Who needs an Umbrella Policy?

Car Insurance and Homeowners Insurance provide a limited amount of liability coverage.Those liability limits can quickly be exceeded during the course of a personal injury lawsuit. Umbrella Insurance is an extra layer of protection for the insured's personal assets.

Usually an insurance company will require that the insured have $250,000 in liability on their auto policy and $300,000 in liability on their Homeowners policy, before the insured is eligible to purchase a $1,000,000 - $5,000,000 Umbrella Policy. A $1,000,000 Umbrella policy will cost between $200-$800 per year depending on the number of drivers, cars and driving history.

In helping a consumer determine if an umbrella policy is appropriate, I have to take a look at what assets are at risk in the event of a personal injury lawsuit. Does the consumer have more than $20,000 in savings. Does the consumer own a home? Does the consumer have a high paying job? If the answer is yes to any of those questions, then I think an umbrella policy is needed to protect these assets.

We live in a litigious society where medical costs are astronomical. It is easier to list who should not get an Umbrella Policy than list the people who should get one. Here are the three classes of people who should not purchase an Umbrella Policy: 1) Those that deem themselves to have so few assets as to be judgment proof. 2) Drivers with 3 or more points on their record who are not likely eligible to purchase an Umbrella Policy. 3) Someone who has a high risk tolerance.

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