Didn’t think an umbrella policy applied to you? Think again. If you own a home or car, or even have an average amount of money in your bank account, we’d suggest looking into an umbrella policy that protects your present and future finances from expensive lawsuits. Umbrella policies used to be popular among the wealthiest of individuals, but with increasing trends of litigation against those with modest incomes, it’s a smart way for individuals of all incomes to protect themselves.

 What is an Umbrella Policy, anyway?

An umbrella policy provides liability coverage for claims that exceed the limits of your underlying homeowners, auto, and other personal liability insurance policies. In essence, it’s a protective layer of insurance that covers damages awarded to another party that your standard auto/home/personal insurance limits won’t cover. Here are a few examples to help you understand how an umbrella policy could apply to your situation.

Auto accidents beyond your limits: Your auto policy limit is $300,000 for bodily injury and property damage, but the accident you caused incurred $600,000 in injuries. Your umbrella policy will cover the additional $300,000 you would have had to pay out of pocket.

Auto accident in another country: If you’ve caused an accident in a rented vehicle in another country, your standard auto insurance will most likely not cover those damages. Don’t fret. An umbrella policy will cover damages and injuries for this type of incident.

Accidents in your home: Didn’t realize a neighbor could sue you for injuries if they fall down your stairs? Your home is bound to have features that could result in injury, including: trampolines, pools, balconies, play equipment and more. An umbrella policy will safeguard you against having to pay out of pocket for any injuries or damages incurred by others in your home or on your property.

Injury from pets: Yes, you should have paid out for obedience school in the beginning, but hindsight is 20/20 right? You’ll be glad you have an umbrella policy to cover expenses from damages to persons or property on behalf of your dog.

Damages on rental properties: Your pockets are likely deeper than your tenants, so don’t get stuck when someone sues you instead of a tenant who may actually be at fault. Safeguard your assets by getting an umbrella policy for your rental unit and rental properties. This coverage can protect you from trips/falls, property damage and even having to pay out for injuries incurred when a neighbor child gets bit by your tenant’s dog.

Certain personal liability cases: An umbrella policy offers coverage for legal defense of claims that aren’t typically covered by basic liability insurance on your homeowner’s policy, including things like being sued for slander or defamation of character, mental anguish, wrongful eviction and other unforeseen personal liability situations.

These are only examples of what an umbrella policy can cover. You will want to check your own umbrella policy or check with your agent about specific coverages.

Don’t have enough assets to warrant getting an umbrella policy?

Think again. Your retirement funds, investments, savings and even your future earnings are at risk if a judge allows someone to garnish your wages to pay off a settlement. In some states, the equity in your home can be part of the judgment and you would be forced to sell your home to pay someone who sues you. If you own a house and have a retirement account or other investments, an umbrella policy of $1 million or more should be part of your financial plan.

How much does an umbrella policy cost?

An umbrella policy is one of the most inexpensive insurance policies available. For $1 million in coverage, expect to pay around $150-$200 per year. For each additional $1 million in coverage, you should expect to pay an additional $100. Of course, this can vary depending on the insurance company and your specific situation. Because an umbrella policy is a form of secondary insurance, it will have specific underlying insurance requirements. This means you’ll have to have certain levels of coverage on both your auto insurance and homeowner’s insurance policies as a condition of being approved for an umbrella policy. The underlying insurance requirements will vary depending on the company you get your umbrella through, but typical coverage includes:

• Auto insurance bodily injury coverage of $250,000 per person/$500,000 per accident
• Auto insurance property damage coverage of $100,000 per accident
• Homeowners insurance personal liability coverage of $500,000

How much coverage do I need?

Coverage is a personal decision that should be made with your assets and earning power in mind. We recommend considering the following when choosing coverage rates: the more you have, the greater the risk and the more protection you need. If you need assistance in estimating appropriate coverage, a Beehive Insurance agent can help.