Contents

Know more about this
(or any other) subject?

Show off your know-how at Quamut Wiki.

Learn more with these titles from Barnes & Noble

The New Health Insurance Solution: How to Get Cheaper, Better Coverage Without a Traditional Employer Plan

The Complete Book of Insurance

Previous:
Disability Insurance

Next:
How to Compare Insurance Companies and Agents

Umbrella Insurance

Umbrella insurance serves two main purposes:

It covers the additional financial obligations you may incur if you’re sued for an amount that exceeds the liability coverage in your auto or homeowner’s insurance policies.
It provides coverage for judgments rendered against you in lawsuits concerning liability issues that are not covered by your other policies. For instance, homeowner’s insurance can cover your liability for medical costs incurred by guests in your home, but usually not for live-in residents, such as a full-time nanny. If your full-time nanny injures herself in your home and sues you, umbrella insurance would likely provide coverage for your liability, even if your homeowner’s would not.

How Much Coverage Do You Need?

Most umbrella policies start at a minimum of $1 million in coverage and increase in $1- to $5-million increments. Coverage is relatively inexpensive, so it’s a good idea to buy as much coverage as you can afford. When deciding how much coverage to buy, consider:

Your income and assets: The amount of coverage you buy should meet or exceed the sum of your annual income and all other assets, including your home.
Your personal response to risk: If you tend to worry about liability, umbrella policies can help give you total peace of mind. If you don’t mind taking on a small degree of risk, you may consider an umbrella policy unnecessary.

Umbrella Insurance Costs

Umbrella coverage is relatively inexpensive. For example, a $1 million policy costs an average of $150–200 annually. For each additional $1 million you add to the policy, costs typically range from $60–100 annually. The premiums you pay for umbrella insurance depend in part on the amount of liability coverage you already have on your homeowner’s and auto insurance policies—the higher the amount of existing coverage, the less you’ll pay for umbrella insurance.

How to Buy Umbrella Insurance

It’s usually best to buy umbrella insurance from the same insurer or agent who sold you your auto and homeowner’s insurance. That way you’ll be sure that your provider has a thorough understanding of the coverage you currently have and, therefore, how much umbrella coverage you need. Insurers who provide umbrella coverage include: