Holes in your Insurance Coverage? Umbrella Policy Might be the Answer

Personal liability umbrella policies act like an umbrella, sitting on top of your auto and homeowner's liability policies to provide extra protection. (Even if you don't own a home, remember that you still need renter's insurance to cover both your liability and your personal property.)

Umbrella liability insurance is designed to kick in when your other policies are exhausted. If you have a home insurance policy with liability coverage of $300,000, the umbrella policy will pay claims above that amount up to the policy limit chosen. It's a good idea to get your umbrella liability, homeowners, and automobile policies from the same company; there's usually a substantial premium discount.

For the protection you get, umbrella liability coverage is not very expensive. Most of the risk is assumed under the primary auto or home policy. Premiums are usually $150 to $300 a year for $1 million worth of coverage. The cost depends on such criteria as the amount of coverage, the insurance company issuing the policy and your own personal risk factors.

When deciding whether or how much to purchase, take into consideration how much you're worth and the likelihood a claim will be made. Do you travel a lot? Entertain? Do you have a trampoline or swimming pool? A rambunctious pet? Are you in the public eye or do people perceive you as having deep pockets? If you answered yes to any of these questions, it is particularly important for you to have umbrella liability insurance.

Worried? Justifiably. We live in a litigious society. It seems these days people don't hesitate to file claims, some seemingly frivolous. Settlements can reach into the millions. In the case of a large settlement or judgment, you could lose all of your assets and still owe money. Your future income, if you have to make settlement payments over time, could easily be at risk. The same is true for any inheritance you may receive (it could be seized for payment), and any inheritance you hope to leave your children.

Protection against claims and lawsuits does more than pay for the damages. Even if a lawsuit is frivolous, you still face the expense of defending yourself. Your liability coverage pays for lawyer fees and defense costs, too.

At a time when million-dollar judgments aren't unheard of, umbrella policies are worth considering. Think of it as the umbrella you keep in your trunk for unexpected downpours.

Contact your Johnson Insurance representative for more information.