Sometimes a picture is worth a thousand words. When it comes to understanding umbrella policies, just picture an…umbrella.
For example, when going out into a storm, you might wear a rain coat, a hood, rain boots, and maybe even rain pants. All of these items help keep you dry and protected, but an umbrella provides that extra layer of protection against the terrible elements. A personal or business umbrella insurance policy provides added protection over and above your other lines of protection.
To protect yourself personally you would purchase auto insurance liability and homeowners’ liability. You would then add personal injury liability coverage, maybe boat liability, or even landlord liability for your rented properties. You make sure you have the highest limit those policies allow, which might only be $500,000.
Then you realize you have a lot at stake if you have a large claim. You have assets, savings, and future earnings. You have future plans, a family, and a lifestyle. Today a claim can easily exceed $500,000 and you feel inadequately protected against the elements. So to protect what matters most to you, you secure an umbrella policy.
The umbrella policy goes “over” your other liability policies. The other policies are first to respond in a claim. So if you had $500,000 on your auto policies and had a $1,000,000 umbrella, you would then have up to $1,500,000 in auto liability protection.
Personal umbrella policies are generally very affordable, sometimes under $100 a year for simple accounts. They go up a little for each of the different risks you have, such as youthful drivers, multiple cars, high performance cars, boats, RVs, ATVs, trampolines, pools, rental properties, etc. In addition, with some carriers, you can even purchase additional auto liability for you and your family members under the under and uninsured motorist coverage limit.
As a bonus, most carriers offer an additional discount on your auto and home policies for having an umbrella policy. Based upon your own personal variables, this savings can offset some, or a lot, of the umbrella premium.
The same concept applies to business umbrella policies. To protect your business, you would purchase general liability insurance. You might also have commercial auto liability, workers compensation and employers liability, employee benefit liability, and employment practices liability. A business umbrella policy can go “over” these other liability policies. Business umbrella policies can be as little as $350 a year (most average businesses range between $450 and $700 a year) to several thousands of dollars for high risk businesses (think large construction companies or high risk product manufactures).
We strongly encourage most people to consider adding an umbrella policy. Wondering if you are “most” people? You are if you have assets, savings, regular income earnings, or will have assets, savings or earnings in the future that you do not want to lose. An umbrella policy protects you from losing what you have worked hard for over the years. If you have no assets, never will, and have no income and never will, then you have nothing to lose so an umbrella policy is like not necessary.
Contact us today if you would like to learn more about umbrella policies and if they are a right solution for you.
Owner, Insurance Guru