Umbrella Insurance Costs: Understanding the Fine Print in Auto Coverage

Umbrella insurance costs are actually very reasonable for the benefits that it provides. Umbrella insurance is a policy that encompasses all of your other policies. It is added on top of your primary coverage. It is not a substitute for primary coverage, but can really increase the amount you are covered for. Umbrella insurance in the past has been more of a luxury than a necessity. It was an added cost that really wasn't needed 20 years ago when accident costs and the number of claims were lower. Umbrella insurance is becoming more of a necessity and it would be wise to purchase. 

How Does It Work

Umbrella liability insurance is added to your coverage. For example, if your auto insurance policy currently covers you for $250,000, then that is all it will pay. Umbrella policies can triple, quadruple or do even more to your coverage. Umbrella policies start at $1,000,000 and go all the way up to at least $5,000,000. Your umbrella coverage will not kick in unless your primary policy runs out of funds. Now of course, normally in an accident your policy of $250,000 should cover you. However, what if you are in a multi-car collision that totals some cars, as well as injure passengers? And what about pedestrians? Hitting a pedestrian automatically makes you at fault and that can be a million dollar lawsuit right there. If this were to happen to you, an umbrella policy would fit in nicely. The policy would cover the lawsuit and you wouldn't be paying anything out of your pocket. Had you not had an umbrella policy, you would have had to pay anything above the $250,000 you were covered for. That could be life altering and really strap yourself and your family.

Costs

Having an umbrella policy used to be a luxury, now it is affordable by most people. Umbrella policies provide an incredible amount of coverage, but the best part may be the price. Typically, umbrella insurance won't run for more than $500 a year. That is not bad for multi million dollar liability insurance. The $500 is a much easier hit to take than having to pay a $500,000 judgment in court. There is really no risk in having umbrella insurance, but the reward to having such a policy is huge if you were to ever need it. You may never need it, but the math works out so much in your favor that it is in your best interest to have an umbrella policy. How about a comparison between your regular insurance and umbrella insurance. Most primary insurances cost almost $1500 a year for a car. That is going to be at least three times higher than your umbrella premium. The coverage for your primary may be $250,000 if you have a good plan. The coverage is it at least four times greater with an umbrella. It seems like a no-brainer; you are paying less for more coverage. Umbrella policies are great ways to protect yourself in the future in the event that something catastrophic were to happen.