What Is an Umbrella Policy and Why Do You Need One?

Umbrella Policy
Take a second and imagine that you’re 61-years old. Imagine that you’re well-seasoned in your career, just a few years away from retirement, and have a healthy portfolio of assets. You have two homes – one permanent and one vacation – and a car that is all fully paid off.

Suddenly, as you’re driving up to your vacation home, you, unfortunately, get into an accident. Luckily, you’re not hurt too bad and insurance will cover the damage to your car and any medical bills that you incur. However, the car you hit and the people in it were not as lucky. Everyone is okay, but there is damage and injuries to the people in the other car.

The judge concludes that you are liable for the accident, responsible for the damage to the car, for the medical bills, for the lost wages, and additional money for their pain and suffering.  Your auto policy covers much of the costs, but the total amount could exceed what your auto policy covers and is close to your entire retirement savings.

Not good.

This seems like a disaster, right?

Unless you have an umbrella policy, this disaster could, in fact, be a disaster. Yet, with an umbrella policy, most of this can be avoided. Umbrella policies take over when your other policies run up against their coverage limits – in this case, saving most of your retirement account from this ill-fated accident.

How Umbrella Insurance Works

Typically, insurance policies render one distinct coverage for one specific thing. For example, your homeowner’s insurance covers your home and everything in it.  On the other hand, an umbrella policy includes most every corner of your financial life. An umbrella policy covers:

  • Bodily Injury
  • Legal Fees
  • Legal Damages
  • Property Damage

So this means that whenever you approach your liability limit, your umbrella policy is right there to help counteract the additional expenses – saving you, your retirement account, and your peace of mind.

Give us a call today to learn how you can set up your umbrella insurance.

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