You work hard to ensure you’re covering all your financial bases. Homeowners insurance – check. Car insurance – check. Health insurance – check. And now someone is telling you your umbrella has to be insured?
Despite the odd name, umbrella insurance covers more than the damage that the lack of an actual umbrella could do. On a rainy day, an umbrella provides extra protection from unexpected showers in addition to your primary coverage, i.e., clothing.
Umbrella insurance works similarly in that it’s designed to augment homeowners or renters insurance, automobile, boat, and landlord insurance policies.
Umbrella insurance can assist with the following types of claims with limited coverage under standard insurance policies:
Bodily injury claims – Such claims may occur when you or a family member is found at fault in an auto accident.
Property damage claims – A claim that pertains to the physical damage to property, e.g., vehicles or another tangible item.
Landlord liability claims – This type of claim is related to the residence you rent out to another party. If a person is injured on the property or damage is done to someone else’s property at the home, then you may be liable for the damage.
Personal injury claims – Injury caused by an accident, or by negligent or reckless action, may result in this type of claim.
Umbrella insurance provides additional coverage above and beyond your standard insurance policy. This becomes important when you have to use your insurance due to a claim, and your liability exceeds your current coverage amount. An umbrella policy would then kick in to cover the difference. For example, let’s say your current coverage limit is $350,000 on your automobile insurance, but your liability exceeds $700,000 in damages. An umbrella policy could cover the balance left by your standard automobile insurance policy. If no such policy is in place, then your other assets are at risk to cover the difference.
Umbrella policies exist to help when your current policy limit has been reached. It not only provides the necessary cushion for claims exceeding basic insurance policy limits, but it can also offer claim coverage for liabilities not covered by your other insurance policies. If you are sued for libel, mental anguish, or other personal liability situations, an umbrella policy can help cover the costs of defending your position in court as well as help you maintain your healthy financial standing.
Sound like this is only for the well-to-do? Umbrella policies are not just for wealthy individuals or families who want to protect their assets. Owning things that have the potential to lead to injury of others like pools, trampolines, recreational vehicles, cars, trucks, motorcycles, dogs, etc. can put you at risk of financial devastation if another party incurs an injury.
If you receive any income or own assets, it is recommended to hold at least a $1 million umbrella policy. Depending on the insurer, plans can range from $150-$300 per year.
While we never think the worst can happen, it’s better to prepare for it. And it’s hard to deny the peace of mind assured for an incredibly low monthly premium.
The Financial Enhancement Group is an SEC Registered Investment Advisor. Securities offered through World Equity Group, Inc. Member FINRA/SIPC. Advisory services can be provided by Financial Enhancement Group (FEG) or World Equity Group. FEG and World Equity Group are separately owned and operated.
