How Important is Umbrella Insurance?
When considering home and auto insurance, it’s important to strike a balance between what you pay in premiums and the type of coverage you receive. For most people, the minor additional cost of umbrella insurance is worth it.
While no one enjoys paying more than they have to for insurance, you don’t want to find out that you don’t have sufficient coverage when you really need it. It’s better to assess your needs properly and match your insurance policy to your possible risks.
Umbrella insurance can be seen as a top-up to your home or auto insurance. Your auto insurance, for example, may pay for personal liability. However, this coverage is usually limited and may not be sufficient when are you are sued for damages. With umbrella insurance you will be covered for anything from $1 million to around $5 million, depending on your policy.
Your umbrella insurance will cover additional medical and legal costs when home or auto insurance has been depleted. It will also cover damage to property in an accident. In other words, it will provide the additional cover for these expenses over and above what your normal insurance will pay.
Consider Your Risk
Even though umbrella insurance is relatively inexpensive, many don’t see a need for additional coverage. So, the big question is do you actually need umbrella insurance? In most, cases the answer will probably be yes.
If you commute long distances by car, your risk of an accident is increased. Similarly, if you drive mostly during peak traffic periods, you are also more at risk of being involved in an accident.
If you’re in an accident and the other party is seriously injured, you may be liable for all their medical costs. You may also have to pay for loss of income if they are unable to work for a prolonged period following the accident. Any damage to infrastructure or buildings that occur as a result of the accident could end up being your responsibility. All this may involve a costly legal battle. Your auto insurance will not cover you for all these expenses, whereas umbrella insurance will.
At home, you are more at risk than you may realize. If someone is injured whilst visiting your home, you may have to pay for medical bills, loss of income, and legal bills. The same would apply if your dog bites someone or they accidentally fall into your swimming pool and have to be hospitalized.
Playing or coaching dangerous sports can also put at risk for all these costs if someone is injured. If you own a boat, there are similar risks.
Landlords who rent their properties face similar risks and would benefit from umbrella insurance.
Peace of Mind
When it comes down to it, you’re better off having umbrella insurance and not needing it, than needing umbrella insurance and not having it. Is it worth saving $10 or $20 per month only to find yourself liable for millions when you’re in an accident or someone is injured in your home?
Carefully assess your situation and ask yourself if any of the situations I’ve mentioned may apply to you. This should act as a guide as to whether you need umbrella insurance. If you’re not sure, speak to your broker or financial advisor.
Regardless of how you approach the question of umbrella insurance, be sure to take it seriously. It’s an important decision that could be the most valuable you’ll ever make.