In today’s world, many people turn to litigation when the unexpected happens. The thought of being sued for hundreds of thousands of dollars is enough to scare anyone, but if you have considerable assets, you may be at greater risk than the average person.
Umbrella insurance can give you the peace of mind that only comes with knowing your assets are fully protected. But is it the right choice for you?
What Is Umbrella Liability Insurance?
Umbrella insurance is essentially an “extra” liability policy that kicks in when your standard home, auto, or other liability insurance is exhausted. For example, imagine your car insurance policy only includes Colorado’s state minimum liability insurance, which pays up to $25,000 for bodily injury or death per person.
You cause an accident and seriously injure another driver who has $100,000 in medical bills. Because your car insurance only pays $25,000, the driver may sue you for the remaining $75,000. If you have an umbrella policy, your insurance will pay the difference. If you don’t, you may be personally liable.
Why You Need an Umbrella Insurance Policy
Umbrella insurance policies can be helpful, but depending on your situation, they may or may not be necessary. Here are four situations where having umbrella insurance is highly recommended.
1. You Have Considerable Assets
If you have significant wealth, an umbrella policy can prevent you from having to dip into your savings or other assets in the event of a lawsuit.
2. You’re More Likely to Be Sued Than the Average Person
For most people, the chances of being sued for hundreds of thousands (or millions) of dollars are fairly low. However, certain lifestyle choices, such as the following, may increase your chances of being sued:
- Owning a backyard pool
- Owning a trampoline
- Coaching youth sports
- Hosting large or frequent parties
- Hosting your kid’s friends frequently for playdates or sleepovers
- Owning an aggressive dog
If you engage in activities that may raise your risk of a liability suit, it’s worth considering an umbrella policy.
3. Your Household Includes Multiple Young Drivers
It’s no secret that teen drivers are more likely to cause car accidents than older drivers. If you have one child who has recently gotten a driver’s license, you may not need an umbrella policy.
However, with multiple teen drivers on your auto insurance policy, your risk of a lawsuit is considerably higher. Premiums for umbrella policies are generally very low. Even if you never have to use the policy, having one is worthwhile for the peace of mind alone.
4. You Own a Business
Generally, personal umbrella policies can’t be used to cover business losses or activities. However, if you’re a business owner — and especially if your business is in a sector where liability lawsuits are reasonably likely — you should consider a commercial umbrella policy. Owning a business can act like a “target sign.” If you’re involved in an incident and others see that you own a business, they may assume you have significant assets, making you a larger target for lawsuits. This is even more pronounced if you hold a professional license, such as a doctor, lawyer, or CPA, which is easily observable.
How Much Umbrella Insurance Do I Need?
At Warrior Insurance & Services Group, we’ve seen firsthand that no two insurance situations are alike. If you’re considering getting umbrella insurance but aren’t sure how much you need, we invite you to get in touch. Get started with a free quote today!