Get Peace of Mind with Umbrella Insurance
One in 10 people know something important that the rest don't. And they've
done something about it. Any ideas?
Here’s a clue:
Most people think that costly lawsuits only turn up in the world of big
business. While that's mainly true, every year individuals get sued for
millions. Millions they don’t have.
What those one-in-10 have done is taken out low-cost umbrella insurance
that protects them against high-cost lawsuits.
Umbrella insurance, also known as excess liability insurance, is a simple
way of adding to your insurance protection. It tops up your coverage with
much higher payouts if you land in big trouble.
But because that sort of thing doesn't happen frequently, the premium you
pay is actually quite small, usually a matter of just a couple hundred
dollars or so every year. It's a small price tag for the peace of mind it
But there's more to it than that. Umbrella insurance covers you for things
that other policies may not.
Let's take a closer look.
Why Umbrella Insurance is Important
When you cause an accident, you generally have to take the blame. And
you're responsible for the cost of putting it right. That's "liability" in
That's how people end up in court being sued. And that's where the
million-dollar-plus settlements happen -- compensation for things like the
cost of serious injury or even death you cause to others, or serious
big-time damage to someone else's property or livelihood.
Yes, these risks are covered in your car insurance and homeowners (or
renters) insurance, or other property coverage such as insurance for your
But sometimes the payout limit in these policies simply is not enough to
cover those costs, especially if there are also legal fees. Research
suggests that something like one out of every eight personal injury
liability awards tops out at more than a million.
Even attorney fees alone can run out at a quarter-million dollars.
An average homeowner with standard insurance may be forced into selling
their property or have a lien placed on it, or have their wages and savings
targeted, to meet such costs.
This type of outcome can result in up to a quarter of an individual's wages
being "garnished" to meet settlement -- and that could last a lifetime.
But umbrella insurance, which provides top-up coverage in slices of a
million dollars or more, can take care of that.
Protection Against Additional Risk
Umbrella insurance policies differ from one insurance company to another,
both in cost and the scope of their coverage (which is why you need a good insurance agent to secure the best coverage for you!).
Some umbrella policies also cover additional risks you won’t always find in
a standard policy. For example:
- Protection against costs for libel and slander -- when people claim
you've besmirched their reputation by saying untrue things.
- Protection against claims of malicious prosecution -- this is when
someone counter-sues you for taking out a lawsuit against them.
- The cost of restoring your reputation if it's damaged because of a
- False arrest, where someone is held against their will for accusations
you make that turn out to be groundless.
- Mental anguish, where someone claims your actions and behavior have made
them distressed and sick.
When Should Your Buy Umbrella Insurance?
Who needs umbrella insurance?
Many of us do -- if we want to protect our assets. It all depends on how
much we have that needs to be protected -- what's known as your net worth.
That's what's at risk if you are sued.
It may also depend on the particular risks you face day-to-day. For
example, if you're self-employed, you're more exposed to the risk of a
costly lawsuit than others.
The same applies if you sit on the board of a not-for-profit organization
where board members can be held personally responsible for dishonesty or
incompetence within the organization.
You might be an individual, a business or, say, a landlord facing the
possibility of being blamed and sued. Note that business liabilities are
not covered within a personal umbrella policy. You will need a separate,
additional excess liability policy for your business.
If you're not sure about whether you need this protection, or even how much
coverage you have through your existing homeowners and auto policies, speak
to your insurance agent.
How Much Umbrella Insurance Should I Get and What Does It Cost?
Most homeowners insurance and auto insurance policies limit the maximum they will pay
out for liability costs to between $300,000 and $500,000.
Umbrella coverage is not added to these policies but provided as a separate
policy. When your liability costs exceed these limits, the umbrella policy
Most people choose to cover themselves with an additional $1 million, but
you can get up to $10 million of coverage. More in some circumstances.
Costs are based on a sliding scale. So, the first million will cost you a
couple hundred dollars per year but each subsequent million will cost you
less, perhaps $50 to $100.
So, you can get high coverage fairly inexpensive if you need it.
It’s worth noting that premiums can often be reduced further if the
individual already has policies with the same insurer.
In other cases, though, insurers only offer umbrella coverage to existing
home and auto owners,
It Makes Sense
Commonsense tells us that umbrella insurance is a good and wise thing. The
alternative almost doesn’t bear thinking about. Contact RC Cook Insurance today for your free umbrella insurance quote.