It is worth having an umbrella policy if the value of your assets exceeds your auto or home liability insurance limits. Umbrella insurance provides additional liability coverage, typically starting at $1 million, and it usually costs at least $150 to $300 per year.
Since umbrella insurance policies are relatively inexpensive, they are worth the investment for people looking to protect their assets from costly liability claims. Umbrella policies also cover certain situations that don’t typically fall under liability insurance, like libel and slander.
How To Decide If Umbrella Insurance Is Worth It
Add up the value of your assets, including your home equity, personal savings, and retirement accounts.
Compare your assets to the limits of your auto or homeowner’s liability insurance policy. If your assets exceed the current limits, then you should consider getting umbrella insurance.
Consider any factors that would make you more likely to have a liability claim filed against you, like owning a swimming pool or a dog.
Most home or auto liability insurance policies can only be purchased with maximum limits of $300,000 or $500,000, depending on the insurer. While these limits may be high enough for the average person, wealthier individuals with more assets may need even more protection. That’s when umbrella insurance is worthwhile. To learn more, check out WalletHub’s guide to umbrella insurance.
You need an umbrella policy if your total assets exceed your car or home insurance policy limits or if you have a high risk of being sued. An umbrella policy is an optional form of liability insurance designed to supplement existing coverage, and it typically costs $150 to $200 annually for $1 million in coverage. As a result, households with a high net worth are the most likely to need umbrella coverage.… read full answer
When You May Need an Umbrella Policy
Your assets are greater than your home or car insurance policy limits.
Your occupation puts you at high-risk for a lawsuit.
You own a trampoline, hot tub, or swimming pool.
You ski, hunt, surf, or participate in another hobby where you could injure someone else.
You own property, especially rental or investment properties.
You have a dog with a restricted breed or a bite history.
You are a public figure.
You own guns.
You frequently host guests.
A common rule of thumb is that households should have an umbrella policy if they have $1 million or more in assets. Umbrella policies are also a good investment for people whose assets will likely increase considerably in the future, as liability settlements can sometimes result in wage garnishment. For example, medical students are often advised to purchase umbrella coverage to protect their future income.
Umbrella insurance covers home and auto liability claims that exceed the limits of the policyholder’s liability insurance or involve situations that aren’t usually addressed by a standard liability policy. These include claims for libel and slander, personal psychological harm, and malicious prosecution. Umbrella insurance does not cover claims that are excluded outright from liability insurance, such as intentional damage. … read full answer
What Umbrella Insurance Covers
Liability in excess of auto/home insurance policy limits
Libel and slander
Psychological harm and mental anguish
Legal defense costs related to liability claims
Liabilities when traveling overseas
Umbrella insurance is typically recommended for individuals who have a high net-worth that can’t be covered by a standard liability policy. To learn more, check out WalletHub’s guide to umbrella insurance.
An umbrella insurance policy does not cover injuries to the policyholder or damage to their property. Personal umbrella insurance also will not cover intentional acts, criminal behavior, damage caused while the policyholder is performing business activities, or damage from certain dogs or vehicle types. If you need umbrella insurance for business purposes, you can purchase a commercial umbrella policy.… read full answer
What Umbrella Insurance Does Not Cover
Your own injuries or property damage
Property damage or injuries that you intentionally cause
Damage that you cause while committing a criminal act
Property damage or injuries that you cause while performing business or professional activities
Any liability that you assumed through a contract prior to the incident
Property damage or injuries caused by dog breeds or recreational vehicles that are specifically excluded from your policy
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