“You can never predict what will happen in life,” says Katie Unruh Vang of the Unruh Insurance Agency.
A friend comes over to swim in your pool, slips, and is paralyzed. A window unit air conditioner falls out and injures a passerby. Someone borrows your snowmobile and is thrown off.
You don’t know what the future holds, but an umbrella insurance policy may be able to help protect you from the unexpected.
In honor of National Insurance Awareness Day, we reached out to Katie from Unruh, who has been part of the insurance industry for more than 18 years. Katie specializes in personal insurance in Pennsylvania and explores why every homeowner should seriously consider getting an umbrella insurance policy – just in case.
What is umbrella insurance?
Umbrella insurance is a separate policy on top of your homeowners and auto insurance that offers broader coverage.
“It’s also called personal catastrophe liability,” explains Katie. “It covers over and above the limits on your underlying policies. So that could be car insurance, home insurance, seasonal properties or rental properties, boats, and recreational vehicles.”
An umbrella policy is additional coverage that protects homeowners from a huge liability loss, such as personal injury or property damage, that could take away from your assets or future earnings.
“We definitely recommend an umbrella insurance policy to anyone who owns a home,” says Katie.
Katie also suggests considering an umbrella insurance policy if you have one of the following:
- A swimming pool.
- Young drivers in your household.
- An automobile.
- One or more recreational vehicles.
- Rental homes, seasonal homes, or Airbnbs.
If you don’t own a home but are still established with assets, you should also look into getting an umbrella policy.
Learn more about homeowners insurance and seasonal homes in How to Avoid Mistakes When Purchasing Homeowners Insurance for Two Homes.
How umbrella insurance saves your future
A homeowner doesn’t even need to be negligent to be sued for an extreme amount of money.
Explains Katie, “If somebody trips and falls on your property or your dog gets out accidentally and a neighbor – these are things you just can’t control.”
Without umbrella coverage, homeowners may lose future earnings and current assets. These include current and future wages, homes, cars, and additional personal property.
With an umbrella policy, a homeowner is protected by the insurance company, who will supply their own defense and will take care of the court costs.
“Expenses to defend are covered,” says Katie, “and so are pre- and post-judgment interests.”
Plus, a true umbrella policy covers the insured person worldwide, whereas auto insurance and homeowners insurance only offers coverage in the U.S. and Canada, and U.S. Territories.
The million-dollar umbrella policy
You’re probably wondering how much umbrella insurance you should get.
The everyday homeowner generally has a “million dollar umbrella” policy, though celebrities and other high-profile persons may have higher limits.
“With our main insurance carrier, the highest limit we can do right now is $10 million,” said Katie.
To be eligible for an umbrella insurance policy, a homeowner must meet the minimum limits as per carrier requirements. The policy itself is generally separate from homeowners and auto insurance, though it is usually written by the home or auto insurance provider.
Cost to protect you from a rainy day
With all the benefits an umbrella policy provides, why wouldn’t a homeowner want to get one?
“The most common aversion to umbrella insurance is just the cost,” says Katie. “People don’t want to spend just a little bit extra.”
The umbrella liability policy cost depends on several factors, such as how many properties you own, if you have a young driver, and what your current liabilities are, but it’s generally not expensive to add an umbrella policy to existing premiums.
“They’re usually under $400 premium and can be much less than that,” says Katie. “They’re pretty affordable, and it just gives you that extra reassurance.”
Auto and homeowners policyholders who want umbrella insurance are generally not turned down unless they have an open liability claim.
As Katie tells us, it’s better to be safe than sorry when it comes to umbrella coverage.
“I’ve heard of one story where a 40-year-old father was killed in an auto accident and his estate was awarded $900,000,” says Katie. “If you had a $500,000 auto policy, which is a good limit, it still wouldn’t have covered that car accident.”
Excess vs. umbrella policies
Another option for liability coverage is excess insurance, which just increases the limits of the policy that you already have.
“If you have the home at $300,000 and get an excess policy of $1 million, then you just have $1.3 million,” says Katie. “It only increases the limits; it does not broaden the coverage.”
Also, an excess policy doesn’t offer worldwide coverage.
“In insurance classes I’ve been to, the instructors always emphasize that the umbrella is the preferred policy over excess.”
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