How can I benefit from umbrella insurance?

If you own your home or value your savings and future earnings, umbrella insurance may be something you want to look into. Only about 10% of people have umbrella coverage, meaning that most people are vulnerable to lose everything in the event of a major lawsuit.

Imagine you are driving one day and get into an accident. You are fine, and your auto insurance will be sufficient in covering the damage to your vehicle, so all is good right? Not so fast. The car that you hit turns out to be a car with 4 executives from a Fortune 500 company, and they are hurt. Their car sustained far more damage than yours and it turns out that they cannot work for several months due to the severity of their injuries. You are at fault in the accident and the executives sue you for damages for the fancy car, their medical bills, and lost wages. The judge rules in their favor and determines you owe 2 million dollars in damages. Your auto insurance pays out $500,000 of this because you have a high end policy, but what now?

Now, you are on the hook for $1.5 million dollars!

Most people can work a lifetime and not make that much money, so how do you pay it? Well instead of having your house taken and future wages garnished, you wouldn’t have to pay anything if you had an umbrella policy! Umbrella insurance covers you in the event of a lawsuit. When you reach the liability limits of your home or auto policy, umbrella coverage kicks in to cover the outstanding amount. So in this case, if you had a 2 million dollar umbrella policy (they start at $1 million), you would have to pay nothing at all! Umbrella insurance even covers the cost of your lawyers, not to mention it gives you an ally throughout the process. When the insurance company stands to lose a large sum at once, they are likely to actually help you fight the case in court in order to lower the payout amount if it makes financial sense for them.

Not only does umbrella insurance cover the outstanding amount from your auto or home insurance policies, it can cover you in a standalone lawsuit as well! If you’re walking your dog to the park and it bites a bystander, umbrella coverage can help you in this situation. For a very reasonable price (usually between $200 and $600 a year), it’s an important layer of protection for you and your family’s assets and standard of living.

If you own your home, have other valuable assets, or simply want to protect your savings and future earnings, umbrella coverage is certainly a great option for you to explore!