Do I Need Umbrella Insurance?

Piggy bank standing on a edge of a cliff in rain and covered by green umbrella

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Umbrella insurance protects your assets if you are sued for an accident or something else catastrophic happens. It will cover expenses over the limits of coverage you have on your car and home insurance. It is easy for medical bills to add up to more than your coverage limits, especially if there is more than one person involved in the accident. Umbrella insurance should not take the place of your car, home or business insurance, instead, it should be considered supplemental insurance that you add to it. 

Do I Need Umbrella Insurance?

Most people in their twenties do not need umbrella insurance. Once you buy a home or begin to build significant assets, it is something you should consider doing. You can purchase umbrella insurance through your insurance agent at the same time you purchase your homeowner’s and car insurance. If you own a small business or if you are really beginning to build wealth, you should have an umbrella insurance policy in place. The best way to tell that you are getting to that point is if you have more in savings than your current homeowner's policy or car insurance policy will cover for injury.

If you own your own business, you may want to have an umbrella policy in addition to the business insurance that you are carrying. Judgments can be a lot bigger for businesses than they would be for individuals. One small accident on your business property may be enough to shut down your business permanently. As your business grows, you may want to increase your coverage. It is important to carefully examine your insurance coverage as you become more successful to make sure you have adequate coverage. You can talk to your insurance agent to determine if you need more coverage. Your financial planner may also be able to recommend whether or not you need to increase your coverage to protect your assets.

When Should I Get Umbrella Insurance?

Umbrella insurance is more important as you build wealth and assets. When you begin to build wealth or open your own business, you should consider getting umbrella insurance. Until you do this, you really do not need to worry about getting the extra insurance. If you work for an employer, and you do not have assets outside of your home, you really do not need umbrella insurance yet. 

As you take on additional responsibilities, get married and have children, you will have a wider variety of insurance needs. It is important to take time to make adjustments as you go through each of the six major financial steps in your life, as well as to just look at your situation each year. Your insurance agent can do this for you. You can also save money on your insurance if you change providers every few years, as long as you have a clean record and very few claims.

These strategies can help you stay on top of your insurance coverage. As you get to the point when you need umbrella coverage, you will be able to recognize it. Your insurance agency should offer a policy and may offer discounts similar to what you can find with car insurance. It is also important to make sure you have adequate life insurance coverage for your family. As your expenses grow, your coverage needs to grow, as well.

How Does Umbrella Insurance Work?

Umbrella insurance is not a primary insurance policy. It is a secondary policy that covers after you have reached your policy coverage limit. It usually goes into effect when you are sued for large amounts of money after a serious accident. When you are being sued, the company that you have umbrella insurance with should work with your other insurance company to help you fight in court and to protect your assets.

You may choose to have your umbrella insurance with the same company as your other insurance policies. This can simplify the process if you are sued. Remember that the umbrella insurance is more of a worst-case scenario insurance, and your insurance company will work to help protect your assets during it. Take the time to research the company that you choose for your umbrella insurance to make sure that they work well to protect you and fight any claims on your behalf. 

Umbrella insurance will also have a limit on the amount of coverage you can receive. It is less expensive than increasing your coverage on your home and car insurance since it is used less often. People who need umbrella insurance are those with more assets than the average person. Umbrella insurance will protect your savings, your home and other property that you have in the event you lose a case in court. The insurance company that issues you the umbrella policy will help you just the same way that a traditional insurance policy will.

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