Hello and welcome back to the podcast. Today we’ll be talking about umbrella insurance. I’m sure you’re familiar with auto insurance, home insurance, health insurance, maybe even travel insurance. But you may be wondering why on earth you would need to insure an umbrella. Well umbrella insurance doesn’t really insure umbrellas. It gets its name because it offers extra protection and sits on over of other insurance coverages you already have. Umbrella insurance is also called excess liability or personal liability insurance. It’s there to protect you from the financial fallout of a really a large claim or lawsuit. For example, if you unintentionally cause a car accident, or someone is hurt on your property and the claims are higher than your auto or homeowner’s insurance coverage, umbrella insurance begins to pay after your other insurance is exhausted.

Why is this important? An umbrella policy protects your existing personal assets (what you own) and even future assets like wages from being taken away to pay the cost of losing a lawsuit over a car accident or an accident on your property. Lose a lawsuit like that and you could have to pay the winning party for medical expenses, legal costs, and lost wages, which can become really expensive really fast. 

You don't have to be wealthy to benefit from an umbrella policy. Even if you don't own much now your wages could still be garnished. Now, if you are young, you don’t own a home, and don’t have much savings, you may not need umbrella insurance. The auto and renter’s insurance you have may be adequate to cover you. But the more you have (or the more someone thinks you will earn), the more you can lose, and the more likely you are to be the target of a lawsuit. 

WHAT you have or HOW you live your life may also increase your chances of being sued. Like having a swimming pool or trampoline. If you have pets that could cause injury like dogs, horses or other large animals. Do you like to host large parties at your house? Drive during rush hour, when drivers are more likely to get into an accident. Coach youth sports?

If you own rental property you are also at higher risk and should have umbrella insurance. Your personal umbrella policy CAN provide you liability protection for accidents at rental property too. But you have to be sure it is included. For example, my umbrella policy will cover up to four rental properties before I need a commercial liability policy. Ask specifically what is covered when shopping around.

How does umbrella insurance work? An umbrella policy provides excess coverage above and beyond what your homeowners and auto insurance policies provide. Let's say your auto policy pays up to $300,000 of medical expenses per accident and your umbrella policy is for $1 million. If you are sued for $900,000 because of a car accident, your auto insurance would pay $300,000 and your umbrella policy would pay the remaining $600,000. Your legal expenses are covered as well. Umbrella policies usually provide $1 to $5 million of extra coverage. You choose the amount of coverage. One million dollars of coverage typically costs $150 to $300 per year.  

When you shop for an umbrella policy, the insurer will require you to have a specific amount of liability coverage in your existing auto and homeowners’ policies. Remember umbrella insurance sits above you other insurance, it doesn’t replace it. It will only pay after you regular insurance has paid. Know those base requirements and increase your auto and homeowner liability limits if necessary. You may get a better price buying your umbrella insurance from the same company you have your home and auto insurance with, though its not required to be with the same company. 

Now, umbrella insurance won’t cover your own injuries or damage to your own property. Your health insurance is for your medical expenses. Your homeowner’s insurance would cover your property from l