Who Really Needs Umbrella Insurance?


Like with most types of insurance policies, you don’t need it until you need it. And although there is a small chance that you would ever lose a lawsuit for an amount that’s more than what your current insurance coverage will pay out, individuals who have high-value assets or who have higher-risk circumstances may want to consider umbrella insurance for extra peace of mind.

To help you decide whether you may need umbrella insurance, consider the following questions.

What is umbrella insurance and how does it work?

An umbrella policy can cover liability claims that exceed the limits of your existing insurance policies (such as homeowners, renters, or auto). What this means for you: if you are responsible for an accident or damage and your liability is greater than you’re insured for with your traditional policies, the umbrella policy kicks in— protecting your assets.

Let’s say that while hosting a party at your home, a guest falls down the stairs due to a loose handrail. Unfortunately, the person has significant medical costs and sues you. Most standard homeowners policies include coverage for this scenario, but only up to a certain amount. Here’s how the math plays out:

  • Your homeowners policy has a coverage limit of $300,000
  • The medical bills and liability claim—including your legal representation fees—come to $400,000
  • You now have a gap of $100,000 for which you’re responsible

With the right umbrella policy, you could be covered for the amount above your homeowners insurance policy limit, which would help protect you from using other assets like a checking account, savings account, or a 401(k) to pay the difference.

When can an umbrella insurance policy be helpful?

While there are numerous scenarios for when umbrella insurance can come in handy, here are some of the more common claims that occur and when this type of policy can apply.

  • Auto accidents: Texting and driving and other forms of distracted driving are a leading cause of accidents, resulting in medical and liability expenses. Keep in mind teenage drivers are at a higher risk for accidents.
  • Dog bites: These make up a large percentage of liability claims. It’s important to know your risk.
  • Rental homes claims: Rental or investment properties have high foot traffic. The more people on a property, the greater risk of a mishap—and a lawsuit.
  • Pool injuries: Pools can be a bright spot for family fun, but they also bring an elevated risk of injury.
  • Slander: Being found responsible for libelous or slanderous comments can be expensive. This is becoming a more common claim thanks to social media.

Getting the right coverage for your needs

While you cannot predict what people will do, you can take precautions to help protect your family and assets with an umbrella policy. A representative from Westwood can work with you to find you the right coverage for your situation and lifestyle. Contact a Westwood agent today to learn more about how an umbrella policy can protect you.

Please Note: This article is for general informational and educational purposes only. It does not represent any specific insurance policy and does not modify any provisions, limitations, or exclusions of any current policy.