You likely have the insurance you’re required to get, such as auto and home insurance, and you probably have health insurance, and hopefully life insurance. For many, that’s enough insurance to adequately protect you and your assets. However, in some cases, you may also want to consider more coverage. If you’re wondering when do you need umbrella insurance, there are several situation when buying it may be wise.
What Is Umbrella Insurance?
Think of umbrella insurance as an extension of the auto and home insurance you already have in place. If you have an auto policy with a $500,000 cap for injuries sustained, and you have an accident in which several people are severely injured, that $500K may be used in very little time. When that amount is exhausted, umbrella insurance steps in and covers the rest of the costs, up to the limit of the policy.
When Do You Need Umbrella Insurance?
Likely, most people living low risk lives do not need umbrella insurance. The basic insurance they have in place will cover them. However, there are some times when you’d benefit from umbrella insurance.
You Have Significant Assets
If you have assets over $500,000, you may want to consider an umbrella policy.
You Have a Teenage Driver in the Home
Teens are inexperienced and can be reckless, increasing your liability.
You Frequently Have Visitors to Your Home
More visitors mean more chances for injuries or accidents to occur.
You Have a Trampoline
Fun, but an accident waiting to happen, especially if you don’t have net fencing around it.
You Have a Rental Home
A rental home can be a great income source, but having one opens you up to lawsuits and expenses, especially if someone is injured or if the house sustains damage in a fire or other weather-related event.
You Have a Pool
Minimize your liability by having a fence around your pool, but still, someone might drown or fall and hurt themselves.
You Have a Dog
You may think your dog is gentle, but it only takes once for a dog to get aggressive and bite someone.
There are two important pieces of information, should you be considering purchasing umbrella insurance.
First, your rates on your existing auto and home insurance policies will likely go up. If you buy your umbrella policy from the same company that you purchase your auto and home insurance, they may first want you to increase your coverage for those policies. The umbrella pays out only AFTER the auto or home insurance is exhausted, so they want those limits to be high enough, which raises your premiums.
Second, if you are sued in the future and have your auto, home, and umbrella insurance with the same company, the insurer may hire you an excellent lawyer because they want to avoid paying out the money, if they can.
Few people discuss this type of insurance, and most people don’t need it. However, if you have liabilities in your life, such as a pool where someone may drown or slip on wet tile and hurt themselves, you may want the peace of mind that umbrella insurance offers.