What is an Umbrella Policy?
An Umbrella policy is a type of personal insurance policy designed to provide additional liability coverage for individuals on top of other liability policies, such as homes or autos. Umbrella policies can also potentially be primary insurance for losses that are not covered by the underlying policies. An Umbrella policy also follows you wherever you are, not just when you are at home!
“How much Umbrella insurance do I need?” This question ALWAYS comes up. It is a tricky question, but the answer is: “More than you may think!”
What Do Umbrella Policies Cover?
Umbrella policies are designed to cover and protect you from large and devastating claims. Once your underlying limits of the policies such as homes or autos are reached, the Umbrella kicks in. An Umbrella policy also extends to other members of your household, such as a spouse and children, who do not have their own property insurance.
Who Needs An Umbrella Policy?
Accidents and claims of high cost can happen to any one person. Umbrella policies can be a need across the board. Whether you have a condo, apartment and car or multiple homes and autos – Umbrella policies are there to be additional liability and are highly recommended by Deland, Gibson.
How Much Coverage Do I Need?
When consulting with a client on their Umbrella policy (also known as excess liability) the question of “How much insurance do I need?” This question ALWAYS comes up. It is a tricky question, but the answer is: “More than you may think!”
The reality of the situation is that as an insurance agent we always need to recommend higher limits, but the right answer comes down to the individual or family’s risk tolerance combined with our guidance.
How Do Umbrella Policies Work?
The best way to explain how an Umbrella policy works are to use a potential example. Many families will have new drivers over the years. Imagine your child, a new driver, is out at night, swerves to avoid a deer, and hits another oncoming vehicle. The auto insurance limits may not cover all of the damage or medical costs of the accident, but that is when the Umbrella policy would then go into effect.
Estimating with Net Worth
Some brokers and agents say you should cover your net worth. At Deland, Gibson, we have used industry formulas that add up an individual or family’s net assets then subtract the liability coverage currently in force. If you have a positive number, you are underinsured. Unfortunately, that formula also doesn’t account for a critical factor: future earnings. In the event of a claim, while most likely catastrophic, your future income could be garnished up to 40% to help pay off a court-ordered award. This type of situation – while admittedly rare – is easily avoided by proper insurance coverage.
The other side of the argument can be made for the likelihood of high risk. If you have younger children that are inexperienced drivers, your risk is higher, but if you are experienced or don’t even own a car, your risk is lower; thus, the chance of loss isn’t as great. Sometimes people don’t carry limits that cover their net worth because they are comfortable taking that risk.
Clients want to have enough coverage after a boating accident or a case of libel via social media. “Penny wise, pound foolish” is a cliché, but it’s true.
Purchasing an Umbrella policy is a very low cost for the limits of insurance offered. Umbrella coverage has also broadened in the past few years. Other things to consider when purchasing an Umbrella are coverage for non-profit board service and employment practices liability for domestic employees such as a nanny.
In summary, it is essential to customize your coverage and exposure to and your limits. Connect with your DG advisor for more information. Deland, Gibson Insurance, helps you organize and identify risk. We also are risk advisors and insurance managers. Deland, Gibson now has locations in Wellesley, Dennis Port, and Franklin, MA. DG is also more sector-focused. With over $75,000,000 of written premiums, the agency looks to continue fulfilling our mission as a client advocate Providing Peace of Mind Through Proactive Service.