Do You Need Umbrella Insurance?

Umbrella insurance provides an extra layer of protection over your standard insurance policies. These are policies that are activated when your homeowners, auto, boat, or other primary insurance policy limits are exhausted and can often cover scenarios that are not included in your primary policies, such as libel or slander.

While we advise that everyone purchase and carry an umbrella policy, the general rule of thumb is that if your net worth exceeds $500,000, you should consider getting umbrella insurance. Why? Because the more assets you have, the more you stand to lose.

But umbrella insurance isn’t just for the wealthy. If you're earning $250,000 or more a year, even a minimal umbrella policy could be beneficial. Umbrella insurance should generally cover the value of the taxable assets owned, as well as any homes beyond the primary residence.

If you’re thinking, "But I don't fit into any of those categories," consider there are multiple scenarios where umbrella insurance can apply. Even if you're not a high earner or don't own multiple properties, umbrella insurance might still be worthwhile. If you participate in high-risk activities that could potentially lead to injury lawsuits—like owning a swimming pool or having a teenage driver in the house—umbrella insurance can provide valuable peace of mind.

The list of those who may need umbrella insurance comprises the following types of individuals:

• High Net Worth Individuals: The more assets you have, the more you stand to lose in a lawsuit.
• High Income Earners: You earn $250,000 or more a year.
• Multiple Property Owners and Landlords: You own multiple properties, especially rental properties, and you must protect yourself against potential lawsuits by tenants.
• Parents of Teenage Drivers: Young drivers are statistically more likely to be involved in accidents.
• Dog Owners: Dog bites can lead to expensive lawsuits. If you own a dog, particularly a breed considered “high-risk,” umbrella insurance can cover you beyond your homeowner's policy.
• Boat Owners: Boating accidents can result in significant liability claims.
• Swimming Pool Owners: Owning a swimming pool increases the risk of accidents and injuries happening on your property.
• Social Hosts: If you frequently host social gatherings at your home, you're at a higher risk of someone getting injured on your property or even suing for damages related to alcohol consumption.
• Volunteers: If you regularly volunteer your time and services, you could be held liable for any damages or injuries that occur while you're volunteering.
• Coaches and Trainers: If you coach a sports team or provide personal training services, you could be held liable for injuries that happen during training or games.

It's important to note that umbrella insurance doesn't cover everything. It strictly covers liability claims against the insured. For instance, it won't cover your own injuries or property damage—that's where other types of coverage, such as health insurance, come into play.

Before you can qualify for an umbrella policy, insurance carriers usually require a certain level of underlying coverage on your primary policies. Typically, homeowners should maintain a minimum of $300,000 in liability coverage on their home insurance policy, while auto insurance policies should carry $250,000 for bodily injury per person and $500,000 per accident, along with $100,000 for property damage. These thresholds can vary by insurer and line of business being covered, so it's important to confirm with your insurance provider what the specific requirements are to be eligible for umbrella insurance coverage.

If you have significant assets or potential risk factors, it could be a smart move. But as always, it's best to consult with your agent to determine the right coverage for your specific needs.