What, Exactly, Is Umbrella Insurance – And Do I Need It?

By Kelly Woodward

Here is a basic definition of Umbrella Insurance: coverage that protects you if you are sued due to an event that takes place involving your vehicle, your home or something you may have done. As an example, let’s say you’re hosting a party at your home and someone falls down the stairs on your deck and injures themselves. That person could sue you for medical expense related to their injuries, as well as pain and suffering. Your homeowner’s insurance may cover personal liability. However, there are limits to what can be paid. Therefore, you could be left with hundreds, if not thousands, of dollars in out of pocket costs.

If you had an Umbrella policy, however, those costs would be taken care of by your insurance provider, as well as any legal fees associated with the lawsuit. Your Umbrella policy would not only potentially protect you if you lost the lawsuit but would cover your legal expenses as well.

It may be easiest to think of an umbrella policy at a supplemental policy and your homeowner’s insurance, renter’s insurance or auto as your primary policies. The umbrella coverage would pick up where your primary policy’s limits have been met.

It also protects your future earnings. In the case of a lost lawsuit, the plaintiff could be awarded more than the value of your current assets. Rather than have your future wages garnished, the umbrella coverage would take care of the full amount awarded to the plaintiff.

How do you decide if you need this type of coverage? According to Dan Green, founder of Growella, if you fit into one or more of the following categories, you should have an umbrella policy:

  • Owners (or renters) of cars, boats or other recreational vehicles
  • Pet owners
  • Parents
  • Coaches
  • People who invite guests into their home or onto their property
  • Rental property owners
  • Volunteers of service or time
  • People who discuss businesses or other people

Most of us qualify for more than one of the above categories; being involved in any of these categories increases your chances of being sued. Therefore, protection is necessary!

So what will an Umbrella policy cost you for all of that protection? Agent Teresa Anderson explains, “Umbrella insurance is surprisingly inexpensive, especially considering everything it can do. It would be a shame to get stuck with massive bills if the unexpected strikes when it could have all been covered at a fraction of the cost. Liability incidents come in all shapes and sizes, so being ready for anything that could happen is key for your financial future.” According to the Insurance Information Institute, a $1 million policy typically costs between $150 to $300 a year. That’s less than $25 per month!

Most financial gurus would agree that the cost of coverage far outweighs the potential cost associated with not being covered. In a societal climate of lawsuit-loving individuals, you can’t go wrong with the additional protection. You just never know when an unfortunate accident could occur.

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