I Used to Believe Umbrella Insurance Was a Waste of Money, But These 9 Realities Changed My Mind

In life, there is a far too common belief that you only need the minimum amount of insurance money to get by. Unfortunately, some people think liability coverage for things like a home or car is only worth the minimum amount required by law or the state. 

The unfortunate reality is that all it takes is one instance, one disaster, to help clarify precisely why things like umbrella insurance policies exist. The hope is that you never have to find out why, but we also have to live in the real world where these policies can ensure you are protected as much as possible. 

What Is Umbrella Insurance? 

In simple terms, an Umbrella Insurance policy gives you extra insurance coverage that goes beyond your existing limits and coverage options. This includes but is not limited to additional coverage around property damage, certain types of lawsuits, injury, and even personal liability. 

Umbrella insurance policies are often available to help cover not just your home but also your automobile in the event of an accident and a boat, just in case something happens to you or a passenger or guest who might be on board. 

Umbrella Insurance Misconceptions 

As one might suspect, there is an all-too-common set of misconceptions about umbrella insurance, who it’s for, and what it offers. The first and most common misconception is that it’s arguably for the wealthy, or only for the wealthy, to be more specific. This is a definite misconception that needs to go away forever. 

Only For The Wealthy

This is an all-too-common myth that hopefully will disappear and never return. Far too many believe that umbrella insurance is only for the super-rich. This belief likely stems from the notion that only the wealthy have considerable assets to protect against a lawsuit. 

The reality is that everyone is at risk in an insurance lawsuit, and even something as simple as rear-ending someone at a stoplight could lead to a multi-million dollar claim, especially if there are any injuries. For example, if you are sued for, let’s say, $500,000, the court could seize personal assets and take money from your paycheck, something an umbrella policy helps protect against. 

Standard Policies Are Good Enough

Don’t get caught in a mindset that you only need a standard insurance policy, as this would be far from the truth. While you might have good coverage with your home or auto, typical limits like $300,000 for liability claims may not be enough if you are caught in a situation where a lawsuit becomes necessary. 

For example, if your neighbor uses your pool and gets injured, they may sue you for $1,000,000, which means there is a $700,000 shortfall if a judge rules in their favor, and you’re on the hook for every penny. An umbrella insurance policy would give you much more financial protection and peace of mind. 

It’s Too Expensive

One of the reasons why umbrella insurance policies haven’t caught on as a popular option for home and car owners is the broad myth or misconception that they are too expensive. This is another instance in which fact is far different from the myth. 

For example, according to Stillwater Insurance Group, a $1,000,000 umbrella insurance policy could cost as little as $150 to $300 per year. This is as little as 40 cents per day and as much as 80 cents. In other words, you won’t need significant financial sacrifices to have this additional coverage and protection. 

Key Benefits of Umbrella Insurance Coverage

It’s pretty easy to tell where we might be going with this, as the myths about why umbrella insurance policies have numerous benefits are relatively straightforward. 

Catastrophic-Size Lawsuits

Sticking with the example of a neighbor falling in your pool and deciding to sue you for $1,000,000, your homeowners’ insurance might only have a cap of $250,000 to $500,000. Once again, you’d be on the hook for the remainder, and it will affect the rest of your life to pay it off if a ruling goes against you. 

This is one of the biggest and most critical reasons why umbrella insurance policies are so important to consider. As these policies can cover bodily injury, personal injury, your injuries, or property damage, this policy will be the difference maker as to whether or not you are on the hook for what could be a life-changing amount of money. 

Personal Injury

Diving deeper into personal injury could help protect you against all kinds of coverage. Not all of it is physical. A personal injury umbrella insurance policy could help protect you against invasion of privacy, wrongful entry, or even defamation of character. 

Property Damage

If you finally give your child the okay to drive the family car and they drive it into a storefront, this is not only very serious but also very expensive. The good news is that if you have an umbrella insurance policy, you can rest a little easier, as long as nobody is injured, of course. 

However, between the cost of structural repairs, any destroyed merchandise, and even potential legal fallout, an umbrella insurance policy can help provide a little peace of mind during a tough time in your life. 

The very same scenario could play out in a much more likely scenario if your child causes a multi-car pileup with multiple injuries and a total amount of claims far exceeding a family insurance policy that only has a $500,000 limit. 

Bodily Injury

As unfortunate as the pool incident might be in our real-life example, umbrella policies exist and are far more necessary than most people can appreciate. Any bodily injury could result in a loss of income, medical expenses, and even funeral expenses, which can and will likely be your responsibility. 

This is why umbrella insurance policies are so critical. The difference they make in real-world examples of catastrophic loss could change your life forever. 

What Kind Of Coverage Do You Need? 

Determining the level of coverage you need for any umbrella insurance policy isn’t all that challenging. First and foremost, look at what assets you have that could be at risk in a lawsuit. This could include potential future earnings, the value of your home, your savings and investments, and any lifestyle considerations you want to consider.

These considerations could include whether you have a new or teenage driver in the family, whether you own a pool, or whether you have a dog. All of these questions lead to direct considerations of how much risk you have, leading to working with companies like Allstate, Progressive, Geico, or more local insurance providers to help estimate your policy coverage level (and cost). 

Finding Peace of Mind

Ultimately, the reason to have umbrella insurance coverage is to give you peace of mind. This will be especially true for people who own a pool and regularly have guests or parents who have teenage drivers, but the best part is that these policies won’t cost you a fortune. 

You can likely find bundle policies around umbrella coverage that can combine with existing home or auto policies for a more significant discount. Better yet, make sure you shop policies around every two years, if not every year, to find out which company (or companies) are giving you the most significant discount. 

The bottom line is that peace of mind does not have a price tag, which is precisely what umbrella insurance policies offer. 

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