Frequently Asked Questions
"Who Needs An Umbrella Policy?"
If you are concerned about losing your financial net worth (assets minus liabilities = net worth) as the result of a lawsuit for personal injuries and/or property damages caused by you, you probably need an umbrella policy. Probably? Yes, because you might already be adequately covered by your homeowner’s and auto policies.
Things to consider:
- First, you need to know your net worth. Without knowing, it becomes a guess as to whether you are adequately covered.
- Calculating you net worth can be easy. It is a matter of creating your Personal Balance Sheet (assets minus liabilities = net worth). Here are a few tips:
- Stocks & Bonds
- Real Estate
- Credit card debt
- Auto loans
- Real estate loans
- If your net worth can be protected by the coverage limits in your homeowner’s and auto insurance policies, there is likely no need to have an umbrella policy.
- The cost of umbrella insurance is relatively inexpensive for the peace of mind it can provide. A million dollar policy will likely be less than $200 per year and each additional million dollar increments will be even less than that.
- Umbrella policies often times cover personal liabilities that are excluded from homeowner’s policies like the following:
- Invasion of privacy
Tim and Christy embraced fiscal responsibility even prior to their marriage 10 years ago. Something they both learned from their very conservative parents. Even sharing that philosophy, they could not agree on the need for an umbrella insurance policy. Christy thinking they were adequately protected with their current coverage limits on their homeowner’s and automobile policies. While Tim believed dollar for dollar this was the best bargain in insurance coverage and given their personal net worth of over $1,000,000 a few premium dollars spent today could save a boatload down the road. He convinced Christy that for less than $200 per year, they could add an additional $1,000,000 of liability coverage to the $500,000 they already had by way of their other policies. It turned out to be a very wise decision. In an odd lawsuit, the court held that Tim and Christy were liable for their child’s actions to the tune of $250,000. It turned out that their homeowner’s policy excluded the coverage but they were saved when they learned they we protected by their umbrella policy.