One of the most useful but often overlooked policies is the umbrella.
The umbrella policy is often compared to a security blanket. It sits over your existing coverage to provide extra protection in case all hell breaks loose. What a lot of people don’t realize is how flexible an umbrella can be.
Umbrella policies come in all shapes and sizes just like their physical namesakes. Most start at $1,000,000 and can get as big as $10,000,000. They also have a range of purposes like covering personal assets up to covering multi location businesses. Some umbrella policies sit over both for broad protection.
What a lot of people don’t realize about umbrella coverage is that it can be for more than just liability coverage. Although its primary purpose is to extend liability protection it can also be used as an extension of your personal protection.
For example in automotive coverage it is generally a good practice to have uninsured motorist protection to cover you if you are hit by someone without insurance. The umbrella can expand this coverage, usually for additional premium. Some business umbrellas have endorsements that extend them over things other than strict liability as well.
To understand the value of the umbrella, I’ll tell you a story that I heard from a colleague of mine. There was a farmer who was getting close to retirement and his farm, worth 1.5 million, was his retirement plan. One evening a gate was left open on his property. Early the next morning one of his cattle bolted across the highway and slammed into an SUV with a family of 5, all of whom sustained significant injuries and sued for their bills and to replace their totaled car. The car spun out and significantly damaged fencing on the neighbors property as well. The farmer did not carry an umbrella and only had 1 million on his farm. Total court costs and damages came to over 3 million. For lack of an umbrella he lost his farm, lost his cash savings, and was unable to retire as planned.
A basic 2 million umbrella probably would have cost him under 1000 per year and would have helped save the farm and his retirement. There are many more examples like this. Moral of the story is, if you have assets protect them.
Courtesy of: J. Wilcox Insurance Associates - https://yourinsuranceguide.co/blog/