A Rainy Day: Why You Need
an Umbrella Policy Now

August 19, 2015



By Tom Hershewe

We all hope that we’ll never need to use our insurance. That’s why we see so many people with only minimum coverage. But, life tends to get in the way of these kinds of wishes. Uncontrollable forces and unforeseeable acts such as weather or other people’s negligence mean that insurance is both a necessity and something that we’ll likely depend on for help. Having an additional layer of insurance – known as an umbrella policy – can give you extra protection for these unknowns.

Umbrella insurance is “extra” insurance. Most policies cover costs over and above the limits of your homeowners, auto and special policies (such as boat or RV insurance) but also cover claims of slander, libel or false arrest. Many people look at the big numbers on their individual policies and feel well covered. However, the costs of an accident or injury, including a possible lawsuit, can make those numbers seem small.

For example, if you or a family member is involved in a car accident and liability insurance covers up to $300,000, but the other driver is severely injured and his or her medical costs are closer to $700,000, your umbrella policy would cover the additional $400,000. This extra insurance prevents you from having to sell your house, investments or declaring bankruptcy to cover costs from a single event. Having an umbrella policy also means that if you or a loved one is sued, the costs of the case, including the settlement or verdict, court fees and your attorney fees will be covered.

Injuries, accidents or property damage that occur at home are another good reason to purchase an umbrella policy. The policy protects you in the event you’re sued if your tree falls on a friend’s brand new car, or from covering medical costs if your dog bites a child. Owners of rental or vacation properties should also consider umbrella policies in case a tenant is injured on the property.   

Purchasing an umbrella policy is often as simple as calling your agent. The majority of insurers offer these policies. On average, a million dollars’ worth of coverage costs very little per day or annually, making it a valuable investment.