Umbrella Insurance

A personal umbrella policy is an extra layer of liability insurance over what your underlying personal policies provide.  You may feel like you are being up sold when your agent offers you one. This might be a sign that your agent hasn’t done a great job at explaining the concept to you. The truth is that it isn’t as cut and dry as types of personal insurance so it can be difficult to explain.

Why Purchase An Umbrella Policy?

We live in a litigious environment. You can’t pinpoint what someone might sue you for. You can; however, assess your assets and compare with how far your underlying insurance will go in the event of a liability suit.  Consider what we in the industry call compensatory damages.  Compensatory damages can be specific or general in nature. Specific losses would reimburse the injured party for medical expenses, lost wages, funeral expenses and also the actual cost to repair or replace any damaged property. General damages compensate for things to which a specific dollar amount can’t be assigned.  Pain and suffering or disfigurement are examples of general damages. If  the individual acted recklessly or willfully then the court may also award damages intended to punish. Umbrella policies pay out more on car wrecks than any other type of liability loss. Anything motorized has a higher degree of injury.

Considering all the factors above helps you grasp how quickly costs can add up in a liability suit. Even the higher underlying limits can be exhausted before the claim is settled. If you have no assets then they probably won’t sue for anything above your underlying policy limits. You can’t squeeze blood from a turnip. Owning a home, vehicles and other property changes the conversation a little bit.  Personal umbrella coverage limits range from $1 million to $5 million. A $1 million policy typically costs a little over $100 annually.  This is a minimal cost for the benefit of protecting your assets.

Things To Note Before You Purchase An Umbrella Policy

There are a few things you need to note before purchasing a personal umbrella policy to ensure you have obtained the right coverage.

  1. Personal umbrella policies do not extend coverage to commercial risks you are involved in and vice versa.
  2. Farming operations are typically commercial policies. You would need to consult with your agent to determine how your insurance provider handles farm and farm umbrella coverage.
  3. Umbrella policies have required underlying limits for homes, boats, autos, etc. This is ultimately for your protection.
  4. Umbrella policies only provide coverage once the underlying limits have been exhausted.
  5.  Failure to obtain insurance or purchasing insurance through multiple agencies on things like boats, motorcycles or recreational vehicles leave you susceptible to gaps in coverage.
  6. If you do not have underlying insurance or your underlying limits do not meet requirements then you are responsible for paying the required underlying limit before your umbrella will pay.

 

If you would like to speak with an agent regarding whether or not an umbrella policy is a fit for you then contact us today!

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