home and auto policies do not.
For example, if you do not have personal injury coverage on your homeowner’s policy then your umbrella would provide coverage for libel, slander and defamation.
These types of lawsuits are becoming more common in the age of social media.
Another example, you have a party at your house and someone drinks too much, drives home, and causes an accident injuring another person.
You could be held legally liable for that injury.
With the right umbrella policy you would be covered for that lawsuit.
You can never 100% insure yourself against every possibility of what could happen to you in life but with an umbrella policy you are much better protected against a wider variety of lawsuits and against the more nasty, expensive lawsuits arising from injuries in auto accidents or on your property.
Umbrella policy coverages vary widely between companies so make sure you know what yours covers.