It’s the time of year we need to make sure we’re covered for unexpected rainfall before we head outdoors. That means packing an umbrella in the trunk in case the clear and sunny skies turn dark and dreary without notice.
It is also a good time with the market rebound since 2009 to see if you are still adequately covered with your umbrella insurance policy amount, or if you may need to increase or obtain coverage.
Just like an umbrella provides you with additional coverage above a jacket and wet weather clothing, an umbrella policy supplements the liability coverage of your existing policies to make sure you are protected against large dollar claims.
What is it? Umbrella insurance acts as a supplement to and provides for liability protection over and above your homeowners, auto, boat and other policies.
For example, if your liability coverage with your homeowner’s policy is $100,000, and due to an accident at your home are sued for $750,000, an umbrella policy would pay for the $650,000 that was previously uncovered. And because the insurer has more at stake, they may be more likely to fight claims against you.
Why do you need it? The damage that can be done may be more than is covered on your normal policies. Some areas financial planners look for are those with children (and especially teen drivers), if you live on a body of water, or own a pool or trampoline. An umbrella policy may also cover you in cases involving defamation, libel, slander, and other situations your regular policy may not.
How much do you need? Many planners recommend covering at least your entire net worth, and consider more since lawsuits are often not based on what you have alone. Since coverage is fairly inexpensive, round up to consider the growth your assets may experience before you recalculate your need for insurance.
Where can you get it? Typically the first place to look is with your current home and auto insurer as many insurers will require they provide those policies as well before offering umbrella coverage. Also contact several independent insurance agencies for quotes.
Having an umbrella policy in place can help protect you from rare situations that could otherwise devastate your financial plan. Talk to your planner about your liability plan, and make sure you don’t get caught in a downpour without your umbrella!
The preceding blog was originally published by the Financial Planning Association®(FPA®). To view the original blog please visit the FPA Web site.
