Is umbrella insurance necessary for everyone?
You don’t have to be wealthy or regularly manage crowded events to have umbrella insurance. The average person can benefit greatly from umbrella insurance, and there are many reasons why they purchase it, for example, people who own a high deck or a pool, maybe they have an unpredictable dog, or they want coverage just in case of a car wreck.
Others who get it regularly engage in activities that increase their chance of a lawsuit such as:
- Coaching kids’ sports
- Volunteering
- Being a landlord
- Posting reviews of businesses or products
- Serving on the board of a nonprofit
- Participating in sports, like hunting or skiing, where you can injure someone[i]
Umbrella insurance is bought as a precaution should a tragic accident ever occur where the costs go beyond the normal limits of a regular policy. It all depends on your preferences and the affordability. A financial professional can assess your situation and help you make an informed decision.
Another reason you may consider umbrella insurance is if you own significant valuable assets such as a house or luxury boat that could get damaged by a hurricane for instance, or some other natural disaster; or something less dramatic, for example, if you are throwing a party or hosting a wedding reception for your kids, umbrella insurance might be a good idea.
In some instances, umbrella insurance is required by an organization or a venue if you are taking a large group like the Boy Scouts or Girl Scouts to say a public pool, such as the VA, which requires an umbrella policy for such events. You may be required to have an umbrella insurance policy of up to $1 million or more.
According to a Forbes study, those with a higher risk potential of lawsuits include:
- People with kids living at home
- People with a pond, creek, swimming pool, or trampoline on their property
- People who own rental properties
- People who have a high public profile
- People who serve on a charitable board
- People who have dogs, horses, or other large animals on your property
- People who host large parties or events at your home
- People who employ a household staff
- People who manage a family trust[i]
One thing to keep in mind is just because somebody lives in your house and is a member of your family, doesn’t mean they are covered by your umbrella policy if they have property or auto insurance in their own name with a different insurance carrier. You will want to find out the details regarding any exclusions that may apply to household members.[i]
What doesn’t umbrella insurance cover?
Umbrella insurance generally doesn’t cover:
- Injuries to you or damage to your personal property.
- A liability you assume under a written or oral contract.
- An intentional or criminal action by you.
- Business losses.
- Communicable disease (such as an STD)
- Damage due to war or terrorism.[i]
How much does umbrella coverage cost?
According to an ACE Private Risk Services report, published by Forbes, the average umbrella insurance cost for a person with one home, two cars, and two drivers is an annual cost of $383 (approximately $32 per month) for $1 million in coverage.[i]
Everybody’s life is unique, so costs will vary somewhat. Therefore, it would be beneficial to seek professional guidance before making financial decisions that could significantly impact you financially in both the short-term and long-term.Consider reaching out to your financial professional
Getting the guidance you need from a financial professional with the knowledge and skillset to help you make an informed decision could very well save you significantly, not only from an economic standpoint but also to try and avoid the stress and mental anguish that could arise from a future lawsuit. The reality is that accidents do happen, and they are usually unexpected. Don’t wait, and regret not taking action today. Contact us if you are considering umbrella insurance.
Important Disclosures:
Content in this material is for educational and general information only and not intended to provide specific advice or recommendations for any individual.
All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.
This article was prepared by LPL Marketing Solutions
LPL Tracking #734005
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