How to Choose the Right Umbrella Policy

Does your umbrella insurance policy cover the gaps that you need covered?

If you’ve taken the time to inquire about the purchase of an umbrella insurance policy, chances are you already understand the need for an excess liability policy. In today’s litigious society, the odds of being sued steadily increase in proportion to the personal and professional assets you own.

To protect and preserve their personal assets against a potential lawsuit, more people are turning to affordable umbrella insurance policies. The typical policy picks up where traditional automobile and homeowners policies leave off. For just a few hundred dollars, excess liability from $1 million up to $10 million can be purchased.

The first step to understanding if your umbrella policy covers the gaps is to make sure the limits meet your specific level of need. Experts suggest that you obtain a level at least equal to current net worth. Young professionals may opt for substantially higher levels due to increasing earning potential.

The second step is to evaluate personal and professional risks. For example, do you hire in-home domestic help such as a nanny or lawn care service? Perhaps you volunteer your professional services to a local charity organization or provide the use of assets to others. While each of these situations is certainly acceptable, it’s important not to inadvertently expose yourself to financial ruin due to a lawsuit arising from an accident or injury.

The third step is to determine situational risk. For example, do you own vacant property that could be subject to increased risk by accident or injury? Do you engage in high-risk hobbies that could injure others?

Something as simple as children playing on an unimproved field could result in a serious accident that exceeds the coverage provided. Sports-related accidents, dog bites and even ill-timed antics of children also place homeowners at risk for excess liability claims.

Finally, it’s important to carefully read and review the limits, exclusions, additions and omissions when purchasing a new policy or renewing an existing policy.