BY Jeannette Wisniewski
Today it’s a broken bone. Tomorrow, it’s a dented fender. Unfortunately, we can’t predict what happens when. But one thing is for sure: eventually, someone will always say, It could have been worse.
Good thing they were so understanding.
At least the fire didn’t reach the houses.
Luckily, no one was hurt.
But what happens when things are worse? Like, way worse? That’s what umbrella coverage (also called personal umbrella insurance or a personal umbrella policy ) is for.
Umbrella insurance is for when things are way worse.
Way worse means being found at fault for an accident or event that resulted in injuries and damages (including defense costs) that your primary insurance coverage can’t completely meet. While the liability insurance you already have sounds like a lot, it doesn’t take more than a little bad luck to easily max those out.
You cause an auto accident. A bystander ends up with a few broken fingers. Your primary policy covers medical costs completely. Whew!
You cause an auto accident. A bystander ends up with a few broken fingers. The bystander happens to be a professional violinist. Now she can’t go on tour. Her lost wages alone are more than what your coverage limits allow. The rest you’ll have to pay out of pocket. She sues you for that and then some. Don’t have that kind of cash? In that case, the courts may go after your assets including your home, your kid’s college fund, and even future earnings.
Do I need umbrella insurance?
The future isn’t ours to see. Whether you will ever actually need to use umbrella insurance is unknown.
What is your peace of mind worth? How can you make the choice easier? Consider whether you have additional risk factors that may put you in this type of situation. Also, ask yourself what you may stand to lose if you don’t have an umbrella policy in place.
If you’re still unsure, here are seven people who should consider buying umbrella insurance:
The World Traveler
A backpacking trip gone wrong. The party at that Airbnb that got way out of hand. The high school cruise that ended with a medical airlift. Umbrella insurance is an additional liability policy that can follow you (and other members of your household) anywhere you go—even out of the country.
Your dog bites the neighbor. Your teenager causes a deadly wreck. Someone breaks their arm falling off the trampoline. If you own your home (or have any equity at all), the value you’ve built so far can be gone in an instant if you are ever sued. Umbrella insurance can cover damages up into the millions, saving your hard-earned assets in the process.
You flooded your apartment and the apartment beneath you. Damages downstairs include several priceless family heirlooms. And while you were sorting all this out, the apartment manager slipped. Renters insurance doesn’t cover heirlooms or enough to pay for all of this fiasco.
The Airbnb Entrepreneur
Your Airbnb has a stellar reputation. But this time things went horribly wrong. You thought the underlying policy you had was enough. It covers some parts of the claim but not others. Umbrella policies usually start at one million in coverage, but you can purchase more. Plus, umbrella policies may cover things that other policies may not, like lost wages.
The Parent of Teen Drivers
Your teen is responsible. He knows you’ve told him not to, but just this once he decides to take a carload of friends to the game. There’s a wreck and the kids in the backseat aren’t wearing their seatbelts. Medical bills are high when one person is involved. Imagine the total when you add up emergency costs, hospital stays, and rehabilitation for several people at the same time.
Car insurance for teens is greater because studies show that teen driving is associated with many risks that older drivers (as a whole) don’t face. This one from the CDC names risks due to lack of experience, cell phone use, and seatbelt habits among others. An umbrella policy covers bodily injury, personal injury, and property damage—giving you financial ease over the unknown.
The Social Media User
We are used to celebrities, politicians, and news outlets getting sued for what they say, imply, or print. It’s especially easy to get in trouble online. You may not have a million followers, but if you (or someone you are legally responsible for) is sued because of something they said or did online, the legal fees can add up quickly. Just a single comment on Facebook cost this woman half a million dollars. What used to be unimaginable is now a real possibility for anyone in the age of social media. The extra liability coverage that umbrella insurance provides can protect you financially in cases of libel, slander, false arrest and even invasion of privacy.
Anyone Who’s Worked Hard for What They Have
You own a home. You have a rental property, a boat, or other recreational vehicles. You are putting money towards a honeymoon, a college education, or a retirement. Umbrella policies can protect you from losing those things should your basic policies not be enough to cover an out-of-the-blue, unfortunate event.
Is umbrella insurance affordable?
Just because umbrella insurance covers costs up into the millions doesn’t mean it’s only for the wealthy. Umbrella insurance often costs less than expected—especially when you consider what it might cost not to have it. In fact, the Insurance Information Institute estimates that a $1 million umbrella policy costs about $150 to $300 a year…much less than the typical auto or home insurance policy. So don’t skip out on giving it some consideration.
An umbrella insurance policy is often bundled with other primary insurance you have. For example, you may have your homeowners insurance and auto policy with a single insurance provider. You don’t have to buy a separate umbrella policy for each one. An umbrella policy is supplemental insurance that sits on top of, or covers (like an umbrella), other policies you have. Sometimes you can get a better rate (or discount) on all your policies by bundling them. That means if you already have your auto insurance with one company but found a better rate for home insurance at another, you should find out from each company how much it would cost to bundle those policies together and add an umbrella policy over them all.
Umbrella insurance isn’t for everyone. But it isn’t for the ultra-rich either. It’s for anyone who needs high-dollar liability coverage and asset protection for when things are way worse.
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