What does Umbrella insurance really buy for me?

5 Responses to “What does Umbrella insurance really buy for me?”

1. Zarnev says:

   May 31, 2009 at 3:40 pm

   Consider this scenario. You cause an accident which puts someone out of work for the rest of their life and causes very high medical bills. The courts can take everything except one car, basic household furnishings, the value of your house over $150,000 (which means if your house is valued higher you might have to sell), and up to 30% of your wages for the rest of your life.

   Do the math. Figure the amount of your assets and estimate 30% of your future earnings. That is what is at risk. Now figure if the premium for an unbrella is worth it.
   References :
   Independent Agent
2. Shane W says:

   May 31, 2009 at 3:53 pm

   Umbrella liability insurance is so named because it acts like an umbrella, sitting on top of your auto and homeowners liability policies to provide extra protection. (Even if you don't own a home, remember that you still need renters insurance to cover both your liability and your personal property). A scenario in which it would come into play would be if you were involved in an auto accident and got sued. Say a jury found you at fault and awarded the other party $1 million. Unfortunately, you only have $500K in auto liability insurance. Here is where your umbrella policy kicks in. Most insurers won't sell you an umbrella unless you purchase underlying limits of at least $250K. It minimizes their exposure. It's a great policy to have. They are usually relatively inexpensive. If you have assets that need to be protected, I'd recommend having one.
   References :
   Insurance Adjuster – 13+ years
3. BSFSU says:

   May 31, 2009 at 4:24 pm

   Umbrella coverage extends your liability coverage to areas where you might otherwise be under-insured. For example, auto insurance is written for standard amounts which will be denoted with something like 25/50/10, referring to to the maximum that the policy will pay for certain claims. Auto insurance is not written above a certain amount, which if memory serves is $250,000. This is where umbrella coverage kicks in, as a bad accident where somebody loses life or limb can get you sued for well above the policy limit. If you have a $2 million umbrella policy, the auto insurance will pay the maximum, then your umbrella policy will pay above and beyond that up to the maximum of the umbrella policy.

   Whether or not you need the policy really depends on your income, future earning capacity, and whether you are in line for money (like inheritance). If somebody sues you for $2 million on an accident claim and gets a judgment, your auto insurance will only pay the policy maximum. You are on the hook for the rest and that won't go away. The only way out of the judgment is to go bankrupt (unless the accident is due to alcohol/drug intoxication, in which case there's no way out).

   With a judgment hanging over your head, there isn't a way for you to build future wealth. The person with the judgment is entitled to assets which exceed certain (low) limits protected by state law until the judgment is paid. In general, umbrella coverage is a good idea, as it gives a lot of protection for relatively little money.
   References :
   MBA
4. mbrcatz17 says:

   May 31, 2009 at 4:59 pm

   Well, there is no STANDARD umbrella form, so it's going to vary. But I'll give it a shot.

   Say, for example, you have $100,000 of property damage on your auto policy. And you're the last guy in on a 10 car pileup. That $100,000 is NOT going to pay all the damages – an umbrella would pick that up.

   Or, you rearend a school bus, and a couple kids are seriously hurt. Same thing.

   Or, you volunteer at church – and someone accuses you of molesting a kid there. Homeowners policies normally exclude it, most umbrellas will NOT exclude it.

   Or, you cause an accident while driving a golf cart, and the golf course. Neither your auto NOR your homeowners would pay – but most umbrellas would.

   As I said, it's a HIGHLY individual form, so you're BEST off asking your agent for some examples. And SOME companies don't do a true umbrella any more – it's an "excess liability" policy. So it's really important to be sure exactly what you're getting.
   References :
   agent, 21+ years
5. J says:

   May 31, 2009 at 5:29 pm

   If you have a decent amount of assets then you could be sued for that amount. e.g. injuries caused by you in an auto accident – you could be sued for hundreds of thousands. Your auto insurance might not cover all of it but the umbrella would most likely do it. It isn't expensive but could protect your assets.
   References :