Umbrella Insurance Coverage: Is it a Good Idea?
Umbrella insurance coverage provides an additional layer of protection beyond the limits of primary insurance policies such as home and automobile insurance. In other words, it offers a supplemental layer of protection from major lawsuits that may exceed the limits of home or automobile insurance.
Who should consider umbrella insurance coverage?
Anyone with a mid to high net worth should consider umbrella insurance coverage. When it comes to a lawsuit, the more assets you need to protect, the more you need to consider additional insurance coverage. In addition, people who engage in activities that make them more susceptible to a lawsuit should consider umbrella insurance coverage. This includes owning and operating a business, in the event you are determined personally liable for any claims against the business.
What does umbrella insurance do?
An umbrella policy bridges the gap between a judgement against you and the primary insurance policy’s maximum payout. For example, if you’re sued after a car accident and the court finds you liable for $1 million in damages and your automobile insurance policy has a $500,000 limit, an umbrella insurance policy covers the remaining $500,000. Without the umbrella insurance coverage in place, you would be personally liable to make up the difference.
What does it take to qualify for an umbrella insurance policy?
Most insurance companies require you to have certain minimum liability limits on your primary insurance policies before you can purchase additional coverage with an umbrella policy. In other words, you cannot be under-insured with your primary coverage and supplement with umbrella coverage.
What are the potential downsides to umbrella insurance?
While umbrella insurance coverage provides protection and the peace of mind that goes with it, there may be a few potential downsides to consider. Adding umbrella insurance is an expense that needs to be budgeted for. In addition, like any insurance policy, an umbrella policy may come with coverage limits, exclusions, and deductibles. The cost-benefit analysis of adding umbrella insurance to your portfolio should be evaluated by your insurance professional.
Depending on your circumstances, umbrella insurance coverage may be a valuable addition to your portfolio. It’s important to balance the pros and cons, as well as to consider how the coverage works in conjunction with your existing insurance coverage, financial plan, and estate plan.
Work with an Experienced Virginia Estate Planning Attorney
We regularly work with other professionals such as insurance agents and financial planners to create a comprehensive estate portfolio for our clients. Contact Wilson Law PLC today at 866-603-5976 to set up a meeting or fill out our contact form and we will call you to schedule your meeting.