Personal Umbrella Liability

What is a personal umbrella policy?

Sometimes liability claims occur that may exceed the limits of your underlying insurance policies due to your family’s activities, use of your home, or as often the case, car accidents. Your umbrella policy is an additional layer of liability coverage that picks up where your underlying home, auto, boat or other underlying policy stops. The umbrella policy is generally issued in increments of $1 million. Most policies are written as “follow form” policies which simply means, what is covered on the underlying policy is also covered by your umbrella. No more. No less. However, in some cases, the umbrella can be broader than the underlying policy.

Do I have to be a millionaire to need an umbrella policy?

Absolutely not. You do not have to be a millionaire to be sued for millions. In fact, as long as you are employable, your future wages may be at risk of wage garnishment. Considering your other assets, you might be surprised just how much you have at risk.

Keep in mind, the liability coverage on your home or auto policy may simply be too low to cover a large claim. Adding an umbrella is often a more cost-effective way to increase your overall liability coverage as compared to increasing the coverage limits on the underlying policies.

How much liability insurance do I need?

This is a personal question, and the answer will vary greatly from one person to the next depending on a variety of factors. However, the following questions may be worth taking into consideration:

1. How much equity do you have in your home?
2. What is the value of your bank accounts?
3. What is the value of your invested assets?
4. What is the value of your personal property?
5. What is the value of your future wages? 

How much is an umbrella policy?

The cost of an umbrella policy can be more affordable than you might expect: a $1 million umbrella policy covering a single home and two cars can be as low as about $200; a $2 million umbrella can start around $350; a $3 million umbrella can be as low as $450; a $4 million umbrella can start around $525; and a $5m umbrella can sometimes be as affordable as $600-$700. Generally, the more assets covered under the umbrella, the more expensive the policy. Also, vehicles & watercraft typically increase the premium on an umbrella than property.