You may have heard of an umbrella policy, but you must likely don’t know how it works. Not having the proper amount of insurance at the time of an accident, can change the course of your financial future. Picture this: You are in a hurry, you are running late to pick the kids up from school, you are behind at work, your phone is blowing up, and you look down for an instant to see who needs you now. You look up to see you are not only running late, you are running a red light, and there is a cyclist in your path.
If the cyclist is injured, it is going to be the liability coverage on your policy that is going to pay for their medical expenses. Your liability is made up of two coverages. 1. Bodily injury. 2. Property Damage. The bodily injury coverage will pay the medical expenses in this example. The state minimums here in Idaho are 25/50 which means, $25,000 per person, and $50,000 per accident. These limits are WAY too low. An ambulance ride and a few nights at the hospital will cost more than that. Throw in a surgery, physical therapy, and lost wages and you could be looking at hundreds of thousands of dollars.
The highest level of coverage you can buy on an auto policy is 250/500 for bodily injury and this is what I would recommend you carry. The nice thing is, to go from 25/50 to 250/500 is nominal in cost. It might be only $5 per month extra per car, for 10X the coverage!
What if the $250,000 isn’t enough? What if there is a fatality? That is where an umbrella policy comes in. An umbrella policy is an extra line of liability insurance to be used, if you exhaust your limits on your other policies. You buy an umbrella in increments of $1,000,000 of coverage and it can cost as low as $11 per month.
The umbrella extends to everything in your household that HAS liability. Your auto insurance has liability, so does your home, your boat, motorcycle, motorhome, etc. The $1,000,000 will extend to any of those policies if their limits run out.
It is an inexpensive way to protect your assets in the event of a tragic, life changing event. If you don’t have enough insurance at the time of loss, everything you have worked hard for is at risk. They can liquidate bank accounts, retirement accounts, college savings plans, and other assets.
Remember, the more you have, the more you have to lose. Learn how to protect it.