Frequently Asked Questions
"Who Needs An Umbrella Policy?"
If you are concerned about losing your financial net worth as the result of a lawsuit for personal injuries and/or property damages caused by you, then you probably need an umbrella policy. Probably? Yes, probably, because you might already be covered adequately by your homeowner’s and auto policies.
Things To Consider:
- First, you need to know your net worth. Without this knowledge, it becomes a guess as to whether or not you are adequately covered.
- Calculating your net worth can be easy. It is a matter of creating a Personal Balance Sheet (assets minus liabilities = net worth). Here are a few tips:
- Stocks & Bonds
- Real Estate
- Credit card debt
- Auto loans
- Real estate loans
- If your net worth can be protected by the coverage limits in your homeowners and auto insurance policies, there is likely no urgent need for an umbrella policy.
- The cost of umbrella insurance is relatively inexpensive for the peace of mind it can provide. A million dollar policy will likely be less than $200 per year and each additional million dollar increment will cost less than that.
- Umbrella policies oftentimes cover personal liabilities that are excluded from homeowners policies, such as the following:
- Invasion of privacy
Tim and Christy embraced fiscal responsibility even prior to their marriage 10 years ago, a trait they both inherited from their very conservative parents. Despite sharing that philosophy, they could not agree on the need for an umbrella insurance policy. Christy thought they were adequately protected with their current coverage limits on their homeowners and automobile policies, while Tim believed that, dollar for dollar, this was the best bargain in insurance coverage. Given their personal net worth of over $1,000,000, a few premium dollars spent today could save a boatload down the road. Tim convinced Christy that for less than $200 per year, they could add an additional $1,000,000 of liability coverage to the $500,000 they already had by way of their other policies. It turned out to be a very wise decision. In an unusual lawsuit, the court held that Tim and Christy were liable for their child’s actions to the tune of $250,000. As it turned out, even though their homeowner’s policy excluded the coverage, they were saved by their umbrella policy.