Umbrella Insurance policies are an affordable way to add an additional layer of liability protecting your assets in case of a large liability claim. Here are a few things to know about umbrella coverage:
Umbrella policies extend over all of the assets within that entity. In other words, your personal umbrella will extend coverage over your car, home, recreational vehicles, and rental properties in your personal name. If you have registered your car, rental property, or other asset, in the name of an LLC, they will not be covered under a personal umbrella policy. Trusts that hold the personal assets can generally be added as an additional insured under a personal umbrella.
Umbrella insurance provides an additional layer of protection beyond your underlying liability limits. It safeguards your assets from costly lawsuits such as accidents like slips and falls, property damage, defamation, and, most frequently, car accidents.
BUNDLE YOUR UMBRELLA COVERAGE
It’s important to recognize that umbrella insurance companies, especially on a home, auto, and rental property risk, will want to cover everything you own, i.e., all policies should be with the same carrier. Sometimes, we have clients whose home and rental portfolios are with our agency, yet they want to insure their cars with a discount online auto carrier and have us add an umbrella. Umbrella Insurance carriers want to know what is going on with the auto risk, who the drivers are, how many cars, etc., and will not offer an umbrella when Your risk out on the road is far greater than an injury at your home or rental property, so pay the extra money to get the protection you anticipate from your umbrella insurance.
UNDERLYING LIMITS
An umbrella insurance policy will also require you to carry higher underlying limits on your auto, home, rental property, and other policies. Typically, the underlying limits required for your auto insurance are $250,000/$500,000 for bodily injury and $300,000 for property damage. If your current limits are the typical $100,000/$300,000, increasing your underlying auto and home limits and adding a $1,000,000 personal umbrella will typically increase your overall insurance cost by about $1000.00 The underlying limits are “stacked” on top of the $1,000,000 umbrella, so your overall liability limit with an umbrella is the underlying limits + the umbrella limit.
HOW MUCH DOES AN UMBRELLA POLICY COST?
At Anderson Insurance Group, we have seen the cost of personal umbrella policies increase to about $400.00 per year. If you have young drivers, multiple cars, and rental properties, the cost can increase up to $1000.00 per year. There has been a 45% increase in $1,000,000 umbrella insurance claims opened in 2032 compared to 2021, according to insurance provider USAA. Combined with inflation, this has caused the cost of umbrella policies to dramatically increase in recent years.
HOW MUCH COVERAGE DO YOU NEED?
Financial planners often advise carrying liability limits equal to your net worth. Dave Ramsay Solutions advises if your net worth exceeds $500,000, you need an umbrella policy. Many online calculators can help you determine the umbrella coverage you need. Balance your needs with the cost, and we think you will find an umbrella policy a good value.
UMBRELLA vs EXCESS LIABILITY COVERAGE:
A true umbrella will provide coverage for a wide range of exposures, such as worldwide coverage or coverage for a rented boat or ATV. Excess liability policies are what the industry terms “follow forms” and will only provide coverage that “follows” or extends from but does not broaden the underlying coverage. In other words, excess liability or follow-form coverage will only provide protection when the underlying policy has provided protection and nothing broader. When given the option, choose an umbrella policy over an excess liability policy for the broader coverage it provides. You will want to reach each policy and consult your agent on the merits of each.
UNINSURED/UNDERINSURED MOTORIST UMBRELLA COVERAGE:
Lance Anderson, an avid cyclist, and agency principal at AIG, is a big fan of UM & UIM coverage on the umbrella policy. This is an inexpensive way to add an additional $1,000,000 of under and underinsured motorist coverage that will stack on top of your underlying limit. In addition to stacking on top of your underlying automobile UM & UIM coverage, if you are involved in an accident as a cyclist/pedestrian and seriously injured, the additional umbrella UM/UIM limits are available to you.
DO YOU NEED AN UMBRELLA POLICY?
Now more than ever, umbrella coverage is an important way to protect your assets. We live in a very litigious world and attorneys are more aggressive than they have ever been. Did you know there are organizations that fund lawsuits? That’s right, if they feel there is a good chance they will win, they will front the money and inevitably, it’s less expensive for the insurance companies to pay than to risk losing in court, seldom do the courts side with the insurance companies. These factors and increasing inflation make an umbrella policy an important part of your asset and financial protection.
For more information, reach out to a knowledgeable Anderson Insurance Group agent
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Legal Disclaimer: This blog is for information purposes only and is not meant to provide coverage determinations or recommendations for how much umbrella coverage is necessary.