Do you need umbrella insurance?

Life in unpredictable. We do our best to protect ourselves and our loved ones from unforeseen changes, but many people overlook one of the most powerful safeguards: umbrella insurance. Often thought of as being exclusively for people with excess worry or wealth, it’s actually a wise move for anyone seeking an additional layer of financial security.

Do you need umbrella insurance? Maybe. Most people can benefit from this coverage, but there are some considerations to help you decide if you’re one of them.

What is umbrella insurance and how does it work?

Umbrella insurance is a type of liability insurance that provides additional coverage beyond the limits of your primary insurance policies, such as homeowners or auto insurance. It is designed to offer protection in situations where the existing coverage may be insufficient to cover the full extent of a liability claim. Here's how umbrella insurance typically works:

• Coverage extension – Umbrella insurance extends the coverage of your primary insurance policies. For example, if you have $300,000 in liability coverage on your homeowners insurance and $250,000 on your auto insurance, an umbrella policy could provide an additional layer of coverage, often starting at $1 million or more.
• Broad protection – Umbrella insurance is broad in scope and can cover various types of liabilities, including bodily injury, property damage, personal injury (libel, slander, defamation) and even legal fees. It helps protect you against significant financial losses resulting from a lawsuit or liability claim.
• Excess liability coverage – Umbrella insurance is often referred to as excess liability coverage because its coverage begins once the liability limits of your primary policies are exhausted. For example, if you have a car accident resulting in a $700,000 liability claim and your auto insurance covers up to $500,000, the umbrella policy would cover the remaining $200,000.
• Affordability – Despite providing substantial coverage, umbrella insurance is generally affordable compared to the amount of coverage it offers. The cost can vary depending on factors such as your risk profile, the amount of coverage you need, and your insurance provider.
• Requirements – To qualify for umbrella insurance, insurers typically require you to have a minimum level of liability coverage on your primary policies. This makes sure that you have a base level of protection before the umbrella policy comes into play.

It's important to note that umbrella insurance does not cover damage to your own property or injuries to yourself. It focuses on liability protection for situations where you may be held responsible for harm to others. Before purchasing an umbrella policy, speak with an insurance professional, like a VIU by HUB Advisor, to determine the appropriate coverage for your specific needs.

Seven reasons to get umbrella insurance

1. Protection from financial catastrophe

Even seemingly minor incidents can unravel into significant financial risks when lawsuits come into play. Umbrella insurance is a strong defense, preventing these legal battles from draining your savings and jeopardizing future earnings. Real-life examples abound – a landlord whose tenant injures himself on the property, a parent whose young driver causes an accident with injuries – these and countless other situations can lead to lawsuits with exorbitant settlements that far exceed the limits of primary coverage.

2. Peace of mind and security

Picture the tranquility that comes with knowing you are financially protected from unforeseen events. Umbrella insurance serves as a shield, helping to alleviate anxiety associated with potential legal liabilities and protect financial futures. Imagine being able to focus on the emotional side of an insurance claim rather than fearing the bill. Umbrella insurance does a lot to make that a reality.

3. Coverage for a wide range of risks

Umbrella insurance goes far beyond the car accidents and property damage that immediately come to mind when discussing insurance claims. Think of scenarios like libel and slander, dog bites, personal injury lawsuits and accidental damage caused by children – all may be covered under an umbrella policy. You’re covered across a spectrum of potential challenges, giving you a comprehensive and robust safety net.

4. Affordable protection

Umbrella insurance likely costs less than you think. Rates are notably low when compared to the potentially astronomical financial risks that are mitigated. Consider the average annual expense of umbrella insurance as a modest investment in your financial safety. The small, predictable expense now can protect against potentially ruinous events in the future.

5. Coverage for additional family members

Umbrella insurance extends to cover the legal liabilities of all household members, including spouses and children. This holistic protection reinforces its role as a cornerstone in securing the collective financial future of your family.

6. Protection for your assets

Umbrella insurance safeguards your assets – home, savings and investments – from potential legal judgments. Without umbrella insurance, your assets could be seized to cover what you owe. Think of this example: someone injured on your property sues you and is awarded $1 million. Your homeowners insurance policy pays $300,000. You are personally responsible for the remaining $700,000 and could lose your assets or have wages garnished to pay it. However, someone with an umbrella policy that has a $1 million limit, would pay only their homeowners insurance deductible. They could pay as little as their deductible on that same million-dollar judgement.

7. Increasing your liability limits

Probably the most well-known reason to get umbrella insurance is increased liability limits. It takes your existing policies and makes them stronger by extending the amount you can cover in the event of a liability claim against your primary policy.

FAQs about umbrella insurance

Whether you're curious about coverage amounts, the difference between umbrella and excess insurance or filing a claim, we've got you covered. We’ve included some of the most common questions that we get about umbrella insurance to empower you to make informed decisions.

1. How much coverage do I need?

Determining the ideal coverage amount depends on a several factors, including your assets, potential risks and comfort level. A general recommendation is to have coverage equal to your net worth or more. However, a VIU by HUB Advisor can provide tailored guidance.

2. What's the difference between umbrella and excess insurance?

While both provide additional liability coverage, umbrella insurance typically offers broader protection. Excess insurance supplements the limits of your primary policies, but only covers what those policies do. It does not cover any additional situations. Umbrella insurance does that but may also cover additional situations, acting as a secondary layer of defense.

3. Does umbrella insurance cover intentional acts?

Umbrella insurance generally does not cover intentional acts or criminal behavior. It focuses on unforeseen accidents and liability claims. Deliberate actions leading to legal issues may not be covered.

4. How do I file a claim under my umbrella policy?

In the event of a claim, notify your insurance provider immediately. Provide details, documentation and any relevant information. The process involves collaboration between your primary insurance provider and your umbrella insurance provider so be sure to have contact information ready to pass on.

5. How much will my premium increase?

Premium increases depend on various factors, including your coverage amount, risk profile, and the insurance company's policies. Generally, umbrella insurance is cost-effective considering the extended protection it offers. Consult with your insurance provider to get a clear understanding of potential premium changes.

The VIU by HUB Advisory Team is standing by to help you with any additional questions you have about umbrella insurance and how it can fit into your insurance landscape.