McQuiston: Who Needs An Umbrella Policy?

By ALLEN MCQUISTON
The Jemez Agency

Who needs an umbrella policy?

You do … probably

There are some types of insurance that are required by law and lenders and other types of insurance that just make sense to have. Umbrella insurance falls into the latter category. Nobody will make you buy an umbrella policy, but doing so could save you from total financial ruin.

Umbrella Insurance Explained
Umbrella insurance (also known as excess liability insurance)  is a form of liability coverage. It is designed to provide additional liability protection above and beyond the coverage traditionally provided by auto, home, and renter’s insurance. This protection kicks in when you reach the liability limits on your insurance policies. For example, if the liability limit on your auto policy is $300,000, the umbrella policy provides coverage above that amount.

You might be wondering why you would ever need that much liability coverage. The fact is that it is impossible to predict how much a judge or jury may award an injured person. It is not unusual to see judgments in the millions of dollars nowadays.  The example I use when  illustrating a large loss is this:  You are driving carefully in the snow.  You hit the brakes to stop, but it’s icy and you slide into a minivan with kids.  One or more of the kids  is badly injured and will require lifelong care and physical therapy.  You are going to be responsible for that lifelong bill.  Without an umbrella policy, your personal assets could be seized to cover the costs of your negligence.

An umbrella insurance policy ensures that you do not need to worry about losing your home, savings, and other assets.

Umbrella Insurance Myths
There are several myths associated with umbrella insurance. One of the biggest is that umbrella insurance is only for the rich. The truth is that umbrella insurance can provide needed protection for every policyholder. We live in a litigious society. Anyone can be sued at any time. And with judges awarding larger amounts of money than ever before, it makes sense to buy additional liability coverage to protect your assets.
Another misconception is that umbrella insurance is expensive. Umbrella insurance premiums are actually quite affordable, and in most cases, cost less than it would to purchase additional liability coverage on auto and home insurance policies. According to the Insurance Information Institute, $150 to $300 per year can buy $1 million worth of personal liability protection. Every million after that typically costs an additional $100 per year. In other words, umbrella insurance is one of the best buys on the insurance market.

Talk to your insurance professional to see how much additional liability coverage you can buy for such a little cost.

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