Is Umbrella Insurance Worth It?

Posted by Matt Simon on Aug 28, 2018

You’ve probably heard of umbrella insurance, maybe you’ve even researched it, but you’re still wondering “is umbrella insurance worth it?” This coverage isn’t required, and you won’t always need it, but when you do, you’ll likely be very thankful that you have it.

You have plenty of important assets that deserve protection, and with all the options for insurance out there, it can be challenging to determine what’s the right choice for you. Bringing all your policies under one roof can help you save money on the basics of insurance, but what happens when those policies reach their limit? This is where umbrella insurance comes in.

So, what is umbrella insurance anyway? This coverage is a type of liability insurance, meaning that it’s designed to protect you from large claims and lawsuits. You might be thinking — I’m never going to run into a large claim or lawsuit. This could be true. This is the reason why many people ask if umbrella insurance is worth it. However, these risks aren’t the types of things you can necessarily predict, but when they do happen, a claim of that size can ruin everything that you’ve built financially. Think of umbrella insurance like a literal umbrella. You don’t think about it until it’s raining, and when it does, you’re better off because you had it on hand.

Is Umbrella Insurance Worth it and Right for You?

Worth aside, is this coverage even right for your situation? Let’s take a look at an example. Let’s say you’re in your early forties, and your total assets are around $300,000. Out of nowhere, you find yourself in the hospital due to a car accident, and the accident was your fault. You’re now facing bills to fix your car, to fix the other person’s car, and your hospital bills. You’ll have to go to court to determine what you’re responsible for covering for the other driver. In the end, you’re responsible for $500,000. Your auto insurance caps out at $250,000, so you’re on the hook for the other half. Now what?

If you purchased an umbrella policy, this is when you would use it. An umbrella policy would take care of the $250,000 and your legal fees as well. Car accidents happen every day. Events like these are what umbrella insurance is designed to do, and how it proves its worth.

Your home and auto insurance, or even renters and auto insurance, are responsible for protecting you from theft or damage, but only to a certain point. Umbrella insurance works similar to its name and covers all of your policies as a liability extension that kicks in when you need it most. This type of coverage is going to prevent your finances from being wiped out in the event of a disaster. And you can’t fully rule out a disaster, no matter how cautious you may be in your daily life, so don’t make the mistake of believing this a policy that you’ll never need.

Umbrella insurance is typically sold in increments of $1 million of coverage, with $1 million being the minimum amount of coverage you can get. It might sound like a lot, but the number is so high because of the costs that this policy is typically used for. You might also think that with so much coverage it will add a large payment to your insurance bills, but actually, umbrella insurance is one of the most affordable insurance policies available.

On average, individuals and families paid around $150 to $200 for their umbrella insurance policy each year, which means they had a monthly payment that was less than $20. In regards to cost, when you recognize that you could be getting $1 million in coverage or more for around $150 a year, umbrella insurance becomes a no-brainer.

Tied in with a multi-line insurance policy, umbrella insurance becomes the perfect way to have peace of mind that the most important things in your life are fully protected. When all of your insurance lines are combined with the same insurance agency, you’re able to save money and work with one agent. Plus, with your umbrella insurance tied into your multi-line policy, you can continue to save money without sacrificing your financial assets.

With umbrella insurance, you’re adding an additional cushion to your policies so that you’re protected even when the absolute worst happens. Although we hope you never have to use it, it’s always a smart move to have for a rainy day.

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