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.