What Is Umbrella Insurance… And Do I Really Need It?

Having umbrella insurance can prevent disaster

Hey there! Welcome to the Kane Insurance Group blog. My name is Taylor, and my favorite color is purple, which I am not ashamed to admit. But enough about me – you’re probably here because you have heard of umbrella insurance (or a personal umbrella policy) and want to know if you really need it, or if it’s just a waste of your hard-earned cash. So, what’s the scoop?

What is umbrella insurance?

First, it will be helpful to talk about what an umbrella policy really is. For those of you that know and are now rolling your eyes in anticipated boredom, just hang on: I’m betting you end up learning something quite important out of this.

So, what is an umbrella policy? It’s a policy that provides excess liability coverage on top of an already existing policy, like your auto or homeowners. Its purpose is to protect you and your family if, God forbid, there is a catastrophic claim and your underling auto or home liability limits are insufficient.

How does it work?

To illustrate how an umbrella works, let’s use an (unfortunately) real life claims example we’ve encountered.  Let’s pretend I am driving down the road and someone unexpectedly walks out in front of my car and is killed.  In the example, my limit of coverage is $250,000.  The person I killed was a doctor with a husband and 3 kids.  So the question will be whether or not $250,000 is sufficient for the pain and suffering this family has now incurred.  We’re guessing you can imagine the answer.

This is where the umbrella insurance comes in – it provides additional liability coverage on covered losses (this means you cannot use your umbrella on a loss that is not first covered by your underlying policy), ranging usually from $1,000,000 to $5,000,000. In this example, we will say I have an umbrella for an additional $2 million of coverage. It would now kick in after my $250,000 of auto liability limits are exhausted, providing a total level of coverage of $2,250,000.  

Why is it so important?

Without the umbrella policy, anything over the $250,000 of my auto limits could potentially come out of my pocket. Since I would be unable to pay this debt in cash, the family could come after any assets I own, putting me and my family in a devastating situation.

Now, many people would then say, “I don’t have that many assets, so I am not sure this is something I need”. However, it is important to know that in a case like the one I described above, even if I have no assets at all, they can come after my future income. This means they could be taking a portion of my paycheck for as many years as it takes to satisfy whatever amount the court determines I am liable for.

That sure scares me, and it’s why we strongly recommend adding umbrella insurance to your portfolio.

How much does umbrella insurance cost?

For a very reasonable price, usually starting around $17 a month, it will help you rest easy knowing you, your family and your assets are well protected; and that if, God forbid, anything so traumatizing as the example I used above happens to you, you will be fully covered.

What do I do now?

Please feel free to reach out with any questions or comments.  Please know the products will both vary from state to state and company to company.  However, this is why it’s so it is important to talk to one of us so we can help.

Feel free to call our office at 610-337-8100, and you’ll be speaking to myself, Dan, or Greg. Also, you can click here for more examples and information about umbrella insurance and to get a quote from our website.

Please comment with suggestions for future posts, or any questions/comments/complaints you might have. I love hearing from and interacting with my readers, so fire away!

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