Personal Insurance

Umbrella Coverage — an Extra Layer of Protection


Do you ever wonder if you have enough insurance to cover a large insurance claim against you? And do you know where the money would come from if you weren’t adequately insured? The answers to these questions come from insurance agents who recommend that clients get umbrella policies, which kick in when policyholders reach the limit on the liability coverage in their home or auto policies.

Consider the risk in the following scenarios:

  • Your teenage son is in a car accident and you are sued for $1 million.
  • A neighbor is injured or drowns in your swimming pool.
  • A passerby trips and falls on the sidewalk at your house.
  • Your dog bites a friend’s child.

What’s My Exposure?

Today, anyone can be sued, and million-dollar judgments are becoming more common. And, alarmingly, any amount exceeding your standard liability policy would fall to you. In order to cover the costs, you could be forced to use money from your current assets, such as savings accounts, 401(k)s, or even your home. And your future earnings could be applied as well. So, while these types of catastrophic events are unlikely, insurance companies offer umbrella coverage for customers who want to protect their assets and feel more secure.   The good news is, this insurance is relatively affordable.  Policies are generally available for $1 million, $2 million, and $5 million in coverage (availability varies by state).

How the Coverage Works

If there is a covered liability claim under your auto or homeowners policy and the dollar amount of the judgment is greater than the coverage limits you have purchased on those policies, the umbrella coverage goes into effect. Certain coverage limits must be met on your auto and home policies before you can purchase an umbrella policy. The big question is often: How much coverage should I carry? The answer usually depends on your net worth. Calculating the value of your home, stocks, mutual funds, and retirement accounts is the first step.

Contact your Leavitt Group insurance representative for more information on umbrella insurance and for a review of your coverage options.

Source:  The Hartford


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