How Much Personal Umbrella Insurance Do I Need?
Personal umbrella insurance kicks in when you reach your limit on your homeowner or automobile insurance. An umbrella policy works the same way your standard policy works. Most of the time, it covers liabilities and beneficiaries that traditional insurance doesn’t include.
The question is: how much umbrella insurance should you get for adequate coverage?
Calculating the Cost
Umbrella policy has a minimum coverage of $1M and provides benefits in a lawsuit and incidental costs. The premium starts at $150 annually, and you pay an additional $100 for every million coverage.
Some say that you should get this insurance coverage twice your net worth or an asset of $300,000 and higher. Net worth is asset minus liabilities. However, this amount might still not be enough, especially if you’re sued for $2Million worth of damages.
Often, families or individuals at risk of being sued can get coverage between $2M and $5M, but you can get as high as $10M coverage. This coverage might be excessive, but the possibility of getting sued for this amount isn’t moot.
The premium cost is quite affordable because you need to buy a homeowner’s and auto policy before you can get umbrella insurance.
Most insurance providers use these two policies to encourage you to buy more coverage. Often, they don’t issue umbrella coverage if you don’t buy the standard homeowner and auto coverage from them.
Who is likely to get sued?
Anyone is at risk of litigation, but the most common is an individual who seems wealthy. More assets mean a higher risk of litigation.
People would always find ways to sue you for unknown reasons. So, it is best to get insurance coverage beyond your liability limit. Remember, most homeowner insurance policy is often capped at $1M depending on the premium you paid.
If you engage in risky activities, the likelihood of being sued is also greater. Thus, you are a likely candidate for getting an umbrella policy.
Parents are also likely to get sued, especially if you have a teenage driver. If your teen gets into an accident or injures someone while driving, you will be sued, even if you aren’t the direct cause.
Why Buy an Umbrella Insurance Policy
Umbrella insurance protects your home equity and assets, retirement savings, future income, and sanity. Lawsuits can become a nightmare if they wipe out your assets either through litigation costs or payment of damages.
You should buy an umbrella policy if you think your liability insurance isn’t enough to cover the cost of judgment. It doesn’t hurt to have a reserve to pay damages.
Inclusions in the Umbrella Insurance
This policy covers the costs of lawsuits and expensive claims. These lawsuits happen when:
- A neighbor gets injured within your property. Insurance will cover the bills aside from litigation costs.
- You slander or smear one’s reputation. Insurance will pay for damages.
- You damage your property, such as a car in an accident. The insurance covers the repair costs.
Exclusions in the Umbrella Policy
An umbrella policy has broad coverage. However, it won’t cover some things.
One, you can’t claim coverage on the damage sustained to your personal properties. Liability, in this instance, refers to accountability and responsibility of inflicting damages to other people.
Two, deliberately inflicting bodily harm to other people isn’t eligible for claims.
Three, liability related to business and professional activities is not part of the umbrella liability under this category. You should get business liability or general liability.
Fourth, assumed liability under a signed contract and war-related liability aren’t covered.
How Does Umbrella Policy Protect You?
The concept is simple. For example, your liability limit is $300,000. Then, you get sued for damages and bodily injury for around $500,000. The amount of $300K will be used to pay for all incidental costs. Your umbrella policy will cover the rest.
Sometimes, getting Santa Fe Umbrella Insurance is more practical and cost-effective than increasing your liability limit.
Final Words
Living in a world where people love to sue other people just for the sake of it is disheartening. However, with umbrella insurance, you don’t need to shell out money to pay the lawsuit settlement. A few hundred dollars in premium means a secure life.
About Daniels Insurance, Inc.
At Daniels Insurance, Inc., we have a unique understanding of the risks that businesses like yours face on a regular basis. With the backing of our comprehensive coverages and our dedication to customer service and quick claims resolution, your business will be fully protected. For more information, contact us today at (855) 565-7616.