On a homeowners policy, it covers you if someone were on your property and fell down your stairs. This bucket of money or personal liability limit would cover the injured party’s trip the hospital, additional doctor bills and so on. Imagine you had a pool in your backyard and decided to host a block party. During this party, your neighbors’ wife fell into the pool, drown and had to be airlifted to the nearest hospital. Common underlying liability coverages of $100,000, $300,000 or even $500,000 would not be enough to cover the high costs of this type of medical treatment, and you would be responsible for making up the difference out of pocket, or possibly in a lawsuit.
This works in the same manner for auto insurance; if you have the required underlying limits for the umbrella policy, it will kick in once your primary limits have been used up. The umbrella will pay up to the policy limit described on the declarations page.
How Much Umbrella Insurance Do I Need?
When considering the amount of coverage you need, think about three things:
The hazards you may encounter. Review the jeopardies as a homeowner or renter, the chance of causing an accident during your daily work commute, and any other possibly dangerous activities you engage in that could put those around you at risk. Are you an avid boater? Causing a boating accident would be something that falls under the umbrella policy as well.
The value of all of your possessions. These assets include properties, belongings in your home, stocks, bonds, savings and retirement funds. Your umbrella policy limits should reflect the amount of stuff you have to protect, the more possessions, the higher the limit should be.
Are you up for to risking future income? Probably not. But did you know that liability lawsuits can result in the loss of stuff you have now and money you haven’t even earned yet? Even if you have few assets now, may want to think long-term about the implications of a major loss.
When thinking about your future earnings, consider your earning potential. If you are on the fast track for a high-paying career, you could be part of a lawsuit that targets money you have only dreamed of earning.
If you think you may need an umbrella policy, but have questions and are in or around the Austin, TX area give Southwest Insurance Center a call.