Have you ever felt like buying insurance was the biggest ripoff ever? Really, I mean you are betting that your house will burn down, that you will get into a car accident or that someone will sue you! What kind of ripoff is that!
Well, maybe it is, but it is also a risk management strategy for you and your family. Sure, you might get lucky and not ever need it, but on the other hand, total disaster may strike.
After years of working, saving, investing and doing without, you may finally have accumulated a nice enough nest egg to retire to the location of your dreams. But, just as you are preparing to sell and move, a prospective buyer trips on the front step, breaks a leg and has complications in the hospital. Their family sues you for negligence. Sure your homeowner’s policy covers part of the legal costs and settlement, but what about the rest? Yep, it is out of your hard earned pocket of savings.
What is umbrella liability insurance?
This type of policy sits on top of your auto or home insurance policy, covering more of your potential liability in case of an accident or other action resulting in legal proceedings against you – hence the name umbrella.
Typically, you are required to have a basic policy with liability coverage before you can buy umbrella insurance. If you have auto insurance, for example, with liability coverage for up to $300,000, umbrella liability insurance could provide up to a million or more dollars of additional coverage. It would cover liability for both your auto and your home, as well as certain other things not typically covered by auto or home insurance. How much does umbrella liability insurance cost?
Obviously, this will vary based on your situation and your insurance carrier. Our policy costs us about $135 a year and covers us for an additional million dollars of liability. We are required by the insurer to carry certain amounts of basic liability coverage on our auto and home insurance.
Typically a million extra in coverage can cost between $100 and $300 and a couple of million can cost between $200 to $500 a year, according to The Wall Street Journal, Lifetime Guide to Money.
What does umbrella liability insurance cover?
As mentioned above, it will pay if you are responsible for someone else’s losses, including your legal defense fees and legal costs if you are wrongly sued. It covers amounts over and above what your auto/home liability insurance covers. It covers things that your home and auto insurance will not cover, such as libel, slander and invasion of privacy.
Who should consider buying umbrella liability insurance?
Years ago, only the wealthy needed to consider buying umbrella liability insurance, however, in today’s litigation happy society, you might want to think about getting it even if you aren’t wealthy.
If you are responsible for enforcing company policy at work, if you have jealous neighbors who might want to sue you, if you own your own business or website or if you are a public figure you should think about getting this coverage. Even if you are none of those, you should consider the cost vs the risk of this extra coverage.
We went for years without having any and didn’t have any trouble. We couldn’t really afford the premiums (heck we could barely afford the life, health, auto and home insurance) and didn’t feel that we had enough assets that anyone would want to come after us.
When I became a manager at work and became responsible for enforcing company policy, we purchased our first umbrella liability insurance policy. The company would pay for any suit and consequent award on my behalf, as long as it thought I was acting within company policy. I did do my best to do so, but since that was quite obviously open to interpretation, we decided to cover this risk a bit better. A bonus was that it also would cover us in case of injury on our new property and in the event that any of our business companies had their veil pierced and someone came after us personally.
Do you have umbrella liability insurance coverage? Why?
This is definitely something to consider especially if you have a lot of assets you need to protect. Every situation is different though so make sure you know all of the circumstances and your options.
Although, I understand not wanting to spend money on the coverage if your blog can’t cover it, you actually could be sued at any time – whether or not your blog makes money. If you aren’t incorporated or if the corporate veil can be broken, you can be held personally liable. Keep in mind I’m not a lawyer though!
I once bought an umbrella policy because by doing so, the premium on other policies dropped sufficiently to cover the umbrella policy’s relatively modest cost. Worth asking your insurance agent about this possibility…
This sucks. Insurance on top of insurance? I get it and Marie is right, our society is sue-happy, but what’s next? Umbrella insurance for our umbrella insurance for our insurance? How many levels do we go before just throwing our hands up and calling the system broken?
I truly to believe that buying insurance is the biggest ripoff ever. I reiterate that sentiment every time I make an insurance payment. I had more assets to protect, perhaps I would feel differently.
