Umbrella Insurance: Do I Need It?

“That will never happen to me.”

How often do you hear that phrase when discussing unfortunate situations, or freak incidents? Unfortunately, most people don’t realize the extent of their exposure to dangerous and costly liabilities until the unexpected hits their home, property or car.

It pays to have the proper coverage in place before the unimaginable happens.

Let’s say your neighbor falls and is injured at your home or in your yard. You’re liable, simply because the accident occurred on your property. If your neighbor requires surgery and misses months of work, the liability coverage under your homeowner policy could be inadequate (most homeowner policies typically provide a liability coverage limit of anywhere from $100,000 to $500,000).

Additionally, if you have to respond to a lawsuit, and the liability coverage under your homeowners policy isn’t adequate, your assets could be at risk. Often times in hindsight, consumers would rather pay for the umbrella insurance premiums, rather than having that money go toward the excessive costs of lawyers, lawsuits and medical bills.

What is umbrella insurance?


Umbrella insurance is excess over your home and auto insurance. Therefore, you must have the proper underlying coverage in order for the umbrella policy to respond. Otherwise, you could have a risky gap in your protection.

As explained in Umbrella Coverage for Preventing Your Ruin, from, umbrella coverage is a neglected area of insurance. While many people have heard of it, they don’t fully understand the value in purchasing it. Umbrella insurance also covers family members, worldwide, for actions that may cause injury to others or property damage.

Verify your policy details with your agent, because each insurance carrier will have required limits that you must follow.

When and why would you need additional coverage?

Whether it’s a serious auto accident involving pricey medical bills or an incident on your property, you can quickly find yourself responsible for damages that exceed the limits on your auto, homeowners or boat policies. Although it is not a requirement, umbrella coverage provides you with the psychological comfort in knowing that you, your family and assets are properly protected.

Without comprehensive coverage, you could be unnecessarily exposed to an accident or lawsuit, causing you to pay out-of-pocket for often costly expenses. Evaluate your current liabilities, risk exposures and existing auto and home policies with your independent insurance agent, to give you a general idea of any places you could use extra coverage.

Questions to ask yourself

Based on your individual circumstances, your agent may ask some of the following common questions to determine your need for umbrella coverage.

  • Besides your auto, do you own any other motorized vehicles, such as a motorcycle or moped?
  • Do any drivers in your household have mental or physical impairments?
  • Do your employees work at your place of residence? Many self-employed people assume that employees’ liabilities are covered in their homeowners policy if they operate a business from their residence, but this is not the case.
  • Are there any business activities conducted at your home or in any property that you own?
  • Within the last five years, have you been denied insurance coverage or have had insurance policies canceled or not renewed?
  • Are there any drivers on your current auto insurance policy under the age of 25?
  • Do you have any vehicles, watercraft, aircraft, or property that is owned, hired, leased or used on a regular basis that is not insured?
  • Do you live in a wealthy neighborhood, where you could be at a higher risk of burglary and other related crimes?
  • Do you travel frequently?

For a full list of questions, visit Questions Asked to Obtain an Umbrella Policy.

What is the cost of additional protection?

You must weigh the cost of umbrella coverage with the cost of not having additional coverage, because the money you spend upfront only pays off if an incident occurs. According to “Umbrella policies plug holes in your coverage”, from MSN Money, the consumer is usually able to establish how much the umbrella liability insurance will pay of a claim.

Your premium cost depends on specific criteria, such as the amount of coverage, the insurance company using the policy and your own personal risk factors.

You should consider buying enough coverage that protects your assets, as well as how much you and your personal assets are worth. This includes your future income, plans for settlement payments and any inheritance.

Although not popularly discussed or overly promoted, umbrella insurance coverage is just as important as your other personal insurance policies, for avoiding costly claims and consequences in your future.

Originally posted at Millers Insurance Agency.

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