Imagine you are heading home from a long exhausting day at work. The visibility is anything from ideal. Roads are greasy, and it’s the first snow of the year. Eventually, before you notice the car’s brake lights ahead of you, it’s too late! No matter if you were driving fast or it’s been a long since you last replaced the worn-out tires, you are here at fault, and there’s a 5-car pileup. However, the worst part is you don’t have sufficient auto insurance to pay for the vehicle’s damages. Similarly, your personal liability coverage will not cover even a fraction of medical bills.
Does it sound like a frightening scenario? Something that many of us have only imagined, but others have experienced firsthand. So, what do you do in such a scenario? Well, if you are fortunate enough to have a professional personal insurance advisor by your side or wise enough to prepare for the worst, all of your claims would be easily covered under umbrella insurance.
Think of an umbrella insurance policy as a fail-safe for your assets and savings. It is an extra liability insurance designed to protect you from lawsuits and major claims. So, suppose you are sued for damages beyond the liability limits of your home, car, or other insurance policies. In that case, an umbrella policy will save your assets and future earnings by covering legal costs during a lawsuit and paying what you owe.
However, it is not a stand-alone policy. It can only be purchased if you already have liability coverage. So, until now, if you have only been depending on your liability coverage policy, here are the top four reasons to invest in an umbrella policy right away.
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Claims are Costly
The first reason is that you are vulnerable to high risk if your homeowners and auto insurance coverages are insufficient. For example, if we consider your car insurance policy, every state has set a minimum liability requirement. So, if you are in California, it is around $15,000 for the injury or one person’s death, $30,000 for the injury or death of multiple persons, and $5000 for any property damage.
Thus, if you have minimum coverage, it’s not enough because a single building or car damage can quickly go beyond $5000. Similarly, the treatment for a person’s injuries can go up to $15,000, especially if surgery is required or injuries are long-term.
This means that your minimum coverage is not sufficient, particularly if you have valuable assets to protect. Even if you raise your limits, how high can you possibly go? The limit of even $200,000 won’t be enough in all situations.
Hence, this is exactly where umbrella insurance comes in. The policy makes it easier to get extra coverage against expensive claims, saving your valuable assets. Moreover, the policy is not just limited to your auto insurance; you can use it for various personal liability insurance policies simultaneously.
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You Own Investment Property or a Business
It is no surprise that people who own more property, particularly investment or rental property, are at a higher risk of experiencing something bad happening on their land. In this case, an umbrella policy offers landlords an additional liability. It protects them against tenants’ injuries, libel, slander, business or owner liability, or vendors.
An umbrella policy can cover different investment properties owned in different states. Investment property owners opt for an umbrella policy to protect themselves if they are held liable for damages or any injury on any of their properties. The policy provides them an effective safeguard of extra coverage against expensive lawsuits for less than a few dollars per day.
Similarly, if you own a business, umbrella coverage offers the extra protection your business needs against unexpected and big events, exceeding your primary insurance limits. This may include employee auto accidents, harassment claims, liability claims, multi-million-dollar devastating lawsuits, etc.
Thus, it is always a good idea to evaluate the potential of your available coverage and limits and then decide if it would be good to have an additional umbrella policy.
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You Express Yourself on Social Media
While social media give you and your kids multiple outlets to interact with people and express yourself, your one remark can unintentionally cause someone harm. This means you can easily be sued for personal injury. One of these examples is when you are unhappy about your kitchen remodeling and post a negative online review, and the contractor sues you for the business loss.
Or let’s say your teenage kid circulates an inappropriate picture of their classmate among their friends, and the classmate’s parents sue everyone involved in it. Likewise, you may also be at risk if you picket a business, write a letter to the editor, speak out at a school meeting, or even at a town council.
While most homeowners’ insurance policies offer personal injury coverage up to certain limits, see if you need to add extra protection by getting umbrella coverage. Remember, something as simple as insulting someone over social media can land you a serious legal disaster.
In such a case, having a personal umbrella can save you even a $1 million settlement that would otherwise make you spend the rest of your life trying to recover the loss.
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It’s Affordable and Gives a Peace of Mind
As we know, umbrella coverage offers additional coverage. However, it doesn’t mean that it is expensive and for the ones with deep pockets only. Instead, the premiums of umbrella coverage are surprisingly affordable for everyone.
Hopefully, as you are less likely to need this coverage compared to other available forms of insurance, this is a highly cost-effective form of coverage. For instance, for just $150 to $300 per year, you can easily add up to around $1 million of additional coverage. Moreover, you can add an additional million to your coverage at $70 to $150. So, considering it can help you save millions one day, it is not a bad trade-off.
Lastly, it helps you focus on better things than worry. While you may already have a lot to worry about, it is unwise to add insurance problems to the list of things that keeps you up at night. Thus, purchasing an umbrella policy today protects you and your valuable possessions against devastating financial losses arising from unforeseen events.
When you have the right umbrella policy, you can rest assured you remain protected and ready to face any unexpected situation without neglecting your financial security.
The Bottom Line
Regardless of your net worth, an umbrella policy can serve as a vital failsafe to guard your assets, savings, and way of life. It helps you identify potential liability exposures and present a focused solution you can always depend on.
So, regardless if you haven’t experienced a costly lawsuit, don’t own a business or investment property, or don’t interact with people online, you can never surely predict when you may run into an unexpected event causing you a devastating financial loss.
Remember, your house, car, and other assets are a source of joy, but any unfortunate event can lead to expensive claims, making you lose your lifelong savings and assets in a blink of an eye. Thus, it makes sense to act wisely and opt for umbrella insurance to protect your assets and future income at all times. After all, it is inexpensive and gives you the peace of mind you and your family deserve.