Financial Well-Being Blog

mother and daughter sharing an umbrella
July 21, 2022

What Do You Risk by Not Having a Personal Umbrella Policy?

You might find yourself wondering, “Do I really need an umbrella policy?” The short answer is: yes, almost everyone does.

There are few people who don’t need an umbrella policy. If you own a home, drive a car, have a pet, host guests in your home, or have a new driver in the family, you should not be without this additional layer of liability protection. While many consider umbrella coverage a supplemental policy compared to home, auto, and even life insurance, for many, the safety net provided by this unique type of policy is anything but optional. In this article, we will review everything you need to know about umbrella insurance— from what it is to who it’s for to how much it costs.

What Is Umbrella Coverage?

A personal umbrella policy is designed to provide an additional amount of liability insurance protection and a broader range of coverage than typical homeowner, auto, and other types of personal insurance policies. It is important to remember that an umbrella policy is for liability to others. It will not cover your own injuries or personal damage. Umbrella policies exist with the ultimate goal of protecting your assets.

In the event of a claim or lawsuit for which you are responsible, you may experience financial repercussions if the limits of your auto or home policy are insufficient, including your personal assets being used to satisfy the suit. With an umbrella policy in place, however, if there is a large claim for which you are responsible, your umbrella policy would pay up to those limits.

Typically, these policies extend your liability limits from $1 million to $5-10 million in addition to the liability limit contained in your other personal policies.

Who Needs Umbrella Insurance?

Tragic and unexpected accidents can happen to anyone at any time, and it is important that you have the coverage you need to protect yourself if and when they do.

For instance, say a homeowner hosts a Fourth of July party with dozens of invited guests attending. Late in the evening, when fireworks are being fired off by the homeowner and guests, a rocket strikes one of the invited guests. The guest is injured, transported to the hospital, and undergoes extensive medical bills that ultimately exceed the liabilities of the homeowner’s insurance policy. If that homeowner doesn't have a personal umbrella insurance policy – the injured party may try to recoup their financial losses through the personal assets of the homeowner. This would mean that boats, cars, vacation properties, etc. of the homeowner may need to be liquidated to satisfy the obligation. Having a Personal Umbrella Insurance policy in place may help in this situation.

If a situation strikes and you do not have that layer of umbrella coverage to protect you, your wages could be garnished, or you could lose your home. Simply put, you would have to find some way to cover the difference between what your current policy covers and the amount you owe. Your umbrella insurance should be that layer for you.

How Much Does Umbrella Coverage Cost?

Though the cost of umbrella coverage will vary by company, the average premium range is as low as a few hundred dollars a year for a million dollars of additional coverage - a relatively inexpensive investment for the additional peace of mind.

What is Not Covered By An Umbrella Policy?

Despite the many applications where umbrella coverage may be utilized, there are many situations that are not covered by umbrella policies such as intentional acts, illegal acts, specific contracts, and anything specifically excluded in your policy. This includes injuries caused by certain breeds of dogs or specific recreational vehicles.

An umbrella policy is additional liability insurance meant to protect you from large liability claims or judgments. It supplements your other policies by providing additional coverage when the liability limits of your auto or homeowners policies have been reached. It also covers things like being sued for slander, libel, or other personal liability situations. Be sure to carefully read all of your insurance policies carefully to understand what may or may not be covered and consult your independent insurance agent to understand your policies and to be sure you have the right coverage for your specific circumstances. Click here to learn more.
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About the Author
scott strickland, president of the communityamerica insurance agency
Scott Strickland

CommunityAmerica Insurance Agency

Scott Strickland is the President of the CommunityAmerica Insurance Agency. Scott leads an exceptional insurance team that is committed to providing the best insurance value for our members. Scott has spent more than 35 years in the insurance and banking, building insurance agencies for banks and credit unions across the United States.

Insurance products may be sold through CommunityAmerica Insurance Agency, LLC, a wholly owned subsidiary of CommunityAmerica CUSO One, LLC and a licensed insurance agency in Missouri and Kansas. Insurance products:

Are Not Federally Insured

Involve Investment Risk

May Lose Value

Are Not Obligations or Guaranteed by the Credit Union