I do have an umbrella policy. My son works for an insurance company and he suggested it would be a good idea. The way he explained it: if you cause an accident and someone is hurt or killed, your insurance will cover the amounts for which you will be sued (and you WILL be sued!) only up to the limit on your policy. So say you have a $500,000 policy and your victim gets a $1 million judgment against you: you are gonna end up owing $500,000. The million-dollar umbrella, which is attached to your auto insurance, not only will pay out whatever the amount of the basic policy provides, it also will cover another million bucks in liability. And it covers incidents that occur on your property as well as the usual automotive mayhem.
One evening I was driving home after dark, going about 10 mph over the speed limit on a six-lane city thoroughfare. The road crossed a canal on whose banks joggers like to run. There’s no signal, but there is a crosswalk. As I was daydreaming my way up the road, thinking about what I was going to do when I got home, some guy ran across that crosswalk right in front of my car. I hit the brake and missed him by less than three feet. Probably by a lot less than three feet!
Had I hit him, I would have been hugely at fault. He was in a crosswalk and I was speeding. He would have been killed or seriously injured, and I would have been sued right straight into the poorhouse.
Thanks for sharing your story. As I said above, umbrella liability policy premiums are protection money – they protect you in situations such as could have happened to you.
Have you ever felt like buying insurance was the biggest ripoff ever? Really, I mean you are betting that your house will burn down, that you will get into a car accident or that someone will sue you! What kind of ripoff is that!
No, I don’t, but it was good to learn about this. For a second, I thought – why would I ensure my umbrella? Cheaper to buy a new one. 🙂
lol!!! My umbrella needed something! Darn thing is held together with paper clips.
This is definitely something to consider especially if you have a lot of assets you need to protect. Every situation is different though so make sure you know all of the circumstances and your options.
Right, the coverage isn’t for everyone.
Although, I understand not wanting to spend money on the coverage if your blog can’t cover it, you actually could be sued at any time – whether or not your blog makes money. If you aren’t incorporated or if the corporate veil can be broken, you can be held personally liable. Keep in mind I’m not a lawyer though!
I once bought an umbrella policy because by doing so, the premium on other policies dropped sufficiently to cover the umbrella policy’s relatively modest cost. Worth asking your insurance agent about this possibility…
Great tip – thanks Kurt.
This sucks. Insurance on top of insurance? I get it and Marie is right, our society is sue-happy, but what’s next? Umbrella insurance for our umbrella insurance for our insurance? How many levels do we go before just throwing our hands up and calling the system broken?
That’s right, insurance coverage for liability that exceeds what your regular homeowner or car policy provides.
I truly to believe that buying insurance is the biggest ripoff ever. I reiterate that sentiment every time I make an insurance payment. I had more assets to protect, perhaps I would feel differently.
It does kind of feel like ‘protection’ money doesn’t it?
I couldn’t have said it better myself. I think that’s exactly what it is.
I do have an umbrella policy. My son works for an insurance company and he suggested it would be a good idea. The way he explained it: if you cause an accident and someone is hurt or killed, your insurance will cover the amounts for which you will be sued (and you WILL be sued!) only up to the limit on your policy. So say you have a $500,000 policy and your victim gets a $1 million judgment against you: you are gonna end up owing $500,000. The million-dollar umbrella, which is attached to your auto insurance, not only will pay out whatever the amount of the basic policy provides, it also will cover another million bucks in liability. And it covers incidents that occur on your property as well as the usual automotive mayhem.
One evening I was driving home after dark, going about 10 mph over the speed limit on a six-lane city thoroughfare. The road crossed a canal on whose banks joggers like to run. There’s no signal, but there is a crosswalk. As I was daydreaming my way up the road, thinking about what I was going to do when I got home, some guy ran across that crosswalk right in front of my car. I hit the brake and missed him by less than three feet. Probably by a lot less than three feet!
Had I hit him, I would have been hugely at fault. He was in a crosswalk and I was speeding. He would have been killed or seriously injured, and I would have been sued right straight into the poorhouse.
That’s what decided me on the umbrella policy.
Thanks for sharing your story. As I said above, umbrella liability policy premiums are protection money – they protect you in situations such as could have happened to you.