Why You Might Need Umbrella Liability Insurance

It is no secret that debt is a major obstacle on the path to financial wellness. Imagine what it would be liked to be saddled with a debt that follows you around for the rest of your life. There are many people that find themselves exactly in that position after a disastrous incident, and it’s not because they weren’t insured. It was because they weren’t adequately insured with the right type of insurance.

Here is a stark reality to consider: We live in an extremely litigious society that is eager to sue for anything and everything. Every single day, American courts and juries are making lawsuit awards that go way beyond anyone’s expectations for things like injuries, lost wages, medical costs, property damage, libel and slander, and several other personal liabilities. Most people on the wrong end of these awards probably assumed their homeowners or auto insurance would protect them. The unfortunate reality is that with high settlements and rising legal costs, traditional coverage in many cases simply does not seem to stretch far enough.

There is a way you can easily minimize this risk with low-cost protection called umbrella liability insurance. This often-underutilized type of insurance covers you in case of a lawsuit that exceeds the regular coverage provided by your automobile, homeowner’s, or renter’s policies. Umbrella insurance also provides coverage for claims that may be excluded by other liability policies related to issues such as false arrest, libel, slander, and liability coverage on rental units you own.

This extra liability coverage can be especially important for anyone whose assets make them a target. But it is also important because your future income could be attacked too. It generally only costs $100-200 for that extra peace of mind.

While you may already know that the cost of this extra peace of mind is reasonable, the main point is that for around 50 cents to a dollar a day (as a very rough average), umbrella or excess liability insurance, kicks into effect when the protection from your regular policy is completely exhausted. For example, while your homeowners or renters insurance policy might provide liability protection of up to $300,000, an umbrella policy can add between one and 10 million dollars of extra protection. In this highly litigious world, it’s not unusual for settlements and legal costs to exceed that $300,000 figure.

A common myth is that umbrella insurance is only for the super wealthy. The somewhat eye-opening reality is that if your assets (including retirement accounts and, in many states, your home equity) and your future income exceeds the liability limits on your auto and renter’s or homeowner’s policy, you could have major problems should you ever end up being faced with a major lawsuit. It is not inconceivable for middle-class families to lose almost everything and even have their wages garnished to satisfy a lawsuit arising from a serious car accident, freak injury at their home, or accusation of libel or defamation of character. Even if you win the lawsuit, an umbrella policy can help recover some of your legal costs.

Ask yourself the following questions:

Are you a potential risk? If you own a dog, have a pool, have a trampoline or other playground equipment, or have a teenage driver in the household you may be at a higher risk.

Are your assets at risk? Ownership of assets such as a primary residence, retirement accounts, brokerage accounts, vehicles, boats and recreational vehicles will want to protect these assets with an umbrella policy.

To learn more about umbrella policies and to get a quote, you can reach out to your home and auto insurance agent. Insurance may not be the most exciting topic and contemplating the need for it can be downright depressing, but ignoring it can leave you or your family in dire straits. So do your family a favor this spring and make sure you’re properly insured.

 

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