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Umbrella Insurance: Do You Need One?

26 May by 5280 Insurance

So, You already have different insurance policies to ensure that your assets and your loved ones are protected. However, beyond the standard ones, you may have missed out on an important and surprisingly affordable type of insurance – umbrella insurance. 

If you want to know more about umbrella insurance and whether or not this is something you should get, read on as one of the best insurance companies in Colorado shares what you need to know about umbrella insurance:

What Does Umbrella Insurance Cover?

The definition of coverage offered by an umbrella policy may sound daunting but you can generally categorize it into three: 

Bodily Injury Liability

This covers the cost of injuries to someone else and may include expenses like liability claims and medical bills resulting from injuries to: 

  • Other people in a car accident where the policyholder is the one at fault
  • Other people hurt by a pet owned by the policyholder
  • Guests who are hurt on the policyholder’s property due to an accident 

Property Damage Liability

This covers the cost of damages or loss of another person’s property. This may include expenses associated with: 

  • Damage to vehicles or other property due to an accident for which the one at fault is the policyholder
  • Claims that are incurred in relation to damage caused to other people’s property by the policyholder
  • Accidental damage to school property by a policyholder’s child

Other Personal Liabilities a Policyholder Could Be Sued For

This includes:

  • Libel
  • False arrest, detention, or imprisonment
  • Slander
  • Malicious prosecution
  • Mental anguish

Understanding the Costs and Benefits

The cost of getting $1 million worth of personal liability coverage from an umbrella policy can be quite low. This typically goes for $150 to $200 per year. For every extra $1 million worth of financial protection, the incremental premium cost diminishes. 

From the perspective of the insurer, the lower payments are reflective of the fact that no payments will be made until after the coverage of other policies has been used. So the probability of any claims being actually made against an umbrella policy is really quite small. That’s why the premium is relatively lower.

Umbrella insurance providers do expect applicants to have homeowners’, auto, or renter’s insurance before issuing umbrella insurance. Typically, an insurer will ask that an applicant have at least $250,000 of liability insurance on their auto insurance policy and around $300,000 on a homeowner’s insurance policy before they even sell a $1 million worth of umbrella insurance.

How Much Coverage Should You Get?

When assessing how much coverage you’d need, you should consider these factors:

  • The total value of all the assets that need protection
  • The perceived scope of risks ( Risk associated with being a homeowner, risk of causing an accident, and potentially dangerous activities that could put others at risk)
  • Potential loss of income in the future

Umbrella coverage should cover the value of the policyholder’s taxable assets, including any homes beyond the primary residence. Assets that are held in employer-sponsored retirement accounts are typically protected from exposure to civil liability under the ERISA or Employee Retirement Income Security Act of 1974. The same protection generally applies up to $1 million worth of assets in individual retirement accounts. So when you assess your needs for umbrella coverage, those that are considered non qualified assets and those in excess of $1 million in IRAs have to be considered. 

Conclusion

It’s always good to have extra insurance that will provide you protection beyond what is already covered by your other policies. That’s what umbrella insurance can do for you. Whether it’s for injuries, lawsuits, property damage, or personal liabilities, an umbrella insurance can give you the peace of mind you need knowing that you are protected. And considering how affordable the premium typically is, there is no reason not to get one.  To know whether or not you’ll benefit from umbrella insurance, consult with one of the best insurance companies in your area.

5280 Insurance is among the best insurance companies in Colorado that offers various insurance products including Umbrella Insurance. Get in touch with us today so we can answer your questions about umbrella insurance!

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