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Do You Need Umbrella Insurance?

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Umbrella insuranceChances are that you know how important it is to protect your assets. Whether you are protecting yourself from damage to your car with auto insurance, or using a homeowner’s policy to protect you from litigation, you need to make sure that your assets are covered.

However, in some cases, you might not have enough coverage to protect your assets from really big lawsuits. Many insurance policies have payout limits, and once liability limits are reached, you could find your assets under attack. If you are worried about lawsuits, and people who might come after your assets, it might be worth it to consider umbrella insurance.

What is Umbrella Insurance?

The point of umbrella insurance is to protect you from the liability that often comes with lawsuits. Those with high net worth — and even some folks without as high net worth — purchase umbrella coverage because it is a cost-effective way to boost your liability coverage. You can get umbrella coverage that includes your car, home, watercraft, and other items.

Umbrella insurance will help you pay legal fees, and even protect your future income from being compromised as the result of a lawsuit. Usually, you need to have more than $300,000 in liability coverage on your regular policies before you can purchase liability coverage. This is because the umbrella insurance doesn’t kick in until you reach your limit on your other policies. Umbrella insurance is meant to boost your coverage, ensuring that you have adequate protection. However, it is usually cheaper than just increasing the coverage on your “regular” policies. In fact, it is often possible to pay for the cost of umbrella insurance by simply raising the deductibles on your current policies.

Do You Need Umbrella Insurance?

While you don’t need to be wealthy to need umbrella insurance, many high net worth individuals like to have umbrella insurance. If people know that you are “rich,” they might be more inclined to sue you for larger amounts. If you have a large amount of assets, and if you aren’t shy about showing it, you could find yourself in an expensive situation. Umbrella insurance can reduce your risk.

Another thing to keep in mind is whether or not you have a number of liability risks. If there are more chances for others to get hurt because of your property, umbrella insurance can help you protect your assets. Some of the items that could warrant additional liability coverage might include:

  • Watercraft that you regularly take others out on
  • A pool in your backyard
  • A trampoline that you make available for neighborhood children
  • An approach to your home that can be difficult to navigate, especially during the winter
  • Pets that might injury others (i.e. a fierce — or not so fierce — dog that might bite)
  • A bullet bike or other fast motor vehicle that you could easily lose control of

These items increase the chance that someone might get hurt by, or on, you property. As a result, you need to be careful, since you could find yourself the subject of bigger claims. Umbrella coverage can help you in these cases.

Carefully consider whether or not you need umbrella coverage. Even someone with a house and moderate assets can benefit from having an umbrella policy. Consult your situation, or work with a trusted financial planner to determine if umbrella coverage is right for you.

(Photo: nicubunu.photo)

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11 Responses to “Do You Need Umbrella Insurance?”

  1. David M says:

    For peace of mind I have an umbrella policy – most people I know with similar assets and risks do NOT however I think it money well spent.

  2. Shirley says:

    When I was a young teen and still at home we had an in-ground pool and a large trampoline. We also had a six foot fence around the back yard.

    The insurance company said that even if the gates were locked and someone climbed over the fence to get to either of them and got hurt, my parents were liable for the injuries because they were considered a “hazardous enticement”.

    I don’t remember ever hearing the term ‘umbrella insurance’ but I do remember my Dad saying that insurance was a priority and was costly.

  3. Why do people love insurance so much? Take some risk and live it up. The only insurance I think that makes sense isn’t even mandatory: health insurance! Well not yet, at least. If you get really sick and can’t pay for a surgery, you die without insurance. If you get into a car crash and lose your car without insurance you lose a car…

    • Matt says:

      Not protecting your assets with insurance would be so stupid. What if your house burns down? Are you just out $900,000 or whatever you’ve paid into your mortgage. Insurance is always something you think you don’t need until something unexpected happens and then your wishing you where insured.

    • Scott says:

      Losing a car is the best-case scenario. In the worst-case scenario, someone else dies in the car wreck, you’re found to be at fault, you get sued and have to pay the other person’s family enough money over their expected lifetime to offset their lost income. Say you hit and killed a 30-year-old married father of two children who was making $40,000 per year. You cut short his career by an estimated 35 years, so you need to pay his family the equivalent of $1.4 million dollars over the next 35 years (in today’s dollars, not accounting for inflation). And that’s not even including any lawyer fees, vehicle replacement costs, medical costs, etc. for you and them.

      This is why insurance is required for all drivers.

      If you are planning on being broke and homeless forever, then no insurance might work. But then again, if you’re planning on that, you probably aren’t driving a car in the first place.

    • Dan says:

      Unless you get in a car accident with another person that’s your fault, and they get injured and sue you. What do you do then?

  4. Ron C says:

    I bought the umbrella years ago. Be certain you have the max liability on our autos, all of them. Make certain your dog is the size of a small cat, to qualify for the umbrella. Then realize that if the guy that cuts your lawn is not covered when he sues for cutting his foot off after hitting a gopher hole, but if he falls off your porch when soliciting your business you indeed are covered.

  5. Lori says:

    We immediately bought an umbrella liability policy after I was sued because of a car accident. The guy sued us for about $100,000 more than our policy limits! (I think it was because of my husband’s job title!) We lost, but the jury only awarded him $20k which insurance paid. If he had won, we would have lost our house and still owed more!
    Made me sick to realize umbrella insurance was about $11 a month. Have gladly paid for it ever since.

  6. Rosemary says:

    We purchased an umbrella policy when our older started to drive. That was 34 years ago and we still have it. IT IS CALLED PEACE OF MIND. For a little more that $100 a year it is will worth it.

  7. I haven’t bought umbrella insurance but I do think about it quite a bit. You just never know when something unexpected might come up and bite you in the backside (financially speaking, of course).

  8. Mary says:

    I have 3 kids 19, 21 an 23 who are all on my insurance policy. My ex husband is very wealthy. Do I need an umbrella policy? I want to be covered from any potential accidents with 3 kids but wonder if they would go after their dad instead of me for that addtional $.


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