Many people believe that umbrella insurance is a coverage that protects you from almost any type of loss, even if it is related to your business or service as a board member.  While it is true there could be some additional areas of protection, the core purpose of umbrella insurance is actually to increase the liability limits you currently have on your auto and home insurance.  If you have $500,000 of liability coverage on your auto insurance policy, a $1 Million umbrella would give you a total of $1,500,000 in protection if you were involved in a lawsuit.  Although an auto accident is certainly one of the greatest risks for a significant lawsuit, there are a number of other circumstances that could make an umbrella policy a wise decision,

  • Do you own a rental property?  Rental homes can create a variety of new risks that could expose your assets.
  • Do you have a dog?  There are over 4.5 Million Dog bites a year resulting in almost 1 million people seeking medical attention for their bite.
  • Do you own a boat, ATV or other recreational vehicle?  While these are often the center of family entertainment they can also be one of the greater risks you face when friends or acquaintances are involved.
  • Teenage Drivers?  This may be one of the single greatest risks to your assets for a period of time.
  • Does anyone in the family use social media or blog?  Cases involving libel, slander and bullying online have become far more common in recent years.

Another misconception about an umbrella policy is that it is expensive.  Given the fact it is usually providing more coverage than any other policy you have, this assumption would seem reasonable.  However, an umbrella policy is actually one of the least expensive insurance policies available.  Many times, you can get a $1 Million policy for under $200 per year!  When you are looking to protect your entire current and future net worth, a couple hundred dollars a year is the type of bargain you shouldn’t pass up!