Our top pick: USAA umbrella insurance
- Coverage up to $1 million
- Rates starting at $19 per month
- Works alongside USAA car and home insurance
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You could find yourself in a tough position if you’re liable for more damages that your insurance covers. If you have a high net worth, you’re especially at risk for an unexpected lawsuit. To avoid getting into debt because of an accident, consider taking out an optional umbrella insurance policy.
A $1 million umbrella insurance policy typically costs between $150 and $300 each year, according to the Insurance Information Institute. The exact cost depends on your personal profile, such as your age and where you live, plus other factors depending on your insurance company.
Those rates may seem lower than typical car or home insurance policies. That’s because umbrella coverage is usually added to existing policies, similar to how you’ll save by bundling insurance. Your risk of maxing out your policy is also lower since your other insurance will kick in first.
If your basic insurance policy — auto insurance, homeowners insurance — covers part of what you owe, umbrella insurance doesn’t have a deductible. However, if your basic insurance doesn’t pay for anything, you’ll pay a deductible.
Umbrella insurance policies often max out at $500,000 to $1 million limits. The more assets you have, the more coverage you’ll need. Review your net worth, home value, retirement plans and even your interest. Consider how much coverage you have with your current policies and if you’ll need extra in the case something was to happen.
For example, say your home is worth $400,000 and your cars are worth $50,000 total. Plus you have savings and retirement of about $250,000. Your total net worth is around $700,000, minus any debts you might have. An umbrella policy of $700,000 should fully protect all your assets if you were sued, even in a worst case scenario lawsuit.
Umbrella insurance is a type of liability insurance that protects you by paying for what you owe beyond the coverage offered by your basic auto, home or renters insurance.
It’s especially recommended for individuals with significant assets who stand to lose a lot from getting sued and can cover you for a wide range of scenarios:
Umbrella insurance covers you over and above your existing policies. Think of it as an extra safety net.
Say you needed to make a claim on your car, home, renters, boat, RV or other insurance. Umbrella coverage kicks in if the costs for damages are above your maximum limits, or if you don’t have an existing insurance policy that would cover the damage.
Usually, you can add umbrella coverage to your existing policies, but high net worth individuals can sometimes buy a separate umbrella policy.
Umbrella insurance isn’t mandatory. However, you’ll want to look at the terms of your current policies to determine if you’re comfortable with the maximum limits on your policy.
If you feel your limits are high enough to protect your assets, you might choose to forgo umbrella insurance. Otherwise, you might want to peace of mind that an umbrella policy can offer.
Consider umbrella insurance if:
You might not need umbrella coverage if:
Before you can buy umbrella insurance, insurers will require you to already have significant coverage under your auto or homeowner’s insurance. However, if you don’t meet the minimum coverage amounts you may be required to increase your liability limits. If you lower your limits or your policy lapses, your umbrella policy starts paying after you’ve paid the maximum liability coverage amount.
Chances are your current insurer will offer umbrella insurance. You’ll most likely need an existing insurance policy with the company in order to take out an umbrella policy or add it to existing coverage.
George’s auto insurance covers him up to $500,000 in the event of bodily injury to others in a car crash. He’s in an at-fault accident, and the resulting medical expenses and property damage total $750,000. After paying his car insurance deductible, George’s car insurance pays out $500,000.
He’s still on the hook for $250,000. His umbrella insurance covers bodily injury liability and property damage up to $500,000, so he uses his umbrella policy to cover the remaining damage. He would still have up to $250,000 to pay for legal fees or additional damage if he’s sued by any of the other drivers.
Umbrella insurance isn’t mandatory, but it could protect you if you’re liable for large expenses that your basic insurance doesn’t cover. To get the best price, compare car insurance companies with umbrella coverage.
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These coverage options serve different functions but have one benefit in common.
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