A common misconception is that your auto or homeowner’s insurance will cover any liabilities you incur. The fact of the matter is that these policies have limits, and, in particularly serious instances, the damages are so extensive that the cost is far beyond your coverage.
If you’re involved in a major auto accident and are responsible for serious property damage or significant injuries sustained by other parties, there’s a good chance you’ll be liable for more than your insurance allows. In such a case, all of your assets are assessed and become available to pay your debts.
The nest egg you’ve been building for retirement, your real estate investments, vehicles, and any other big-ticket items could be at risk, which is not only detrimental to your life, but your family’s life as well. Looking at what you’ve spent your life procuring, do you really want to risk it all over a potential liability lawsuit? Obviously not, but how can you protect yourself?
Umbrella Policies are insurance plans meant to cover above and beyond the limits of your current existing policies. At whatever amount your auto or homeowner’s insurance policies cap out, your umbrella policy will pick up where the others left off, ensuring that you have adequate funds to pay any damages you’ve caused.
Bear in mind that these types of lawsuits aren’t restricted to auto accidents. Any incident involving a personal injury on your property can, and often will, open the door to a liability lawsuit aimed in your direction. With the frequency of people suing one another these days, having an umbrella policy provides you with the protect you need when you least expect it.
Oftentimes, the coverage on umbrella policies can range anywhere from $1-10 million, and the rates are much more reasonable than you may imagine. Additionally, considering the fluidity of your assets through the years, as time goes by you may acquire more things. It’s important to remember to reassess your policies annually to ensure you have adequate protection, because what was sufficient before you owned a home, a boat, or a new car will not likely be enough to cover your new acquisitions.
To determine whether or not an umbrella policy is right for you, start by adding up the overall value of your assets; this includes the value of your home, contents of your bank accounts, stocks, bonds, and available funds in any 401(k) or retirement plans you have in place. Don’t forget to consider the salary you’ll be earning through to the time you retire. Considering the total value of your assets, assess the liability coverage you currently have between your auto/homeowner’s/any other policies. Based on this comparison, you’ll be able to see whether or not an umbrella policy is necessary to ensure the security of your financial future.