Umbrella Insurance: Money Saving Tips for Auto Coverage

Umbrella insurance is an extra policy to your current insurance that adds even more liability protection. Umbrella policies are gaining popularity due to the peace of mind they provide. The whole point of adding liability protection is to cover yourself in case of an accident where you hold liability, or fault. Umbrella policies are around for lots of different types of insurance, but auto umbrella insurance policies are much newer. The fees and charges involved with a major accident today are much higher than they used to be. If you are in a multiple car accident and you are found at fault, you will be liable for the repair bills to the cars, which may be very high. In addition, you may also be liable for medical bills for those injured. With medical costs as high as they currently are, that can easily run into $100,000 or even million dollar range with serious injuries. Not even the best insurance policy in the world is going to cover that. Umbrella policies kick in when the primary policy runs out of coverage.

Lets create a scenario here that can definitely happen. You are driving and your friend calls you. You become so distracted that you take your eyes off the road for a split second, and in turn you hit a pedestrian while running a red light. You are clearly at fault. Chances are your auto insurance won't cover this. An umbrella policy would and likely cover the million dollar judgment you are about to lose. Another added benefit of umbrella coverage is that you can expand it onto other things, not just your car. You can expand it to include things such as your home, boat, and other valuable assets. Now you can drive around knowing your house is insured, and conversely while you are in the house, know that your car is insured.

Cost

OK, you are probably thinking that this coverage is going to cost a lot of money. Umbrella insurance policies typically start at one million dollars worth of coverage and can be as high as five million dollars. However, there is a silver lining here. The premiums for such coverage are typically around four or five hundred dollars for a year. It is so small because there aren't many people who are actually forced to use their umbrella, so they can charge less for it and still make their money. Think of it this way. If you are in an accident would you rather pay hundreds of thousands, or prevent that from happening by paying $400 a year? Most people would rather protect themselves just in case. That is what keeps insurance companies in business. 

Overall, an umbrella policy may seem like something you don't need. However, if you were ever going to need it, you will be glad you did invest. If you need to use one, that means you are likely looking at a million dollar lawsuit. Umbrella coverages can literally save your financial life.