Since it has been a cold and rainy January here in San Diego, we thought it would be appropriate to explain what umbrella insurance is and how it can protect you in a storm. Umbrella insurance has little to do with the rain, but it is rightfully named because it covers a wide variety of liability claims and judgments against you. It sits on top of your other insurance policies such as your homeowners, auto, motorcycle, boat, etc. and is used when the liability limits have been reached on those other policies.
For example, if you have auto insurance policy with liability coverage of $250,000, what happens if you’re at fault in an accident and the other driver’s injuries result in medical bills of $400,000? The answer is simple, your personal assets may be at risk if you were to be sued. In today’s litigious society, this is a very real scenario. If you had a $1 million-dollar umbrella insurance policy, it would cover the additional $150,000 on top of your auto insurance limit. This is why umbrella insurance is often referred to as “excess liability” coverage. This additional coverage can be an extremely cost-effective way to reduce your liability risk. A $1 million-dollar umbrella insurance policy generally costs about $250 per year depending on your current policies and the insurance company you decide to use.
Typical items covered by umbrella insurance include bodily injury and injury treatment costs, personal injury such as slander, libel, defamation of character, etc., legal defense costs, property damage and if you are sued as a landlord. When evaluating an umbrella policy, you should always ask your insurance agent what is and what is not covered under the particular policy you are considering.
Keep in mind that your insurance company may require a certain amount of coverage on the underlying homeowner’s or auto policies before they allow you to purchase an umbrella policy. This may increase the cost of those policies that you own if you don’t meet the insurer’s standards for obtaining an umbrella policy. The insurance company wants to make sure you are adequately covered with your primary liability policies first since the umbrella only covers the amount above those limits.
CCMI does not sell any type of insurance, but we encourage clients to consider umbrella insurance as additional liability protection. Please give CCMI a call if you have any questions regarding umbrella insurance.
CCMI provides personalized fee-only financial planning and investment management services to business owners, professionals, individuals and families in San Diego and throughout the country. CCMI has a team of CERTIFIED FINANCIAL PLANNERTM professionals who act as fiduciaries, which means our clients’ interests always come first.
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