Maybe you’ve heard of umbrellas. Maybe you haven’t.
I don’t mean the kind we’ve been using all summer long to combat Indiana’s unpredictable weather.
I’m talking about a personal liability umbrella policy.
Or maybe you’ve heard of it but it was called something else?
A Personal Umbrella By Any Other Name Would Smell as Sweet
It’s completely possible you’ve already tired of me using the word umbrella-ella-ella. So from here on out, I’ll mix it up between
- the word that shall not be named (other than the next hundred times I say it), and
- the other name it’s known by – an excess liability policy.
Either way, personal umbrellas add excess liability coverage on top of your underlying liability coverage. And what is that, exactly?
Liability is protection for bad things that happen to other people because of you.
In the auto insurance world, this could mean someone’s car getting all janky thanks to an accident you caused. In the homeowner’s insurance world maybe your dog bit someone or you didn’t get to those snowy/ice stairs in time before someone slipped and fell on them.
Those are some common examples of liability claims that could get filed. How they get paid out all depends on your
There are two ways insurance companies like to get down as far as liability limits go. One’s called a combined single limit (CSL) and the other option is split limits.
If you have a CSL of $500,000, your liability limit is 500k. So if a claim’s filed against you for that dog bite or the winter fall, your insurance will pay out up to that amount to deal with any medical bills or court costs that you incur from the claim. It’s important to know that they’ll only pay the amount you owe as a result of the claim, and only up to that liability limit. So if you have a CSL of 500k but the dog bite only cost 1k, your insurance would pay out 1k only. On the flip side, if your limit is 500k but that fall resulted in lifelong injuries which will cost well above 500k… well… too bad. 500k’s the limit.
If you have split limits, your policy might look something like 250/500/100. The 250k would go towards each person’s physical injuries caused by that accident. 500k’s the limit for total payout per incident. 100k allotted for any property damage resulting from the occurrence. Those limits are pretty generous for most situations. But sometimes they’re not enough.
The Personal Umbrella’s Role
When the worst happens, a personal umbrella policy’s your best friend. Think loss of life or permanent disablement type claims. Knock on wood you never experience either of those things for obvious reasons. But also because they can be financially devastating for anyone who doesn’t have excess liability coverage.
But if you have it, in most cases you’d be set because you’ll be covered by your liability limits plus at least a million dollars beyond that. Which means you can focus on recovering from the incident instead of the bills that are sure to be coming your way.
What Kind of Limits Do Umbrellas Offer?
Umbrella policies come in increments of $1 Million. They’re pretty cheap (somewhere between an extra $7 – $20 a month for a million dollar umbrella policy). Sometimes they even qualify you for discounts.
Regarding how much coverage to get, it depends. Usually, people get between 1 mill – 5 mill. If you’ve been blessed with lots of assets, make your choice based on the value of those assets. In other words, if you’ve got 3 million dollars worth of awesome things, you should get a $3M personal umbrella to match.
Is Excess Personal Liability Coverage Right for Me?
I think everyone should get an umbrella. But that’s up to you. There’s a lot of reasons why you should (millions, you could say), but some argue there’s a pretty good reason why you shouldn’t. Curious what that might be? Watch our YouTube video to find out:
Boring Legal Disclaimer
You’re smart and already figured this out, but just to make it offish, know that this is a brief overview of coverage most policies have. It’s not a comprehensive description or a commentary on your specific policy. Your trusted agent can help you with that.
And a Note about Shopping for Coverage
There are two things you should keep in mind when looking for insurance:
- Do NOT shop by price alone. People who focus purely on price usually get the worst quality of service. Not to mention they’re much more likely to end up experiencing catastrophic claims.
- Trust your gut and find an agent with integrity. Your insurance agent is one of your most important financial/risk advisers, so choose this relationship wisely.
Well, folks, that’s it for now. So tell me – are you going to add an umbrella policy to your liability coverage?
Note – If you’re in Indiana we can help you with that.
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