Do You Need an Umbrella Insurance Policy? Questions to Ask Yourself

November 18, 2019

To start off, what is an umbrella insurance policy?  Simply put, it is a policy that (offers higher limits of liability than your primary homeowner, auto, boat or other personal insurance policy.)  An umbrella policy covers unexpected and tragic events, such as you being held responsible for bodily injuries in an auto accident.  Your basic insurance would pay the expenses in these situations (but if the loss is greater than your primary policy limits, the umbrella policy offers more coverage so that your personal assets are not attached.) In deciding whether to get an umbrella policy, ask yourself these questions to be sure you make the right decision.)

How much risk do I face in my daily life?  Everybody faces some risk every day, e.g. catching a cold or getting into a car accident on the way to work.  But you may face more or less risk than others depending on your circumstances.  Do you have any new drivers in your family, who will naturally have less experience on the road than others?  Does your property have any attractive nuisances, objects that could cause injury, such as a pool, large trees or some loose rocks?  If you have a dog, is he aggressive to other people’s pets?  These are just some examples, but if you answered yes to any of these questions, you will want to strongly consider an umbrella policy because there would be damages involved in these circumstances that your basic policies would not cover entirely.

How many assets do I need to protect?  Am I a target? If you have more assets than the average person that you need to protect, do I have a high profile as a business owner or baseball coach, Lawsuits may go for higher because of who you are.   

How many people do I serve with my job?  Umbrellas are sold to business and individuals. Businesses are almost always held to higher degree of responsibility and so are targets for large lawsuits. Do we have clients’ personal data, will our food make someone sick, what happens if my machines catches on fire and burns down a building. Other examples are if you are a landlord you are responsible for the well being of all the tenants in your building.  Due to the large number of people for whom you are responsible, you are at a greater risk of being held liable for something that goes wrong, such as a tenant slipping on ice that you forgot to salt.  If you are a CEO you have a greater risk of former employees coming after you for wrongful termination or other issues. Therefore, it is necessary to consider the responsibilities of your occupation when deciding whether to get umbrella coverage.

Would my family benefit from this policy? The umbrella policy covers not just the named insured but also everyone in the household. If one of them was held liable for an unfortunate event, you could be affected as well (like losing assets that you shared). Therefore, you should discuss with your family whether they feel their basic coverage is adequate or if they would like the extra protection of an umbrella policy.

The process of selecting insurance policies to best fit your needs is a tough process for anyone. Do not forget to also talk to your insurance agent and other experts to figure out what is the best fit for you and your family.


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