Do I need umbrella insurance?
Even the most careful person with the best intentions can end up on the hook for a huge judgment from a personal liability lawsuit. While you’re unlikely to find yourself in this situation, it’s still smart to protect yourself against such a devastating financial loss. Umbrella insurance can help you do that.
Umbrella insurance is a type of personal liability insurance that can be indispensable when you find yourself liable for a claim larger than your homeowner’s, renter’s or auto insurance will cover.
Umbrella insurance even covers certain liability claims those policies may not, such as libel, slander, and false imprisonment.
Umbrella insurance might be especially right for you if you could see yourself in one or more of these scenarios:
your dog runs off leash and attacks your neighbor, who then sues you to cover their medical bills, lost wages, and pain and suffering
you cause a 5 car accident and your auto insurance isn’t high enough to replace all 5 accident’s victim’s vehicles
you send sandwiches to your child’s team game for the team to enjoy, but several children get food poisoning and their parents are unhappy
your teenager throws a party while you are gone, someone brings alcohol, and one of the attendees gets arrested for drunk driving on the way home
You might have also noticed that, even though umbrella insurance acts as coverage above and beyond your homeowners and auto insurance, the incident doesn’t have to involve your property or your vehicle for your umbrella insurance to cover it. You’re also covered worldwide, with the exception of homes and cars you own under other countries’ laws.
There’s certainly a fear factor involved in the decision to buy umbrella insurance. Many insurance companies say you need it because of the lawsuit-happy world we live in, where anyone can sue you for anything and ruin you financially. You can find plenty of personal liability horror stories in the news, where juries awarded multimillion-dollar judgments to the victims that individuals had to pay. But how likely are you to find yourself in such a situation? Do you really need umbrella insurance? The real question you should ask yourself is, am I at risk of being sued? Everyone is, so in a sense, umbrella insurance makes sense for everyone. It’s a small price to pay for the extra peace of mind.
But some people are more likely to need an umbrella policy than others. If you engage in some activity that puts you at greater risk of incurring excess liability, you’re an even better candidate for an umbrella policy. Personal liability risk factors include owning property, renting it out, employing household staff, having a trampoline or hot tub, hosting large parties, and being a well-known public figure. Having a teenage driver in the family also puts you at increased risk, as does owning a dog or owning a home with a swimming pool. Basically, the more likely you are to be sued, the more strongly you should consider purchasing umbrella insurance.
But umbrella insurance is quite cheap compared to other types of insurance, especially considering how much coverage it provides. The Insurance Information Institute says most $1 million policies cost $150 to $300 per year. You can expect to pay about $75 more per year for $2 million in coverage, and another $50 per year for every extra $1 million in coverage beyond that. Most insurance companies’ umbrella liability policies start at $1 million in coverage, with higher limits available.
