Personal Umbrella Liability
What is a personal umbrella policy?
Sometimes liability claims occur that may exceed the limits of your underlying insurance policies due to your family’s activities, use of your home, or more often than not, car accidents. Your umbrella policy is an additional layer of liability coverage that picks up where your underlying home, auto, boat or other underlying policy stops. The umbrella policy is generally issued in increments of $1 million. Most policies are written as “follow form” policies which simply means, what is covered on the underlying policy is also covered by your umbrella. No more. No less. However, in some cases, the umbrella can be broader than the underlying policy.
Do I have to be a millionaire to need an umbrella policy?
Absolutely not. You do not have to be a millionaire to be sued for millions. In fact, as long as you are employable, your future wages are always at risk of wage garnishment. Considering your other assets, you might be surprised just how much you have at risk.
Keep in mind, the liability coverage on your home or auto policy may simply be too low to cover a large claim. Adding an umbrella is the least costly way to increase your overall liability rather than the cost to increase the coverage on the underlying policies.
How much liability insurance do I need?
This is a personal question and the answer will vary greatly. However you can use the following as a calculation guide to determine the sum of your exposed risk is:
1. How much equity do you have in your home?
2. What is the value of your bank accounts?
3. What is the value of your invested assets?
4. What is the value of your personal property?
5. What is the value of your future wages? (Current income multiplied by # of years until 65)
How much is an umbrella policy?
The cost of a $1 million umbrella policy covering a single home and two cars is about $200. The cost of a $2 million umbrella is about $350. A $3 million umbrella is about $450. A $4 million umbrella costs about $525. A $5m umbrella may cost between $600-$700. Generally, the more assets covered under the umbrella the more expensive the policy. Also, vehicles & watercraft typically add more premium to an umbrella than property.