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. The last thing you want is to be sued for everything you have worked for. Unfortunately, you get into an accident: while you may have walked away unscathed, a couple of passengers in the other car suffered more serious damages. Between medical bills and lost wages, you are on the hook to them for almost a million dollars. Without exhausting the resources you have worked a lifetime to build, how do you cover your liability?
Umbrella insurance may be the answer. While you have home and auto insurance, those policies are designed to cover the physical damages to the vehicle, as well as cover medical expenses – but they have coverage limits. Umbrella insurance supplements these policies with additional liability coverage.
Umbrella liability insurance earns its name because the coverage arches over your car and homeowners policies to provide an additional layer of protection. Also known as excess liability coverage, umbrella insurance coverage starts where vehicle and homeowners insurance liability limits stop.
So why do you 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 exceed your auto liability limits, personal umbrella/excess liability insurance can cover the extra expense.
- Above and Beyond Home Insurance - If a neighbor falls on your property and you are legally responsible, umbrella coverage can pay the additional expenses beyond the liability limits of your homeowners insurance.
- Social Media – If you are involved in a spirited discussion on social media, and one of your comments are perceived to cause someone’s reputation harm, your umbrella policy could cover legal liability in excess of the limits of other policies.
These are just a few examples of the protection umbrella coverage provides. Most insurance is written to protect one aspect of your life; umbrella insurance works differently. Umbrella insurance protects your overall financial well-being, covering legal liability in excess of traditional 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. An umbrella policy isn’t a stand-alone policy. Generally it’s sold as an add-on to an existing home or auto policy.¹
People spend a lifetime building assets and accumulating wealth, whether through savings or retirement planning. Since umbrella insurance is designed to protect your assets from a lawsuit, it make sense to purchase an umbrella policy when you have assets to protect.
Umbrella insurance can provide an additional layer of protection for your existing policies. Curious to learn more? Contact your local Farm Bureau agent who will help you weigh your options, and help you prepare for a different kind of rainy day.
1There are specific amounts of liability coverage that must be carried on the primary or underlying automotive and homeowner’s policies in order to maintain the umbrella policy.