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An umbrella covers you and keeps you dry on a rainy day; an umbrella policy does the same thing financially speaking. On a "rainy day" perhaps the worst day of your life, an umbrella protects you and your assets from legal jeopardy. This analogical liability insurance is typically in addition to liability insurance already carried by you via your auto or homeowners insurance.
How does it work? When you purchase auto and home insurance, you also get liability insurance to cover bodily injury and property damage claims brought against you due to (typically) your negligence. Examples include auto accidents, neighbors slipping on your shoveled sidewalk, a dinner guest suffering a food allergy, contractor falling off of your deck railing, etc. Your auto insurance picks up the auto accident, and your homeowners insurance would cover the other examples. Your insurance company, however, specifies the amount of money they will pay on your behalf; these are the "limits of insurance" that you purchased. For the remainder of this discussion, let's assume you purchased good liability limits of $500,000 on both your home and auto policies.
So what if there is more than $500,000 worth of bodily injury or property damage? Those were the highest limits my insurance company would offer! The answer is the umbrella policy. Traditionally purchased in increments of $1,000,000, you can insure that you will have enough money to cover damages your lifestyle exposes you to. Having assets in excess of your liability limits, exposes those assets to judgments that may arise against you. If you carry $500,000 on both the auto and home insurance policies, you would have a total of $1,500,000 for bodily injury and property damage claims brought against you covered by either auto or homeowners insurance.
Will your primary policy coverage be enough? Maybe... but maybe not. One bad slide on the ice could knock the car in front of you off the road. What if that person is killed or can never work again? Would your $500,000 of auto liability coverage be enough to sustain that person's family indefinitely? Perhaps not... in which case they may sue you for your assets and you could lose everything you have worked hard to build.
But I don't have $1,000,000 or more in assets; why would I need an umbrella policy?
Aside from the benefit of protecting your fellow human being financially if you cause them harm, there are other reasons to consider the umbrella policy even if you don't feel your assets require this. The main reason is that an umbrella policy typically broadens the perils you are insured against. In other words, you may be covered for things you auto and home insurance don't cover. For example, if you go on vacation to a beach and rent a boat, and you hurt a passenger or a skier from another boat, your umbrella may potentially cover this. You may not own a boat of your own, and you may not have purchased a boat- owners insurance policy, so there would be no underlying coverage for this. Your umbrella, however, may pick up the tab if you purchased one.
Another example would be a hunting accident. You may not have purchased firearm insurance, and your homeowners insurance may exclude bodily injury arising out of the use of a firearm, however, the umbrella, again MAY cover this accident.
Conclusion: Purchasing personal umbrella coverage may very well be one of the best things you can do to protect your assets with extra legal protection against legal action. Lawsuits occur all the time. Anyone can be sued, regardless of income level for just about any reason. Ask one of our agents to show you how inexpensive this extra layer of coverage can be!