Insurance keeps you covered when accidents happen. But there’s a cap on how much coverage your insurance policy will provide, and when that runs out it’s up to you and your wallet to pay for the rest.
But there is good news: an umbrella insurance policy can help cover the difference. You might be wondering where to get umbrella insurance and what the process of purchasing a policy is like. We’ll break it down for you.
What is umbrella insurance?
Umbrella insurance is essentially insurance for your insurance. It provides you with extra liability coverage in case you hit the coverage limit on your existing home, auto, boat, or renters insurance policies. Policies typically range from $1 to $5 million dollars worth of additional coverage, and experts say that average premiums sit between $200 and $300 per year.
When you might need umbrella insurance
Umbrella insurance can come in handy any time you’re faced with an incident that could lead to serious financial fallout. Say you invite a friend over and they’re hurt on your property, or you accidentally hit someone’s car while driving, both of these instances could lead to severe injuries and costly medical bills that you would be held liable for. Your net worth, household makeup, and overall lifestyle can all be deciding factors in whether or not umbrella insurance makes sense for you.
You might want to consider adding an umbrella insurance policy to your existing coverage if:
- You have a high net worth
- You own one or multiple properties, including rental properties
- You often have visitors in your home
- You have a swimming pool
- You have a teenage driver
- You own a dog
- You’re a frequent traveler
- You’re a public figure
How to buy umbrella insurance
There are a few ways you can go about purchasing an umbrella insurance policy to extend the coverage limits on your existing policies.
1. Assess the value of your assets
The point of umbrella insurance is to protect your finances and the assets that mean so much to you. But how do you determine how much your assets are worth? By calculating your net worth. That’s the value of what you own, minus what you owe. If your underlying insurance policies don’t have high enough coverage limits you run the risk of losing those assets down the line if you’re held liable for an incident whose costs exceed your current coverage.
“When shopping, consumers should add up the value of their home equity, investment accounts, second car and other property, to see if their personal worth is greater than they thought,” says Mary Boyd, president and CEO of Plymouth Rock Assurance Independent Agency Group, an insurance company based in Massachusetts. “For many people, their personal worth could be greater than the liability limits offered by their base insurance policies.”
2. Request and compare quotes from several insurance companies
Hint: you may already have an insurer who you can buy an umbrella insurance policy from. In fact, most of the major insurance companies require you to purchase umbrella insurance through them if you already have an existing policy. And, you’ll typically need to meet a certain level of coverage on those existing policies to be eligible for umbrella coverage.
However, if your insurer doesn’t offer umbrella insurance coverage, you’ll need to do a little research to find the right company and policy to meet your needs.
“The first thing you need to do is find a reputable insurer that sells umbrella policies,” says Brian Greenberg, CEO and founder at Insurist. “You can do this by looking at reviews and testimonials on the company’s website, as well as its overall reputation in the industry.”
Many insurers offer online quotes in just a few minutes. However, for the most accurate quote, you may want to consider speaking directly with an insurance agent over the phone or in person.
A few factors you’ll want to consider when shopping around and comparing quotes:
- Coverage: You’ll want to ask clear questions about what is included in your coverage and the coverage limits offered. Are the limits high enough to cover the total value of your assets?
- Premium: Ultimately, your premium may be a major deciding factor for you when considering different policies. Knowing how your premium will fit into your budget might help you better determine if a certain policy is the right one for you, or if you should keep shopping around.
- Discounts: If you’re requesting a quote from an insurer you’re already working with, ask if they offer discounts for bundling it with your existing auto, home, renters’, or boat insurance. If you’re requesting quotes from outside companies, ask if they are offering any discounts for new policyholders. Certain insurance companies may also offer discounts if you’re above a certain age, have a safe-driving record, have filed few or no claims in the past, or have a high credit score.
3. Determine how much coverage you’ll need and then apply
Once you’ve shopped around and compared quotes, you can select the insurer that offers the right coverage level for your underlying policies at the lowest premium and submit an application for a new policy. This part can also be done online, over the phone, or in person with an insurance agent.
You can expect that your application will ask you where you’re located, your personal identifying information, information about your income, assets, and existing insurance policies and their coverage limits. Gather all of these supporting documents before beginning the application process so that you can make sure that you’re providing your insurance company with the correct information.
Once your application is submitted, your insurer will process your application and you should receive formal notice of approval or denial. The amount of time this takes will depend on the insurer you’ve chosen. If you are approved, keep in mind that you will need to renew your policy, the same way you would your existing policies. And if your net worth has changed in that timeframe, you may want to reevaluate whether or not your coverage amount still meets your needs so that you’re always protected.
“Umbrella coverage can help you protect the assets that you’ve worked so hard to accumulate,” says Boyd. “While most home, auto, and watercraft policies come with some liability protection, just one lawsuit could quickly reach the limits of your policy.”