With all the different insurance types
and options out there, it's easy to become confused when it comes time to purchase a policy that is best for you and your family. Understanding how to protect your assets with an umbrella insurance policy will go a long way to putting you in a better place to make a decision that is best for your financial situation. In this article, Step 1 explains what an umbrella insurance policy is, Step 2 helps you evaluate your current policies, Step 3 describes how to determine the level of protection you need, and Step 4 recommends talking to an agent. Part 1 of 1: How to protect your assets with an umbrella insurance policy
Step 1: Understand what umbrella insurance is. Before deciding whether you need an umbrella insurance policy, you should get a sense for what it actually covers.
As the name implies, umbrella policies provide coverage over or beyond the liability limits of your other policies. If you are ever at fault for an accident or some other tragic event, then your assets are at risk. Since you’re on the hook financially for the damage you’ve caused, even if it was purely unintentional, this means your assets are at risk too.
Effectively, your various possessions, such as your car and home and even income, are opened up to liability claims: your assets are incredibly vulnerable.
Umbrella insurance gives you an extra liability limit above and beyond what your other insurance policies offer, so that in the event you are sued or otherwise required to pay out huge sums of money, your insurance policy will pay this on your behalf rather than your assets being at risk.
Step 2: Evaluate your current insurance policies. Look into the details of your existing policies to determine what level of liability protection you currently have.
This will give you a better sense for how vulnerable you are. Remember that even though the liability amounts in your auto insurance may seem high, rendering an umbrella policy unnecessary, the fact is that these limits can be met easily in certain circumstances.
Step 3: Determine the level of protection you need. There are several important factors to consider when determining how much protection you need to carry.
First of all, think about your assets, both current and future. This includes any major possessions like you car and home, but also less obvious assets like stocks, savings, and other funds.
What may be surprising is that your future assets - that is, the ones you don’t even possess yet - could also be at risk. Future earnings could be garnished to pay for damages. In essence, the more you have to lose, the greater the level of protection you need.
Another aspect affecting your level of coverage is your risk. You should ask yourself, how likely is it that I will be in the sort of situation that I might need to pay for damages or be sued?
Consider your daily life and the activities you usually engage in. What level of risk is associated with them? Do you have a miserably long and treacherous commute each day? Do you engage in risky behaviors generally? What dangers, if any, could be associated with your home or other possessions?
Take a long, hard look at your situation to appraise objectively what your coverage needs are. Many people feel comfortable getting a policy with a $1 million liability limit, but if you think it is necessary based on the above considerations, it may be worth acquiring a policy with a higher limit.
Step 4: Reach out to insurance agents. If you are in doubt about your true needs or you want to move forward, contact an insurance agent.
The agent will be able to help you come up with a policy tailored to your situation and can get you signed-up if you want to move forward with an umbrella policy.
An umbrella insurance policy is a financially prudent pathway to protecting your assets. If you are ever caught up in a bad situation or make a mistake, then you can have the peace of mind that comes with knowing your assets are not exposed to lawsuit and that your family and way of life are safe.
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