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How much Personal Umbrella coverage should I carry?


What is Umbrella Insurance?

Umbrella insurance is a form of liability insurance that will supplement your basic liability policies, such as your auto, home or renters insurance. An umbrella liability policy covers a much higher limit and goes above and beyond your primary policies claims directly relating to your home and auto.

The main purpose of your umbrella policy is to protect your assets from an unforeseen event, such as a tragic accident in which you are held responsible for damages or bodily injuries. If another party files a lawsuit against you, your umbrella coverage will pay for the damages you’re legally responsible for up to the policy limit. Umbrella policies also provide a broader form of coverage and can help cover legal fees, false arrest, libel, and slander.

How Does Umbrella Insurance Work?

An umbrella policy only pays once your primary liability limits have been exhausted. The claim will be made against you, the policyholder, on behalf of the wronged party. Then your insurance company may pay the settlement amount up to the limits of your coverage. (Most umbrella insurers require underlying liability limits of $300,000 or $500,000.) If the settlement amount exceeds your coverage limits, you are responsible for paying the remaining amount out of pocket.

How Much Umbrella Insurance Should I Carry?

When choosing your coverage limits, consider three things:

  1. The risks you may face. Consider risks as a homeowner or renter, the risk of causing an accident during your work commute, and any potentially dangerous activities you participate in that could put those around you at risk. High profile professionals might need more coverage, even though they do not have significant assets, as they are considered a target for lawsuits. Similarly, persons with lavish lifestyles and expensive possessions should purchase higher limits, as they too are targets.
  2. Youthful Drivers. If you have teenage drivers in your household, you are at greater risk for a liability claim. Studies suggest that two-thirds of drivers between the ages of nineteen and twenty-nine text and drive while over eighty percent use their cell phone while driving.
  3. The value of your assets. These include properties, possessions, stocks, bonds, savings and retirement funds. The more assets you have to protect, the higher the umbrella policy limit you should consider. In a lawsuit, lawyers will aim for your available assets but probably settle for a comparable insurance amount. In this way, you are not dragged into court, where the results of a jury settlement are problematic.
  4. The potential loss of future income. Because liability lawsuits can result in loss of both current assets and future income, even those with few assets to protect may want to consider. The umbrella policy will also pay for defense costs, which can be considerable, even if you win a judgment.

How Much Does Umbrella Insurance Cost?

Umbrella insurance is very inexpensive, because the odds of it ever paying out are quite small. Most claims are paid by your primary auto and homeowners policies. Umbrella policies provide peace of mind for a reasonable cost.

To receive a firm quote on personal umbrella coverage, please call me at 1-800-272-6055 X118.

Barbara Gracey Backer


Barbara Gracey Backer is the Vice-President of Gracey-Backer, Inc., an Insurance Agency in Delray Beach, Florida specializing in All Lines of Professional and Personal Insurance. She may be contacted at 800-272-6055 X118 or at barbara@gbifl.com.

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