You aren’t perfect; in fact, nobody is. That’s why you have liability insurance in the first place – to protect against financial responsibility stemming from accidents and negligence. Of course, even the highest available limits on your insurance policies can fall short of covering your liability after a major lawsuit. For those scenarios, there is umbrella insurance, and it could mean the difference between a financially secure future and total financial ruin.
What is Umbrella Insurance?
You can think of umbrella insurance as extra ‘back-up’ liability protection. This coverage kicks in when you have used up all of the available liability coverage in your primary insurance policy. Normally, you would still have to pay any excess damages above and beyond your limits. With umbrella insurance, your supplemental coverage picks up where your primary coverage left off, paying additional damages up to the limits of your umbrella policy.
For example, imagine what would happen if you injured a young parent in a car accident. The victim is no longer capable of working to support his family and sues you for medical bills and a lifetime of lost wages. The court rules in the victim’s favor, leveraging a $1.25 million judgment against you. Your auto insurance only covers a maximum of $250,000 per person per accident. You are left with $1 million in financial liability that you will need to pay out of your own pocket. With umbrella insurance, your supplemental coverage would pay the remaining debt. Without it, you might face asset liquidation, wage garnishment, and many years of indebtedness to the victim.
What It Covers
Umbrella insurance is designed strictly for liability damages, meaning it will not cover your own injuries or property damages. It also will not cover any criminal or intentional act. However, umbrella insurance does typically cover expenses related to other people’s property damages, injuries and funeral costs, as well as your legal costs during the lawsuit. It can also extend to damages not typically covered by primary insurance policies, such as claims of defamation, libel, or slander.
While umbrella insurance policies have limits, most offer coverage starting at $1 million. Many companies allow you to add additional coverage in increments of $1 million each up to a total limit of $5 million, although some companies have maximum personal umbrella limits that reach as much as $10 million. That is in addition to the liability coverage you already have in your primary insurance policies.
Should You Purchase Umbrella Insurance?
Consider what you have to lose in the event of a major lawsuit. Would it be your retirement? Your investments? Your kids’ college fund? The money you had saved for your daughter’s dream wedding? Not to mention, if you lose your defense, a million-dollar judgment would do much more than wipe out the money you already have; it could affect how much money you are able to save in the future. In other words, it’s about more than what you own now – it’s about what you are capable of earning in the years to come.
While we recommend a one-on-one consultation with your independent insurance agent when making decisions about your coverage, there are certain signs that could indicate umbrella insurance is right for you. Some of the most common reasons people purchase extra liability coverage is to protect a significant accumulation of savings, property, or other assets. You might also need supplemental liability protection if you own a rental property, swimming pool, trampoline, or engage in activities or sports that increase your risk of being sued.
How Much Does Umbrella Insurance Cost?
You may be surprised to find that umbrella insurance is highly affordable. In fact, it may be the most affordable insurance coverage you own, costing just about $150 to $300 per year for $1 million of coverage or more. If you want to add even more coverage, each additional million is usually available for just $50-$75. Considering the low premiums, umbrella insurance generally provides a good value for the cost. Add in the litigiousness of the society we live in, and it’s easy to see why so many people purchase umbrella insurance for extra peace of mind.
Keep in mind that insurance companies typically require that you have a certain amount of primary liability coverage in your homeowners, auto, boat, and other insurance policies. If your current limits are too low, you may need to raise them before an insurance company will issue you a supplemental liability policy.
Shop for Minnesota Umbrella Insurance with an Independent Agent
Several Minnesota insurance companies offer umbrella insurance, so how do you know where to begin your search for coverage? When you choose Krog Insurance, you are choosing an agency that will help you seal the gaps in your coverage by shopping and comparing supplemental liability policies from multiple insurers. We want to help you protect everything you’ve worked hard for – your nest egg, your retirement, your lifestyle, and your future.
Remember, umbrella insurance isn’t just for the wealthy. It’s for anyone who wants to stay in control despite situations that cannot be controlled. If you are considering a supplemental liability insurance policy, there is no better time than now to contact our office to request a personal risk assessment. We can help you determine what could be at risk and how much coverage might be necessary to protect it.