If life unexpectedly comes at you with a curveball — like an accident, a lawsuit, or even an erroneous accusation — your standard insurance doesn’t always pay off. That’s where umbrella insurance comes to the rescue. Think of it as an emergency backup safety net that sweeps you up when the other insurance plans run out.
What is umbrella insurance?
Umbrella insurance gives you extra liability protection beyond your existing car, home, or renters’ policy. It kicks in after your regular policy is reached. Suppose you have a terrible car accident and the damages exceed your auto policy limit. The umbrella insurance covers the amount over the limit — possibly saving you from financial ruin.
But it’s not necessarily all about car accidents. Umbrella insurance can help in more unexpected situations — like if you are hurt at your home and sue you, if your dog bites you, or even if someone sues you for slander or libel.
“Who doesn’t want the peace of mind that comes with knowing they’re covered?” asks Peter Piotrowski, chief claims officer at Hippo Insurance. “Umbrella coverage completes where your standard policies run out, and that can be a game-changer.”
Who really needs it?
Technically, anyone can carry umbrella insurance — but some individuals need it more than others. If you’re extremely wealthy (i.e., you have assets in excess of $500,000), you may be more vulnerable to being sued. The more you have, the more there is to lose if you get sued.
You may also want to consider umbrella coverage if:
- You rent out houses or second homes.
- You have teenage drivers on your car policy.
- You host parties or gatherings at your home.
- You own a pool, dog, or trampoline.
- You’re a landlord, coach, or volunteer where accidents could happen.
Even if you’re cautious, accidents involving other people can easily spiral into expensive legal battles. An umbrella policy can keep your savings and future earnings safe.
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Who might skip it
Not everyone needs to purchase umbrella insurance right now. If your home and auto policies already have liability coverage of more than the worth of your entire possessions, you may not yet need the extra layer.
But what the pros say is to review it every year or two. As you earn more income, or buy property, start your own company, or invest more, you’re a greater risk — and that’s when umbrella insurance is a good investment.
How much will umbrella insurance cost?
Interestingly, umbrella insurance is not expensive considering the protection it offers. Coverage usually starts at $1 million, and most people pay between $150 and $400 annually. The premiums might be higher depending on your risk factors as well as how much coverage you want — policies can go up to $5 million or more.
To calculate how much coverage you need, add up your assets — your home equity, savings, investments, and vehicles. Your umbrella policy must cover at least that amount to fully protect you.
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How to buy umbrella insurance
To qualify for an umbrella policy, you’ll need auto and home insurance with some liability requirements — typically at least $250,000 on car and $300,000 on home insurance.
Most insurance providers will give you a discount if you package your umbrella policy with your existing coverage. You can also comparison shop online at websites like ValuePenguin or The Zebra to find the best deal.
You’ll generally be required to give some information on your assets, income, and existing policies when you apply. Then, your insurer will help determine the amount of coverage that is right for you.
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