Have you heard of an umbrella policy?
Most people purchase car and home insurance at some point in their life. This is done to comply with the law and to protect their large purchases. Many people have also purchased life insurance to protect their growing family in the event of a premature death.
A wise decision is to purchase an umbrella policy to add to your existing insurance portfolio. This product is designed to protect you and your hard-earned assets, given the litigious society in which we live.
An umbrella policy, so named because its coverage acts like an umbrella, is additional liability insurance designed to pay out in addition to the liability on your car and home insurance policies. Your home and car insurance policies have liability coverage to protect you in the event of a lawsuit. Below are a few reasons to purchase an umbrella policy:
1) It’s cost-effective: It’s inexpensive.
You can purchase $1 million of coverage for $150 to $350 a year depending on the properties you own, number of vehicles you own, number of drivers in your household, your claims history and your driving record. That’s $3 to $7 per week for peace of mind. You must ensure adequate liability limits are in place on your car insurance and home insurance. In Massachusetts, your car insurance part 5 Optional Bodily Injury to Others should be $250,000 per person/$ 500,000 per accident, and your home insurance should be $500,000 of liability.
2) In case you are sued: Consider the following scenarios: your dog bites the neighbor, your friend trips and falls on your patio, your spouse hits and injures a cyclist while driving, or you are involved in a serious car accident where the other driver is injured. An umbrella policy will cover you after your car insurance or home insurance has paid out. If the jury awards a claim payout in the amount of $1 million, and your home or car insurance pays out $500,000, where does the remaining $500,000 come from? If you don’t have an umbrella policy, it would come from your assets: home, savings account, investments, future assets, etc. If you have an umbrella policy in place, it would come from the umbrella policy.
3) Corporate lawyers fighting for you: If you purchase an umbrella policy for $1 million, $2 million, $3 million+ in liability, the insurance company fights for you. They do not want to pay the full amount of the liability coverage you have and often they do what they can to settle. Insurance companies have good lawyers and good lawyers are expensive – often, $150 to $500 per hour. If you don’t have an umbrella policy and you have to hire a lawyer to fight your case, it will be expensive. The cost to hire an attorney for one hour is about equal to the cost of an annual umbrella policy. When purchasing an umbrella policy, companies typically offer $1 million to $5 million of liability coverage, but you can also purchase higher limits if needed. Consider your net worth when you choose your coverage — you could be sued for all of it. An umbrella policy is a simple, affordable solution to help reduce your risk, protect your assets and plan for your future – which for most is to maintain and increase your assets.
Originally written for the Cape & Plymouth Business Magazine (Umbrella Policy)