If you accidentally injure someone or damage their property, you could be sued for damages. Chances are, you already have coverage that protects you against personal liability in your homeowners, auto, and other insurance policies. While it may cover hundreds of thousands of dollars, what would happen if you were sued for more? Could you afford the excess damages that exceed the limits of your coverage? With umbrella insurance, you don’t have to.
Understanding Umbrella Insurance
Umbrella insurance is supplemental coverage that kicks in when you exhaust the limits of your primary liability coverage. In a typical lawsuit, your homeowners insurance or other primary coverage would pay for your legal fees and any judgments against you up to the limits in your policy. Even if you choose the highest available limits, however, you may fall short of what you actually need by tens or even hundreds of thousands of dollars. That’s enough to not only threaten the money and assets you have accumulated but also threaten the income you have yet to earn in the future. If you have umbrella insurance, its coverage starts paying when your primary coverage stops.
Consider the following example:
You are driving down the road in heavy fog and low-visibility. You clip a bicyclist, sending him to the hospital with life-threatening injuries. It takes months of surgeries and rehabilitation before he is able to return to normal life, although he is no longer capable of working in his physically demanding career. The victim sues you for damages, including medical bills, lost wages, and more. The legal bills and judgments against you stack up to more than $2 million, but you only have $250,000 in bodily injury liability coverage on your auto insurance policy. Fortunately, you also have a $2 million umbrella insurance policy. It pays for all of the remaining damages, saving you from a lifetime of indebtedness and wage garnishment.
What Umbrella Insurance Covers
Umbrella insurance is liability only. It does not pay for your personal losses, and it will not pay for any financial responsibility you have in connection with a crime or intentional act. Instead, it typically covers things like:
- Victim injuries
- Victim property damages
- Victim funeral costs
- Rental property liability
The amount of coverage your umbrella policy provides depends on the limits you choose. Most insurance companies provide a minimum of $1 million in supplemental liability protection, although you can increase this amount in increments of $1 million according to your needs. Many insurers offer a maximum of $5 million for personal umbrella insurance, but some may go as high as $10 million. Talking to your independent agent can help you better determine how much coverage you need and which insurer may be right for you.
Should You Purchase Umbrella Insurance?
There is no way to know if you will be sued, but there is a way to prepare for the possibility. In today’s litigious society, anything is possible. What are you personally at-risk of losing in the event of a major lawsuit? Were you saving for your kids to go to college? Are you investing for an early retirement? Whatever it is, it could be at risk of loss – even if you haven’t earned and saved it yet.
To find out if umbrella insurance is right for you, we recommend contacting our office to request a personalized risk evaluation. By working directly with an independent agent, you can consult with someone who has industry experience and can point out gaps in your coverage you may not have seen before. We believe that most people can benefit from umbrella insurance – not just the wealthy. You should consider this important coverage if you:
- Own rental property
- Have a lot of money saved or invested
- Have other significant assets
- Own a swimming pool or trampoline
- Participate in sports or coach a team
- Participate in any other activity or hobby that increases your risk of being sued
How Much Does Umbrella Insurance Cost?
Umbrella insurance provides a high-value benefit in exchange for a very low premium. It typically costs less than $1 per day to get $1 million of additional liability protection. Additional coverage is also available, usually in increments of $1 million. Depending on your insurer, you may be able to purchase as much as $5 million or more. Although premiums can vary, each additional million is usually priced between $50 and $75 per year. That is a small price to pay for extra peace of mind.
To become eligible for an umbrella policy, your insurer may want to see that you already have primary liability coverage that meets certain required limits. This usually applies to homeowners insurance, auto insurance, boat insurance, and most other policy you have or need that contain liability protection. We here at AFI Insurance can help you raise your primary coverage limits to where they need to be to qualify for umbrella insurance.
Shop for Umbrella Insurance with an Independent Agent
We know you have options when it comes to Illinois umbrella insurance coverage. With so many companies to choose from, where do you start? At AFI Insurance, we can help you narrow down your options according to your individual preferences. We can shop and compare rates on policies that fit your unique coverage needs, making it easy for you to choose the umbrella insurance that is right for you.