FAQ about Umbrella Insurance
A. Why hasn't my agent told me about umbrella insurance? Umbrella insurance is one of the most underutilized financial security tools available. Many agents may not even mention it unless you have a red flag for needing it (you are high profile, high risk, or very wealthy), or because you ask.
B. Do I need umbrella insurance? Reviewing your assets is a good way to approach this question. Do you have more than $200,000 in assets (home, retirement funds, your company, etc.)? Then it's likely that you need umbrella insurance. The next question to look at is risk: if you own a business or have a lifestyle that is likely to affect the lives of others, then you might need umbrella insurance. C. Is umbrella insurance expensive? No. Umbrella insurance premiums are usually about $200 to $300 a year. While the deductibles can be hefty (usually starting at $300,000), in most cases your primary insurance policy covers most, if not all of this amount.
D. How does umbrella insurance work? When someone is unintentionally harmed by you or your property, they have the right to sue you for the cost of damages. This is why we have liability insurance-to pay for things that are directly or indirectly our fault. But if someone sues you beyond what your insurance policy covers, you are responsible for coming up with the balance of the money. For many people, this can be financially devastating. Umbrella insurance protects against this sudden financial loss by paying for what your insurance doesn't cover.
E. How do I qualify for umbrella insurance? After you review your assets, risk, and the adequacy of your traditional insurance coverage and decide that you might need umbrella insurance, make an appointment to see an insurance agent. The agent will review the finer points of your liability and risk. Most umbrella insurance companies require that you already have traditional home and auto liability insurance policies in place.
F. How do I determine how much umbrella insurance I need? Risk should be your biggest deciding factor when purchasing umbrella insurance. Many people look at their assets and buy enough umbrella insurance to cover the combined value of those assets. But that is often not enough. What you own doesn't determine how much a lawsuit will cost-risk does.
G. What is the minimum for umbrella insurance? Most umbrella insurance begins at a policy limit of $1 million, with a deductible of $300,000 or more.
H. Does umbrella insurance have to be with the same company as my other insurance? No, in fact some experts warn against having all of your insurance policies with one carrier. Frequently, it keeps you from getting the better rate, although this isn't always the case. But if convenience is important for you, having all your insurance policies under one company may be the answer.
I. What questions will my agent ask me when I call? Your agent will want to know whether you have traditional liability insurance and what those policies cover, the value of your assets, and the risk of your lifestyle and business. To fully understand risk, the agent will ask questions about how you use your property, how often you entertain or how many people enter your business on any given day, and other related questions.
J. What does the rating system mean, and how can I find out how find out how my insurance company is rated? If you want to find out more about your umbrella insurance agency, look it up with a credit rating agency. The rating agency performs a comprehensive analysis of a company's balance sheet strength, operating performance, and business profile. To find out more about your company's rating, check out the website for worldwide insurance rating agency, A.M. Best (www.ambest.com).
