Please Share My Umbrella (Insurance).

What did the homeowners' insurance policy say to the auto insurance policy?  The punchline of this rather corny joke is both the title and topic of this post.  I came across this great article the other day about how personal umbrella policies plug holes in your coverage.  It does a great job of explaining what an umbrella policy is and how it works.  I want to go into a little more detail here on just a few of the points of the article.  The author starts by addressing three common misconceptions about umbrella insurance. 

"They are only for rich people."
Let's say that you were at fault in an accident that resulted in a judgment against you for $500,000.  Your auto insurance would typically provide coverage for the liability up to a $300,000 limit or whatever limit you had selected. You would then be responsible for the difference of $200,000.  Now, if you don't have $200,000 to cover that obligation, then you would just have this huge debt looming over you and you would pay as you are able (most likely for the rest of your life).  On the other hand, if you had $200,000, you would pay it off right away out of your own pocket.  So the reason people believe that umbrella policies are only for people who are well off is because those people are more inclined to spend the money to insure that such an event would not wipe out a lifetime of successful planning.  They will spend hundreds of dollars to protect thousands.   But even if you don't have a huge pile of cash, who wants to run the risk of "...a whole lot a tryin' just to get up that hill."  before you can finally put it behind you and start "Movin' on up"?

"It's too expensive."
Having just said that "people will spend hundreds of dollars to protect thousands", a basic personal umbrella policy is more affordable than you may think.  I've recently quoted several umbrella policies for my clients and the premiums for $1 million in coverage has ranged from $100-$200 per year or around $8-$15 per month. 

Adding additional coverages like uninsured and under-insured motorist coverage may be advisable and can add to the premium a little.  But, adding this coverage extends your protection beyond just damages that are caused by your personal negligence.  This post by David Lowe, a personal injury attorney, entitled "How Big is Your Umbrella?" sheds some additional light on this topic.

"It's too complicated to coordinate it with your existing coverage."
It really isn't that complicated to coordinate with your existing home and auto insurance even if you purchase it separately from a different carrier.  In some cases, the other carrier may ask you to adjust your liability limits on your current coverage in order to provide you with the most cost efficient means of acquiring the additional coverage.  They will tell you what the limits need to be and, once you've adjusted the limits, they will issue the policy.  Not that complicated really.  More on that here.

In conclusion, whether you rent an efficiency or own a mansion, drive an old used car or have a chauffeur, if there's any chance that you could cause someone injury or damages that would allow them to sue you, a personal umbrella policy is a very cost effective and simple way to protect and preserve what you've worked so hard for, whatever that may be.

Contact me for a quote.

 

Related articles by Zemanta

• Umbrella Coverage for Preventing Your Ruin