Few Who Should Have Umbrella Liability Insurance

Henry Stimpson

Anyone who owns a home, has significant assets or is earning a good living should have umbrella liability insurance, but most don't bother.

If you think you’re adequately covered just because you have auto and homeowners insurance policies, you might be wrong. According to an insurance agent, those two just don’t provide proper liability insurance for most people.

Auto insurance policies typically offer up to $500,000 per person and $500,000 per accident in liability protection, while homeowners policies generally provide up to $500,000 of liability insurance.

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f you, your spouse or your child is found liable for having caused a serious injury or death, you can be held responsible. If you don’t have enough insurance to cover the full amount, you must come up with the difference and may have to drain your savings or assets. A lien could be put on your house and your wages could be attached, McCummings says.

Though McCummings reminds his customers regularly, probably less than 15% of them have an umbrella policy. Most people are loath to spend money for something they may never use. But that’s shortsighted given the risk. Especially since umbrella insurance typically costs less than $200 a year for a $1 million policy, he says.

Most umbrella policies also cover libel, slander and invasion of privacy, which aren’t typically covered by home insurance. The umbrella policy can pay for a lawyer to defend you and pay any judgment or settlement up to the policy limit for covered losses, he says.

To qualify for an umbrella policy, you must have $250,000/$500,000 of auto liability insurance if you own a car. You also need at least $300,000 of liability coverage under your home, condo or renters policy.

Most people can buy umbrella insurance at the standard rate from the same insurer that writes their auto and/or home insurance.

However, each insurer has its own underwriting rules. People deemed high-risk, including people with bad driving histories or in certain high-profile occupations, will need to have their agent shop around and usually find a pricier specialty insurer willing to underwrite them, he notes.

Today, even a $1 million umbrella isn’t enough for some. You can add coverage in $1 million increments at a fairly small cost.

“I think it’s the best insurance bargain around,” McCummings says.

“Today, you can get hit with a much bigger judgment or jury award than that,” Nick McCummings, insurance agent with Harrington Insurance Agency, points out.That’s why anyone who owns a home, has significant assets or is earning a good living should have umbrella liability insurance, he says. The people who most need it are those with a swimming pool, a dog or a young driver in the family.The policy sits atop your home and auto policies. If you have $500,000 of liability insurance under your homeowners policy and buy a $1 million umbrella policy, you’ll have $1.5 million in total protection.