The average liability coverage for home and auto is usually $500,000, but more than 13 percent of personal injury lawsuits total over $1 million. What about that other $500,000? This is where a personal umbrella policy protects you.

Confused as to why you need personal umbrella insurance? You’re not alone. Most people don’t know these seven things.

1. Extra Protection Over Car Insurance

You might think of an umbrella policy covering beyond your homeowner’s insurance limits, but it also extends your car insurance policy. An umbrella policy can also cover your recreational vehicles like a snowmobile, boat, motorcycle, or ATV beyond its coverage limits.

2. Worldwide Coverage

Do you travel abroad? If so, an umbrella policy might be the perfect companion.

Umbrella policies protect you no matter where you are. If you get in an accident overseas or accidentally damage someone else’s property, you could easily go beyond your regular policy limits.

3. You Could Be Liable for Your Children’s Actions

Do you have teenagers or young children? Did you know that you can also be liable for their actions?

Think about social media. You could get sued for comments on sites like Twitter and Facebook. The liability risk doesn’t just apply to who types the comments.

Lawsuits are filed against parents for negligent supervision. These lawsuits can be rather costly to defend.

If your child is in a severe accident texting a friend, you could also be liable for negligence. Umbrella policies give you additional protection beyond your normal limits.

4. Additional Personal Injury Coverage

You might just think of personal injury as physical harm, but there is additional personal injury coverage that helps you financially. Examples of other coverage include false arrest, defamation of character.

As mentioned above, social media is gaining ground for lawsuits with harmful posts. Coverage for this defense may not be included in your regular policy.

5. Protection Against Liability Risks

No matter your lifestyle, risks are always there. If you have a dog, you could be held liable for a dog bite even if the dog is provoked. You could also be sued if a neighbor kid ventures in your pool and drowns.

These claims can easily add up to costs beyond your coverage limits when you think about legal fees. This is where your umbrella policy kicks in and protects you and your family.

6. You Could Lose Everything Without an Umbrella Policy

If you don’t have an umbrella policy, you could lose everything. Think about this situation.

You are involved in a serious car accident that paralyzes the other driver. The other driver sues you and the judgment is for $1 million. You have great insurance with a limit of $500,000.

You are on the hook for the other $500,000. This means you may have to sell off your assets and lose future earnings to pay this extra money.

7. It is Cheap

This is probably the most surprising fact about umbrella insurance—it’s relatively inexpensive. A $1 million personal umbrella policy costs about $150 to $300 a year. Each million is about $75 more.

The price does vary by risk and location but it’s a general idea. You could make up some of that extra cost by increasing your home and auto deductibles to $1,000, which is all you would have to pay out of pocket for a loss.

Umbrella policies are inexpensive because they activate you exhausted your liability coverage on your home or auto insurance policy.

Most companies will require you to have at least $300,000 or $500,000 liability coverage on your home an auto policy before you can buy an umbrella policy.

What is Not Covered

There are some items that are not covered in a personal umbrella policy.

Business Losses

Any losses related to your business or damage to property would most likely not be covered by a personal umbrella policy. This applies even to home-based businesses.

Personal umbrella policies also don’t cover professional or business liabilities like a malpractice lawsuit. You could get a commercial umbrella policy for business losses.

Personal Property

A personal umbrella policy will help with expenses if you damage someone else’s property but not your own. Personal umbrella policies cover liability.

Let’s look at a scenario to help explain. You live in a condo complex and your bathtub overflows because you let the water run. Your umbrella policy will not cover drywall damage to your own home but will pay for expenses to your neighbor’s drywall and flooring below you.

This coverage kicks in after you exhaust your homeowner’s insurance limits. You would most likely not have to pay any expenses out of pocket other than your deductible.

Criminal or Intentional Actions

If you intentionally harm someone, your umbrella policy will not cover your actions. This also applies to illegal behavior. It will cover you for false arrest, but not if you willingly participate in illegal activities.

Contracts

If you enter a contract, your personal umbrella policy will typically not cover you from any liability of this contract. For example, if you hire someone to work on your home and have a lawsuit, you will most likely not have umbrella protection.

Determining If You Need Personal Umbrella Insurance

Most people feel they don’t need an umbrella policy, and they are not required. If you fit some of these descriptions, you should talk to your agent about adding an umbrella policy to your insurance coverage:

Have a large amount of assets or money
Own a pool
Own a trampoline
Have a dog (check into breed restrictions)
Travel outside the country and worried about liability
Coach kids’ sport teams
Own rental property
Volunteer
Serve on a nonprofit board
Participate in sports that could result in injury to others like hunting or skiing
Post product reviews
Have teenage drivers

These scenarios above have increased risks. Talk to your agent about the best insurance to cover your needs.

Evaluate Your Insurance Needs

Life happens fast and is pretty unpredictable. A personal umbrella policy can protect you beyond your normal insurance to make sure you can keep what is valuable to you.

It’s important to you evaluate your insurance needs regularly.

Reach out to us to make sure you have the best coverage for all your insurance needs like your business, family, and employee benefits.