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Do You Need Umbrella Insurance?

Posted By Miranda Marquit On 04/03/2012 @ 12:10 pm In Insurance | 11 Comments

Chances 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 [3] 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 [4]. 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 [5]
  • 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 [6])


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[1] Tweet: http://twitter.com/share

[2] Email: mailto:?subject=http://www.bargaineering.com/articles/umbrella-insurance.html

[3] insurance policies: http://www.bargaineering.com/articles/finance-55-compare-insurance-policy-rates.html

[4] adequate protection: http://www.bargaineering.com/articles/7-deadly-sins-of-personal-finance-get-adequate-insurance.html

[5] pool in your backyard: http://www.bargaineering.com/articles/summer-home-improvements.html

[6] nicubunu.photo: http://www.flickr.com/photos/nicubunuphotos/5243019499/

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