What are Umbrella Policies, and Do You Need One?
We’ve all got that one friend in our life who is absolutely on top of everything and prepared for anything. Have a headache? She’s got some ibuprofen. Phone dying? She’s got a charger she can lend you. Car broken down on the highway? Well, she doesn’t have a replacement spark plug – I mean, come on, she’s only human – but she can help you get a tow to a good mechanic. And you can bet that if it starts raining, she’s got an umbrella on hand. Which brings us to our topic for today: umbrella policies.
There for You in a Pinch
Most insurance policies provide coverage in one specific area or field: auto insurance protects your car, homeowner insurance covers your house, etc. Umbrella policies are unique in that they work to provide coverage for nearly all aspects of your financial life – and, just like a real umbrella, you hope you don’t have to use it if you bring it along; but if you do end up needing it, you’re sure glad you have it. Essentially, umbrella policies exist to pick up any additional costs that might occur over and above the expenditure limits of any of your other policies, which can oftentimes be exceeded as the result of lawsuits or other damages that might occur as the outcome of an accident. Umbrella policies are sweeping in the ground that they cover, including but not limited to:
- Bodily injury (including injuries other policies don’t cover)
- Property damage (including types of damage not normally covered under home or auto policies)
- Other sorts of legal damages (libel, slander, violation of privacy, false arrest, etc.)
- Legal fees (as may be accumulated during a lawsuit or court proceedings)
Pretty handy, right? Umbrella insurance is great at helping policyholders get out of sticky situations. There are a few things that umbrella insurance doesn’t cover (malpractice suits, intentionally-caused damage, workers compensation claims against employers, or damage caused by any business-related activity), but overall, umbrella policies can go a long way towards helping you rest easy at night.
Sounds Helpful, but is it Right for Me?
While having an umbrella policy can provide some peace of mind, it’s important to note that not everyone needs one. Umbrella insurance will cover additional monies owing that exceed the limits of your existing policies, but only as related to any damages that other parties have suffered. This means that umbrella insurance provides coverage against any claims or lawsuits made against you by other parties – but if the cost of your own damages happens to exceed your existing policy limits, you’re still on the hook for the difference.
There are two schools of thought when it comes to determining if you need umbrella insurance. Some folks recommend looking into umbrella insurance if the net worth of your assets exceeds $1 million – the minimum amount covered by most umbrella policies. Others suggest that it’s a good idea to sign up for a policy if the worth of your assets has outpaced the liability limits of your home or auto policies, to keep you safe in the event of an unexpected accident or lawsuit. Regardless, umbrella policies are viewed as a sound investment in the world of insurance, with just a couple hundred dollars a year granting you an additional $1 million of liability coverage.
Are you interested in adding umbrella coverage to your insurance policy? Still not sure if it’s right for you? Give us a call at Lucas & Wright today, and we’ll answer any lingering questions you might have about umbrella policies!