Posted by Tim Sine in: blog

Perfection isn’t a reality, which is why liability insurance is important. You can avoid financial ruin if you accidentally cause major injuries or property damage to others. The problem is, your insurance isn’t perfect, either. That’s where a personal umbrella insurance policy comes in.

If you’re sued for damages that exceed the liability limits of your car insurance, homeowners insurance or some other coverage types, an umbrella policy helps pay what you owe. 

Who Needs Umbrella Insurance?

Umbrella insurance is beneficial for those who:

  • Own property.
  • Have significant savings or other assets.
  • Are worried about liability claims against them when they travel outside the U.S.
  • Own things that can lead to injury lawsuits such as pools, trampolines and dogs (check with your insurer to make sure your breed is covered).
  • Engage in activities that increase your chances of being sued, such as:
    • Being a landlord.
    • Coaching kids’ sports.
    • Serving on the board of a nonprofit.
    • Volunteering.
    • Regularly posting reviews of products and businesses.
    • Participating in sports where you could easily injure others (skiing, surfing, hunting, etc.)

The Inner Workings of Umbrella Insurance

Just about anyone can benefit from umbrella insurance, since a large lawsuit can wipe out not only your current savings but also what you stand to earn in the future. Even if you don’t have the money to cover a massive settlement now, you could be stuck paying off the debt for years.

For a better understanding of how umbrella insurance comes in play, imagine the following scenario:

You run a red light, accidentally T-boning another car. There is significant damage to the vehicle, and several people are injured. The car needs $50,000 in repairs, and the treatment of the injuries totals $250,000. Additionally, the other driver is an orthodontist who will be out of work for months due to a broken arm and sues you for $200,000 in lost earnings. You’re on the hook for injuries and lost wages. If you carry only $300,000 liability coverage with your car insurance, the remaining $200,000 will have to come out of your pocket. With umbrella insurance, it would pay the difference between what your primary insurance covers and what you still owe. It is essentially a fail-safe for savings and other assets. 

How Much Coverage is Needed?

It’s wise to purchase at least enough umbrella insurance to cover your net worth. This includes your savings, other assets, and income. You may also want to include potential income if you’re likely to earn much more in the near future than you do now — if you’re a medical student, for example.

It’s difficult to pinpoint exactly how much umbrella insurance is the “right” amount because you don’t know how much a potential worst-case lawsuit could cost you. Umbrella policies typically start at $1 million in coverage, so you get a decent amount no matter what you choose.

About Sine Insurance

At Sine Insurance Group, we are dedicated to providing you with custom-tailored insurance policies to protect your assets. Our comprehensive packages have been expertly crafted to serve St. Louis and the surrounding areas for the past 25 years. For more information about our products, contact us today at (636) 947-1177.