Personal umbrella insurance: for the costly claims you can’t always expect (or even prevent)

Honestly, we think anyone with an active auto and home/renters/condo insurance policy should get an umbrella policy. This is because umbrella insurance is an affordable coverage that could prevent you from a life-altering setback if a claim exceeds your existing insurance limits.

People with additional exposures (greater opportunities for accidents) have even more reasons to get the coverage.

Some of these exposures include:

• Pools
• Trampolines
• Jungle gyms/playsets/swing sets
• Boats/watercraft
• Snowmobiles
• ATVs/Go Karts, etc.
• Dogs
• Parties and playdates
• Youthful/inexperienced drivers 
• Investment properties
• Membership on boards or volunteer groups
• Significant savings/assets

There are countless claim situations that have the potential to exhaust your standard home/renters/condo and auto policies. These are just some examples of incidents, but multiple variations of property damage, bodily injury, or personal injury could necessitate umbrella coverage:

• You cause a car accident resulting in injuries, fatalities, or property damage
• Your dog bites someone, causing injury
• Someone gets injured or drowns in your pool (this can happen whether you’re monitoring pool use closely, or if some neighborhood kids sneak into your pool while you aren’t home)
• You have your child’s friend over for a playdate and they get injured on your trampoline, playset, stairs, etc.
• Someone gets injured by or while using watercraft you own
• You (or your child) speak or publish something false or negative about someone, or someone claims you spoke or published something false or negative about them

That’s a great question, and at the end of the day, only you can answer that based on how much risk you’re willing to tolerate. 

Many suggest your policy should cover the value of all your assets, but because umbrella policies are offered in $1 million increments (with a $1 million minimum), you don’t need to do any precise or complex calculations.

Most of our clients opt for a $1 million policy, because it is affordable, and probably enough to cover any of the more likely incidents that could occur.

People with multiple properties and/or significant monetary assets, or who own a business, may want a policy limit of $2 million, $3 million or more to further protect themselves if they are targeted in a lawsuit.

Here’s the good news - probably not as much as you think.

Costs of personal liability umbrella policies range based on various factors such as (number of properties, number of autos, driver history, number, age and experience of drivers, number of watercraft/snowmobiles, etc.), but a $1 million policy may cost between $160 and $300 per year. 

As you increase policy limits beyond $1 million, the premium cost increases in smaller increments. 

For example a $2 million policy might only cost 1.8 times the cost of the million dollar one (rather than double), a $3 million dollar policy might cost 2.55 times the million dollar policy (rather than three times) and a $10 million dollar policy might cost 8.9 times the million dollar policy (rather than ten times).