Do You Really Need an Umbrella Insurance Policy?
You may have good auto and homeowners insurance, but one serious accident can create damages that go far beyond the liability limits on those policies.
That is where umbrella insurance comes in.
An umbrella policy provides an additional layer of liability protection above policies such as your auto or homeowners insurance when a covered claim exceeds those underlying limits.
One Accident Can Go Beyond Your Auto Insurance
Imagine you cause a serious accident involving several people.
Medical treatment, lost wages, rehabilitation, and other damages eventually total $750,000.
Your auto insurance provides $250,000 of liability coverage.
Once that $250,000 limit is exhausted, there could still be $500,000 in damages for which you may be legally responsible.
If you had a $1 million umbrella policy that applied to the loss, it could provide another layer of liability coverage above your auto policy, subject to the umbrella policy’s limits, terms, and exclusions.
Without that protection, the financial consequences could extend far beyond the accident itself.
“I Don’t Have a Million Dollars. Why Would I Need a Million-Dollar Policy?”
This is one of the biggest misconceptions about umbrella insurance.
You do not need to have $1 million sitting in a bank account to be exposed to a large liability judgment.
Imagine a court determines that you owe hundreds of thousands of dollars beyond what your insurance pays.
The issue may not stop with the money you have in savings today. In Utah, creditors with a judgment can potentially use tools such as bank-account garnishment, execution against certain non-exempt property, and continuing wage garnishment to collect money that is legally owed. Utah law limits how much of a person’s disposable earnings can generally be garnished, but a judgment can still affect future paychecks.
That means your future income can be something worth protecting too.
You may want additional liability protection if you:
Own a home
Have savings or investments
Earn an income
Have a teenage driver
Own rental property
Have a pool, trampoline, or dog
Simply want another layer between a major lawsuit and your personal finances
Umbrella insurance should not only be thought of as insurance for wealthy people. It is protection against the financial consequences of a liability claim that exceeds the coverage you already have.
Your Home Can Create Liability Too
Umbrella insurance is not only about car accidents.
Imagine someone is seriously injured on your property and you are found legally responsible.
Your homeowners insurance provides personal liability protection, but only up to the policy’s applicable limit. If a covered liability claim exceeds that limit, an umbrella policy may provide additional protection.
Think of your liability insurance in layers.
Your auto and homeowners policies provide the first layer.
The umbrella sits above them.
For example:
Auto liability limit: $250,000
Covered liability claim: $600,000
Amount above the auto limit: $350,000
If the claim qualifies, the umbrella policy may provide coverage for that amount above the underlying auto limit, subject to its own terms and limits. Umbrella insurers generally require certain minimum liability limits on the underlying policies.
When deciding whether you need umbrella insurance, do not only ask:
“How much money do I have right now?”
Instead ask:
“What could I lose financially if I caused a serious accident or was responsible for a major liability claim?”
Your home, savings, investments, and future earnings may all be important parts of that conversation.
At Tommy Thomsen Insurance, we can review your existing auto and homeowners liability limits and show you how an umbrella policy could add another layer of protection.
Let’s Review Your Liability Protection
A serious accident can create financial consequences that last much longer than the accident itself.
Request an insurance review through our website or call Tommy Thomsen Insurance at 801-982-7200.
We will explain how umbrella insurance works, review your current liability limits, and help you determine the amount of additional protection that fits your situation.
This article provides general insurance information and is not legal or financial advice. Garnishment and collection laws include limitations and exemptions. Umbrella coverage, underlying limit requirements, exclusions, premiums, and claim payments vary by insurer, policy, and circumstances.