Umbrella insurance, sometimes called personal liability insurance, is designed to cover catastrophic situations in which a legal award could exceed the limits of your auto or homeowners insurance. It is generally sold in increments of $1 million worth of coverage and goes into effect once the primary insurance limit is reached.
“Although homeowners and auto insurance are important foundations for financial protection, they may not be enough,” says Josh McCarthy, Personal Insurance Sales Manager, for Johnson Insurance. You could be liable for amounts that exceed your insurance coverage. If you own a house and have a retirement account or other investments, an umbrella policy should be a part of your financial plan and a step towards protecting your wealth.
“Let’s say, someone is injured on your property and successfully sues you for $500,000. If your homeowners policy limit is $300,000, you'd be personally responsible for the remaining $200,000, plus the deductible amount on your primary insurance. But, if you have a $1 million umbrella policy, you would be completely covered except for the deductible amount.”
You don't need to be wealthy to benefit from umbrella insurance, but the more assets you have, the more at risk you are for a lawsuit. Even if you don't have significant assets, it's possible a judge could garnish your future wages to cover an award that exceeds your primary insurance coverage.
You should also consider umbrella insurance if you:
Depending on the policy, umbrella insurance may also cover being sued for libel, slander, defamation of character, wrongful eviction or invasion of privacy.
A Johnson Insurance Personal Insurance agent will help you review your current homeowners and automobile insurance coverage to ensure you have adequate primary coverage. They will review your financial situation and liability risks to see if umbrella insurance may be appropriate for you. Premiums are generally very affordable, usually costing just a few hundred dollars a year for $1 million of coverage, with additional $1 million increments costing even less.
It's a small price to pay for additional peace of mind.