• Umbrella Insurance: What It Is, and Why Every Homeowner Should Have It
  • September 18, 2012
  • Law Firm: Ross Feller Casey LLP - Philadelphia Office
  • Most insurance policies are limited to very specific circumstances: Homeowners insurance covers incidents involving the home itself, like fire, storm damage, and vandalism, while auto insurance protects against car theft, accidents, and the like. But, what happens when there’s an incident not included in any of your current insurance policies? Or when the limits on your policy are lower than your liability, and you can’t cover the difference? The answer lies in umbrella insurance.

    Umbrella insurance is exactly what it sounds like: a catch-all policy to protect your assets - both present and in the future - against liability issues. It can cover you in all sorts of scenarios, like lawyer fees if you have to sue or defend yourself in court.

    If you’re a homeowner, umbrella insurance is particularly beneficial because it can protect the large investment you made in your home. Think about this scenario: A guest at your home slips and falls, and they sue you successfully for $1 million. But, your homeowners insurance only covers up to $300,000 for claims. In this case, you would be liable for the remaining $700,000, and in some cases that could mean having to sell your house to come up with the cash. However, if you had a $1.5 million umbrella insurance policy, you would be covered because the umbrella policy would take over when the homeowners insurance is exhausted.

    The Money Myth

    One of the biggest misconceptions surrounding umbrella insurance is that it’s only for wealthy people. They have more to lose, and therefore more to protect, so an umbrella policy of $5 million, $10 million, or more makes sense. However, people of all income levels can benefit from umbrella protection. A judgment in a liability case can be the same whether you make $20,000 per year or $500,000 per year, and you’ll need the money to take care of it. An umbrella policy provides that fund, and it does so for a very affordable premium.

    That being said, you want to make sure you’re only paying for coverage that you need. If you have a $600,000 home, sizeable stock portfolio, retirement fund, and other valuable assets, you’ll want a higher limit to ensure all of it is covered. Alternately, a $1 million policy may be more than sufficient and may also be the more responsible economic choice for your income level. Remember, you can always adjust the limits to match your financial situation as it changes over the years.

    To learn more about umbrella insurance and how it can help homeowners, or for help figuring out the right coverage level for you, contact a reputable insurance agent.

    Mario Cattabiani is the Director of Communications at Ross Feller Casey, LLP in Philadelphia, PA.