Umbrella insurance pays for liability damages that exceed the limits of your homeowners, auto, or other primary insurance policy. This includes any court costs, legal defense fees, settlements, and judgments. It can also protect you against scenarios for which you may not have coverage, such as while renting a boat, traveling abroad, or experiencing accusations of slander, libel, or defamation of character.
Understanding Umbrella Insurance
You are driving down the road and look down for just a moment, only to come crashing into a brand new car. On the inside, two adults are severely injured. Weeks later, you are sued for more than a million dollars worth of medical bills, as well as months of wages that both victims will lose while undergoing rehabilitation and recovery. With your court costs and legal fees included, you will owe $1.1 million, but your auto insurance only covers $500,000 per accident. How will you pay the remaining $600,000 debt?
The above scenario is one that happens often. Someone purchases the highest available liability limits for their auto insurance, homeowners insurance, and other policies believing they will be adequately covered in an accident. Then the unthinkable happens, and the actual damages turn out to be much more expensive. The fact is that if you injure someone or damage their property, you can be held financially responsible – even if you don’t have enough insurance to cover the liability. With umbrella insurance, you can have peace of mind knowing you are covered even when your primary insurance coverage runs out of steam.
What Umbrella Insurance Covers
Since even the highest coverage limits on these types of policies can come up short of meeting your needs in a lawsuit, purchasing an umbrella policy could saving you tens or even hundreds of thousands of dollars or more if your income and assets are threatened by litigation. Umbrella insurance is flexible liability coverage that adapts to nearly anything you need it to be. If you caused a car accident, your umbrella coverage can become an extension of your auto insurance liability. If your dog bit someone in the park, umbrella coverage can become an extension of your homeowners liability protection instead.
Your policy will cover only liability – not your own personal damages, injuries, or loss. It also does not cover criminal or intentional acts. However, it can extend to several other expenses, including those arising from victim injuries, property damages, and funeral costs. It can also cover you against rental property liability if you have tenants.
Should You Purchase Umbrella Insurance?
Umbrella insurance is the type of coverage you pay for but hope to never need. If you do, though, it could mean the difference between financial security and losing everything – including your dreams of a financially independent future. Even if you do not have much money in the bank now, you should consider umbrella insurance if you still have the ability and plan to earn additional income in the future. If you are sued, you could be forced to make payments on judgments against you for years to come, affecting your ability to save, travel, or enjoy the lifestyle you dreamed of having. It might even threaten your retirement or the money you have earmarked for your kids to go to college. That’s why umbrella insurance is not just for the wealthy; it’s for everyone.
You might need umbrella insurance if you:
- Have significant assets or income to protect
- Plan to earn income for many years to come
- Expect a large inheritance
- Own rental property
- Have high-risk possessions, such as a pool, trampoline, or dog
- Participate in any activity that could increase your risk of being sued
Choosing Your Coverage
All umbrella insurance policies provide high-limit coverage, but it is up to you to determine how high those limits should be. In most cases, policies contain a minimum of $1 million in supplemental liability coverage, although you may be able to purchase as much as $5 million or more depending on the insurer. Talk with your independent agent for help deciding how much umbrella coverage may be right for you.
How Much Does Umbrella Insurance Cost?
Umbrella insurance is very affordable for the average family. In fact, $1 million of coverage probably costs less than what you pay for your coffee each morning in the drive-thru. If you want additional protection, you can add-on to your umbrella policy in increments of $1 million, usually for just $50 to $75 per million per year. That is a small price to pay considering the potentially life-changing benefits.
Keep in mind that there are requirements for purchasing umbrella insurance since it is secondary to your primary coverage. Insurers typically want you to have high limits on your homeowners, auto, and other liability coverages before they will issue an umbrella policy. If your current limits are not high enough, we here at Mark Leonard Insurance can assist you in bringing your coverage up to speed.
Shop for Umbrella Insurance with an Independent Agent
Always use an independent agent when shopping for umbrella insurance. At Mark Leonard Insurance, we have access to multiple insurers, each of which offers its own terms and benefits to policy-holders. We can help you compare Wisconsin umbrella policies and rates and narrow them down to find one that is right for you.