Understanding Umbrella Insurance

It is simply prudent to carry insurance to protect your most valuable assets. To this end, most people will insure their car and their home. However, folks with significant assets beyond these two basic items need to protect those other assets as well. Umbrella – also known as extra liability – insurance addresses this need.

Why obtain an umbrella policy?

A standard homeowners or automobile liability insurance policies comes with limits on their coverage. That is, the insurance company is only liable to pay up to a certain amount no matter how much the actual costs are. People with significant assets are then forced to make up the difference. Umbrella insurance adds a second layer of coverage to protect against this possibility.

A simple example

You or someone else on your auto liability insurance policy has a devastating auto accident for which they are determined to be at fault. The other person’s car is totaled and the driver plus three passengers are severely injured. Replacing the car and paying the other party’s medical bills could easily reach $500,000 to $1,000,000. You would be personally liable for any monies not covered by your auto liability coverage – usually $300,000 – $500,000.

How much should I buy?

Umbrella insurance policies are typically sold in $1,000,000 increments. It is highly recommended that you purchase enough to cover your entire net worth. This type of insurance is remarkably inexpensive when compared to the alternative of having to meet any liability obligations yourself. A small downside is that you will still have to carry traditional homeowners and auto liability insurance.

What does it cost?

Bear in mind that an extra liability insurance policy does not cover all expenses involved with an accident – legal costs are the most notable exception. Still, for $150 to $300 per year per $1,000,000 worth of coverage, umbrella policies are worth their weight in gold or dollars or whatever else your assets are invested in.

One final note – business entities as well as individuals can be sued for amounts beyond the limits of their liability coverage. Be sure to allow for that possibility as well. For more detailed information on the benefits of both personal and business umbrella insurance, please contact us at The Marcus Group. We can be found online at MyFlaInsurance.com or reached directly at 954.721.1180.