Why You Need Umbrella Insurance in Place

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You have probably heard of umbrella insurance, but if you are still unsure of what it is and why you need it, we will explain more here.

You can think of umbrella insurance as a way to build the defense up in your wealth strategy.  It protects the money you have built up from being taken away when something unexpected and unfortunate happens.

Most people can benefit from having a umbrella insurance in place, but especially if you have a high net worth.

Let’s start with the basics.  What exactly is an umbrella policy?  It is a personal liability coverage that protects you and anyone in your household from lawsuits or claims that may be higher than your other insurance policies would cover.

Bad things can happen to any of us and if you are found to be responsible, you could be looking at huge sums of money that need to be paid out to other parties involved.  If your insurance policies are capped and the amount is higher, you need to pay that out of pocket, unless you have an umbrella policy in place, in which case, that would take over at that point.

Umbrella insurance covers five main areas.

Bodily injury— This comes in when someone hurts themselves on your property, such as a friend falling on your broken front step.

Legal fees—If you get sued by someone, umbrella insurance comes in here so you don’t have to worry about those lawyer fees breaking the bank for you.

Injury to people’s reputation—If you’re sued for slander, libel or defamation, umbrella insurance will cover these expenses.

Property damage—Anytime there is damage to someone else’s property due to a reason that involves you, umbrella insurance would step in to cover those costs after your other insurance has hit its max.

Rental property—If you are a landlord, this would be something you want to have in place to cover yourself if you are sued regarding an accident on your rental property.

So now that you know what is covered, how do you know how much you need to buy?  The rule of thumb is to have an umbrella policy that matches your net worth. For example, if your assets are worth $2million, then that is the amount you want to have on the policy.

Think of it as the more money you have saved (or even earn) the more you have to lose.

Also, an umbrella policy will need to be connected to an existing homeowners or auto policy.  This coverage is not sold on its own, but it is  affordable.  Affordable enough that it would be unusual to not add it to your policies when you have that much investment to protect.  It is an added way to have peace of mind while you enjoy life.

If you are interested in an umbrella policy, please reach out to us here at John Scott Insurance Agency and we are happy to help you get that setup.


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