When it comes to protecting your assets, umbrella insurance is often an overlooked but crucial component of a comprehensive insurance plan. With a 67% increase in umbrella claims from 2010 to 2020, according to Safeco Insurance, the need for this type of coverage is more apparent than ever. The average umbrella claim now stands at approximately $500,000, with auto accidents being the leading cause of these high payouts. Despite its benefits, many Hampton Roads and Virginia residents still don’t have an umbrella insurance policy in place.
So, what exactly is umbrella insurance, and is it worth the investment?
What is Umbrella Insurance?
Umbrella insurance, also known as personal liability umbrella insurance, provides additional liability coverage beyond the limits of your existing policies, such as auto or homeowners insurance. If you’re found at fault for injuries or property damage and your base policies don’t fully cover the costs, umbrella insurance steps in to cover the remaining amount.
Excess vs. Umbrella Insurance
While excess liability increases your coverage limits, umbrella insurance offers broader protection. It may cover situations not included in your underlying policies, such as legal fees and damages if you’re sued for slander or libel—coverages not typically included in a standard homeowners policy.
Real-Life Example
Imagine you run a red light and collide with another vehicle, causing serious damage and multiple injuries. Your auto policy limit is $300,000, but the total liability amounts to $500,000, including repair costs, medical expenses, and a lost income lawsuit. Without umbrella insurance, you’d be responsible for the $200,000 difference. However, with umbrella coverage, that amount would be covered, protecting your savings and assets.
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What Does Umbrella Insurance Cover?
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Others’ injury treatment and funeral costs
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Others’ property damage
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Lawsuits involving slander, libel, defamation of character, and other personal attacks
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Your legal defense costs
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Your tenant’s injuries or property damage if you’re a landlord
What Umbrella Insurance Doesn’t Cover
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Your own injuries
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Damage to your personal belongings
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Injuries or property damage that your business is responsible for
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Intentional or criminal acts
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Liability associated with contracts you’ve entered into
Who Needs Umbrella Insurance?
While not legally required, umbrella insurance is highly recommended if you have assets to protect or a higher risk of being sued. Consider this coverage if you:
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Own property
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Have significant savings or other assets
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Travel internationally
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Own high-risk items like pools or trampolines
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Are a landlord
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Have a teen or inexperienced driver in your household
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Coach youth sports
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Frequently host guests or parties
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Serve on the board of a nonprofit organization
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Participate in high-liability activities
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Are a public figure or hold a visible role in the community
Cost Considerations
The cost of umbrella insurance depends on the amount of coverage you choose, your location, and your overall risk profile. According to the Insurance Information Institute, a $1 million policy typically costs between $150 and $300 per year. Additional coverage can be added at relatively low incremental costs.
Protecting Your Future
Deciding whether an umbrella policy is worth it ultimately depends on you—but we strongly recommend having one in place.
Even the most cautious individuals can face unexpected personal liability lawsuits. While the odds may be low, the financial impact can be devastating. Umbrella insurance offers an affordable way to protect yourself against such risks. If you’re interested in learning more about how umbrella insurance can safeguard your assets, request a quote today for personalized advice and support from our team in Newport News, VA!
