Do I Need A Personal Umbrella Insurance Policy?
GEICO sent me an email the other day pimping their Personal Umbrella Insurance Policy (yes, the email was spammy and yes, I read it because I actually like Geico quite a bit) that started with these three questions:
Do you own your home? Yes.
Do you own any significant assets in addition to your home? Yes, a couple things.
Have you built an investment portfolio or a retirement savings account? Yes to both.
They said that if I answered ‘yes’ to any of those questions, I need a personal umbrella insurance policy… I answered yes to all of them! So do I need a personal umbrella policy?
The purpose of the personal umbrella liability policy is that it’s a catch-all insurance policy if I ever get sued for something, I lose, and my first line of defense, such as the homeowners or automobile insurance policies I have, get breached (ie. I’m sued for a lot of money). It’s essentially an extra layer of protection between the lawyers and my assets.
So let’s say I get into an accident, am sued, and found liable for half a million dollars. I hope and that never ever happens but if it does, my auto insurance will pay out the first $300,000 and then I’m responsible for the remaining $200,000 which basically means my house. Now if I added a $1M personal umbrella insurance policy then the $200,000 would be covered by that insurance too. The umbrella insurance policy also happens to cover when I get sued for something without an underlying insurance protector, such as if I slander someone and they decide they want money so they can feel better about it.
The average price for a $1M personal umbrella liability policy is anywhere between $150-$300 with the next million costing around $75, and each million after that for a mere $50 a pop. It’s about on par with renter’s insurance and if you do the math, anywhere between $12.50 to $25 a month. To be eligible, especially at those prices, the insurer will want you to have auto and homeowner’s/renter’s insurance that will cover you to a minimum amount (around $250k for auto, $300k for homeowner’s/renter’s) because they are the second layer of defense.
Right now, I honestly don’t think it’s really necessary but it’s something to consider for the future.
Photo by Carlos Noboro.
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There are 11 comments, add your thoughts now!
“Right now, I honestly don’t think it’s really necessary but it’s something to consider for the future.” Do not be a fool! All it takes is one bad accident on a slippery day for your wages to be garnished for the rest of your life. Eat out one less time per month and you can protect yourself from most lawsuits. Also realize that the umbrella policy insuring company will put forth many resources to guarantee that the suer does not get their money, protecting even more from someone winning the case against you.
I’m with the monkey! For $150 a year, you can get a lot of protection.
I’m with the monkey as well. Accidents happen. You can spend a lot of time and effort saving and planning for retirement and all it takes is some silly accident to wipe you out. Please take some time to learn more about umbrella insurance. Here are a few articles to get you started;
http://www.fool.com/community/pod/2005/050302.htm
http://moneycentral.msn.com/content/Insurance/Insureyourhome/P35349.asp
http://www.bankrate.com/brm/news/insurance/umbrella-policies1.asp
BTW, I just paid mine this weekend — a bit over $150. It can be tax deductible too if you have a side business/extra income.
Do you deduct as part of your home office?
It is not a bad idea at all if you have any significant assets. The premiums are farily inexpensive because the risk to the insurance company is fairly low, but it is a great safety net if something goes very wrong. If you are really interested in protecting your “stuff” then you could get into some trusts. The details are very advanced, but as a budding personal finance guru, you should probably start learning about them.
We carry a significant umbrella policy. It’s just part of the price of protecting yourself.
I am thinking of going with the Umbrella Policy. Do you think Gieco is good for it. I have my Car Insurance with them and I like them for their service.
How do we learn more about trsust - ProHabber?
I actually had a question.
Whats the difference between the Umbrella Policy / and Trusts. Are Trusts for VERY WEALTHY Individuals?
If a 1 million dollar policy covers my assests then is a trust necessary?
I just checked out Geico’s website and they do offer an umbrella policy. I can’t say anything else about them because I have never used them for anything. With insurance, you just want to make sure that in the event that you need to make a claim, the company will be there for you.
The umbrella insurance policy is just that - an insurance policy. It will cover you in the event that you need to make a claim. A trust is used to hide assets from other people and they are also used for estate planning. The goal is to protect what you have and trusts do not have to be for the very wealthy. They will cost you some money to have set up through a lawyer, but they will protect any amount of assets that you want to put into them.
The single best way to learn about trusts and what they can do for you is to talk with a lawyer that specializes in estate planning.
I am doing a project in school about insurance. I wanted to learn more about the umbrella insurance policy. Do you know if all the insurance companies carry this policy? If not which ones do have it?
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