Excess coverage above the homeowner and auto policy
No, this will not cover your dry-cleaning bill if your umbrella does not open. However, similar to an umbrella, this insurance helps provide you with a canopy of protection against catastrophic financial events. Think about this:
Your dog bites and seriously injures your neighbor. You are liable for the extensive medical expenses. Your friend falls in your yard at your annual cookout and successfully sues you for $1 million. Your homeowners insurance tops out at $500,000. You are mowing your yard just before the big game on Saturday and in your rush to finish you don’t see the rock that is hurled by the mower into your neighbors yard striking him in the head causing a permanent disability and a $5 million award. Your teenage son or daughter is at fault in a major car accident which injured the occupants of the other vehicle and causing damage well in excess of your $250,000 car insurance coverage limits.
These are just a small sample of situations where a personal umbrella policy would be helpful by providing additional coverage. Here’s how it works. Once your primary insurance coverage is exhausted, whether it’s your homeowner’s insurance, car insurance, or boat insurance, your personal umbrella policy responds. Plus, umbrella insurance covers many situations that typically aren’t covered by other liability policies.
I Don’t Think I Need An Umbrella Policy
Umbrella policy coverage limits can range from $1 million and up. If you think that is too much insurance and you don’t have a need for it, take this test. Add up your assets to include the value of your home, your money in the bank, stocks, bonds, 401(k) funds and other retirement savings, and other assets such as a classic car or new boat. Take a look at your liability coverage you have on your homeowners, auto, and boat policies. Do your current liability policies cover your assets? If you don't have liability protection that exceeds your assets, you need a personal umbrella policy. The premiums are very affordable, and you can protect yourself against a financial game changer.