Life is full of uncertainties, and while we may take precautions to protect our assets, accidents and unexpected events can still occur. That’s where umbrella insurance comes into play. Umbrella insurance provides an additional layer of liability coverage that goes beyond the limits of your existing home, auto, or other insurance policies. This article will explore why carrying umbrella insurance is essential for safeguarding your financial well-being.
1. Protecting Your Assets:
According to Sebastian Pelaez, owner of Multi Insurance Services, accidents can happen to the most responsible individuals, regardless of age or driving experience, and more than 80% of catastrophic accidents involve motor vehicles. Damages awarded on the severity of an accident and personal trauma to the victim are decided by juries, not your ability to pay those damages. Sebastian advises that an umbrella policy will also provide defense coverage for attorney’s fees and other legal costs.
One of the primary reasons people should carry umbrella insurance is to protect their assets. In today’s litigious society, lawsuits can arise from various situations, not only from a severe car accident or a dog bite incident, but even a social gathering at your home. If you are liable for damages exceeding the limits of your primary insurance policies, your personal assets, including savings, investments, and even your home, may be at risk. Umbrella insurance acts as a safety net by providing additional coverage, ensuring your assets are protected in the face of a substantial claim or lawsuit.
2. Enhanced Liability Coverage:
Many people do not know that most standard insurance policies, such as auto or homeowners insurance, offer liability coverage, however, their limits are often capped. According to Ashley Croley, Insurance Agent, umbrella insurance coverage may help you protect your assets and financial future by providing additional protection in case of a liability lawsuit. In a severe accident or lawsuit, the liability claims can quickly exceed these limits, leaving you personally responsible for the remaining expenses. Umbrella insurance offers an extra layer of liability coverage, typically starting at $1 million and going up to $5 million or more, depending on your needs. This extended coverage helps bridge the gap and provides comprehensive protection against catastrophic events.
3. Coverage for Personal and Property Damages:
Umbrella insurance covers bodily injury or property damage caused by you or your family members and extends coverage to personal injury claims. Personal injury includes libel, slander, defamation, or invasion of privacy. Ashley Croley adds that an Umbrella Policy may also help protect you against personal injury claims for some situations not covered by your underlying auto or home policy, such as defamation of character, libel, or slander. Such claims can arise from incidents that happen in social media posts, comments made in public, or even a heated argument. Without umbrella insurance, you might be left personally responsible for the legal costs and damages associated with these claims. With an umbrella policy, you can rest easy, knowing you have an additional layer of coverage to protect you from potentially ruinous financial consequences.
4. Worldwide Coverage:
Another advantage of umbrella insurance is that it provides coverage worldwide. Whether traveling abroad or hosting an event outside your home country, umbrella insurance ensures you are protected. Many standard insurance policies have geographical limitations, but an umbrella policy extends coverage across borders, giving you peace of mind no matter where you are. Also, according to Sebastian Pelaez, an umbrella policy provides vacation, rental, and liability protection for boats, personal watercraft like Sea Doo’s and scooters.
5. Cost-Effective Coverage:
Contrary to popular belief, umbrella insurance is relatively affordable compared to the amount of coverage it provides. Considering the potentially devastating financial consequences of a lawsuit or substantial liability claim, the cost of an umbrella policy is a small price to pay for the added protection it offers. Insurance providers often offer umbrella policies at reasonable premiums, and the cost may decrease if you already have multiple policies with the same provider.
5. Do you need coverage? Who needs an umbrella policy?
According to Sebastian Pelaez, anyone who operates a motor vehicle or owns a home or condominium is vulnerable to legal action. If you have a swimming pool or own an ATV, RV, boat, or motorcycle, your need for extra protection is even greater.
Ashley Croley recommends personal liability umbrella policies for customers to gain peace of mind and protect the life they have built for their families. They add that planning for the unexpected is a great way to feel confident about your financial future. And, as each person’s needs differ, it is important to have a conversation with your agent to determine what amount best fits your needs.
At Ranch Capital, we advise that once your net worth reaches $1 million, it is essential to have an umbrella policy. Dave Ramsey, a personal finance expert with Ramsey Solutions, even recommends that people obtain umbrella insurance policies when their net worth exceeds $500,000.
My husband and I carry umbrella insurance and draw great peace of mind knowing we are protected, especially since we have three young drivers on our auto policies. We realize that we have never had more risk exposure than we do in this season of life.
In an increasingly litigious society, carrying umbrella insurance is a wise decision to protect your assets, financial well-being, and peace of mind. It provides an extra layer of liability coverage, surpassing the limits of your existing insurance policies. By investing in umbrella insurance, you are safeguarding yourself against the unpredictable, ensuring you can face any unexpected event confidently. Remember, it only takes one incident to wipe out a lifetime of savings, making umbrella insurance an essential tool in your risk management strategy.