Why You Need an Umbrella Policy

If you’re thinking about your insurance coverage, there’s a common question: Is an umbrella policy worth it? 

Here’s how to think about it. Imagine you are a few short years away from your retirement: Your home and your car are paid for, and your retirement accounts are the result of years of careful planning and saving. Unfortunately, you get into an accident, and while you may have walked away unscathed, a couple of passengers in the other car suffered more serious injuries. 

Between medical bills and lost wages, you are on the hook to them for nearly a million dollars. The last thing you want is to be sued for everything you have worked for. Without exhausting the resources you have worked a lifetime to build, how do you cover your liability? 

This is exactly what umbrella insurance is for. So, how does an umbrella policy work? Liability coverage for homeowners and auto insurance policies is designed to provide you with financial protection up to the coverage limit.  This coverage may protect you in accidents where you may be responsible for property damage or injuries sustained by others. Auto insurance is for vehicle related accidents and personal liability on your homeowners insurance is for other accidents (like a dog bite).   

Umbrella coverage may provide additional liability coverage, arching over your car and homeowners policies to provide an added layer of protection. That’s why it’s also known as excess liability coverage: It usually provides further protection above the vehicle and homeowners insurance liability limits. 

If you’re wondering if an umbrella policy is right for you, here are some considerations to help you make the decision. And to get a big-picture view of your home and auto coverage, connect with a Farm Bureau agent.

Why Do I Need Umbrella Insurance? 

Umbrella liability coverage can be useful in many different scenarios. 

• Additional Auto Protection: If you’re in a car accident and your liability for damages that exceed your auto liability limits, personal umbrella/excess liability insurance may cover the extra expense depending on your limits.
• Above and Beyond Home Insurance: If a neighbor falls on your property, or your dog bites a friend at a picnic, which causes serious injuries, and you are legally responsible, umbrella coverage can pay the additional expenses beyond the liability limits of your homeowners insurance.
• These are just acouple of examples of the protection umbrella coverage provides, giving you peace of mind and extra protection against life’s risks, accidents and mishaps.

Most insurance is written to focus on a specific risk; umbrella insurance works differently. Umbrella insurance protects your overall financial well-being, covering legal liability in excess of auto or homeowners underlying policies. In many cases, umbrella insurance is written for amounts of $1 million or more, but owners generally find the coverage is quite affordable for the added peace of mind that it provides.  

Note that an umbrella policy may not be a standalone policy. Generally, it’s sold as an add-on to an existing home or auto policy. However, in most cases, specific amounts of liability coverage must be carried on the primary or underlying auto and homeowners policies to keep umbrella coverage active. 

People spend a lifetime building assets and accumulating wealth, whether through savings or retirement planning. Umbrella coverage is the most useful when you have assets to protect. 

Protect Your Future 

Umbrella insurance can provide an additional layer of protection over your underlying policies. Curious to learn more? Reach out to Farm Bureau to help you weigh your options and help you prepare for a different kind of rainy day.