Umbrella insurance is easily the most overlooked, yet cheap and important form of insurance. What is it? Umbrella liability coverage, also known as excess liability or personal liability insurance, supplements existing insurance policies, such as auto and homeowners insurance. It activates when the liability limits of these primary policies have been exhausted.
Key Benefits of Umbrella Insurance:
Why Umbrella Insurance is Essential
Consider the value of your assets and their role in your financial security. Beyond tangible assets like your car, house, and investment accounts, your future income is also a valuable asset. Without adequate insurance, a substantial lawsuit could result in significant financial hardship. An umbrella policy can prevent this by providing coverage where other policies leave off.
Key Coverage Areas
1. Bodily Injury Liability
Covers medical bills and liability claims resulting from:
2. Property Damage Liability
Covers costs associated with:
3. Other Personal Liability
Includes coverage for:
Weighing the Costs and Benefits
Umbrella insurance is relatively affordable, often costing between $300 to $500 annually for $1 million of coverage. Additional coverage increments typically come at reduced premiums. The low cost reflects the fact that umbrella insurance only activates after other policies are exhausted.
Tip: Discounts may be available if you bundle umbrella insurance with other policies from the same provider, potentially reducing costs further.
How Much Coverage Do You Need?
Consider the following factors when assessing your coverage needs:
Additional Considerations
Plan Ahead
"You've worked hard to accumulate assets, and no matter your net worth, you could be subject to a lawsuit," says Matthew Kenigsberg, CFA, CFP®, of Fidelity Managed Solutions Client Investment Analytics. "Considering options like umbrella insurance can help protect your assets and future income."
Action Items for Your Consideration
