What the heck is an Umbrella?

The average everyday person is not always as educated as they should be when it comes to their current insurance. Whether that be in the form of their auto insurance or life insurance. But more often than not I find people who have never even been informed about an umbrella policy. I mention the policy and ask if they have one or have had one, and many times the customer is confused by the question. "Whats an umbrella?", is what most people respond with. As an agent it is my responsibility to cover all possible situations that you could encounter throughout your life. These situations are often analyzing what loses you could sustain in the event of an incident caused by your negligence. An umbrella is one piece of the puzzle to keep your future secure and safe for your and your family.

An umbrella policy is a policy that is put in place as a backup coverage policy that will cover all policies currently held by a household. The name umbrella literally describes what the policy does. Imagine your car, home and any other policy you own, such as an ATV. Now picture each of these policies as separate but still part of the same household. My car has $200,000 of liability coverage, but my house has $500,000 of liability coverage. I own both of these policies, so they are in one household but I cannot use part of my $500,000 of liability coverage from my homeowners policy to pay for an incident caused by my negligence in my car. But with an umbrella policy you can. Typically umbrella policies start at $1,000,000 of coverage and increase by 1 million as you go higher.  What that million does is cover all of your current policies held in your household, such as auto, home, boat, motor home, and it covers it like an umbrella. This coverage would kick in if you were to use up all of the available amount of coverage in any one of your other policies. 

Lets say I have a home that has $300,000 of liability coverage. If I burn down my own house and that fire spreads to my neighbors house I am liable for the damage caused to the neighboring homes that sustained damage. This $300,000 could get wiped out fairly quickly, leaving you with hundreds of thousands of dollars of damage to pay for because of your liability in the situation. The homeowners would have a right to seek compensation for the loss as well as compensation to rebuild the home. If I happen to burn down two homes around me that once large sum of $300,000 is quickly diminished. But if I have planned ahead and have a 2 million dollar umbrella policy this will kick in and help pay towards the damages and reconstruction of the homes. This is the same for any other policy you own. The umbrella would kick in the same way in a auto claim where you owe more money for medical payments, lost wages or property damage that cannot be paid for because it exceeds the limit of coverage for that specific policy.

The umbrella is essentially a backup plan in case of a dire situation where your current coverages cannot cover the amount of payments for which you are liable for. It is your ultimate backup coverage in any situation. This policy can be the deciding factor between you losing all of your retirement money or being completely covered by your insurance policies and not having to pay out one penny of your own. It can save your wages from being taken because you weren't prepared for injuring a driver so bad that he totaled his brand new Ferrari and is now missing work for the next 6 months from being hospitalized. This is the ultimate backup plan that can save your assets and secure your future income from being taken from you for usually around 100-300 dollars a year.