What is a Personal Umbrella Policy? Why Do You Need One?

What is a Personal Umbrella Policy? Why Do You Need One?

Have you ever used a really large, well-made umbrella on a rainy day? If you have had that privilege, you know the feeling of being mostly dry even though it is pouring. And you might feel a little sorry for all the people who are trying to stay dry using the collapsible umbrellas they pulled out of their bags.

When it comes to insurance, a “personal umbrella policy” is very similar. It might not seem necessary if you are having a “sunny” year or two, but if one of life’s catastrophes strikes you, having an additional $1,000,000 or more of protection will seem like an incredibly wise decision.

This additional protection sits on top of your existing personal liability policies, things like your auto, home, boat, and rental property insurance. Each of these policies typically has several hundred thousand dollars of liability coverage, which seems like enough until catastrophe strikes.

A person who is paralyzed in a car accident or by slipping on a wet surface will easily claim hundreds of thousands of dollars in medical expenses, lost wages, and rehabilitation expenses. If your auto insurance policy, for example, is exhausted, the injured party has the right to legally pursue your other assets. Some people have had their wages garnished or had to take a loan against their home equity to satisfy these expenses.

A Personal Umbrella Policy provides additional protection in such a situation. If your auto policy will only pay out $300,000 for an injury you caused, a $1,000,000 umbrella policy will provide an additional million dollars of coverage, taking your total protection for an auto accident to $1.3 million. If you had a $2,000,000 umbrella, your total insurance protection for this situation would be $2.3 million.

We encourage our clients to consider the protection of an umbrella policy, which can often be put in place for as little as $150 annually. This can provide you and your family with additional protection against life’s inevitable downpours.

Personal Umbrella Policies are purchased in million-dollar increments and can often be added with your existing home or auto insurance insurer.  In addition, this will provide you with an additional discount on the policies you have already purchased.

James Dick, CPCU, AAI