How to buy umbrella insurance
The insurance protects you in the event of an accident. But there’s a cap on the 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’s 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 buying a policy looks like. We’ll break it down for you.
What is umbrella insurance?
Umbrella insurance is essentially insurance for your insurance. It provides you with additional liability coverage in case you reach the coverage limit of your existing home, auto, boat or renters insurance policies. Policies typically range between $1 million and $5 million in additional coverage, and experts say average premiums are between $200 and $300 per year.
When you might need umbrella insurance
Umbrella insurance can come in handy whenever you are faced with an incident that could have serious financial fallout. Suppose you invite a friend over and they get hurt on your property, or you accidentally hit someone’s car while driving, both of these cases could lead to serious injuries and expensive medical bills for which you would be held liable. Your net worth, household composition, and general lifestyle can all be deciding factors in determining whether or not umbrella insurance is right for you.
You may want to consider adding an umbrella insurance policy to your existing coverage if:
- You have a high net worth
- You own one or more properties, including rental properties
- You often have visitors in your home
- Do you have a swimming pool
- You have a young driver
- You own a dog
- You are a great traveler
- You are a public figure
How to buy umbrella insurance
There are several ways to purchase an umbrella insurance policy to extend the coverage limits of your existing policies.
1. Assess the value of your assets
The purpose of umbrella insurance is to protect your finances and the assets that matter so much to you. But how do you determine how much your assets are worth? By calculating your net worth. It’s the value of what you own minus what you owe. If your underlying insurance policies do not have high enough coverage limits, you run the risk of losing those assets if you are held responsible for an incident whose costs exceed your current coverage.
“When shopping, consumers have to add up the value of their home equity, investment accounts, second car and other possessions, to see if their personal value is higher than they thought. “says Mary Boyd, President and CEO of Plymouth Rock Assurance Independent Agency. Group, a Massachusetts-based insurance company. “For many people, their personal value could exceed the liability limits offered by their basic insurance policies.”
2. Request and compare quotes from several insurance companies
Tip: You may already have an insurer that you can purchase umbrella insurance from. In fact, most major insurance companies require you to purchase umbrella insurance through them if you already have an existing policy. And, you will usually need to achieve a certain level of coverage on these existing policies to be eligible for umbrella coverage.
However, if your insurer doesn’t offer umbrella insurance coverage, you’ll need to do some 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 of Insurist. “You can do this by checking out the reviews and testimonials on the company’s website, as well as their overall reputation in the industry.”
Many insurers offer quotes online in just a few minutes. However, to get the most accurate quote, you may consider speaking directly with an insurance agent over the phone or in person.
Here are some factors to consider when shopping around and comparing quotes:
- Cover: You will 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?
- Prime: Ultimately, your premium can be a deciding factor for you when considering different policies. Knowing how your premium will fit into your budget could help you better determine if a certain policy is right for you, or if you should keep shopping around.
- Discounts: If you’re asking an insurer you already work with for a quote, ask if they offer discounts for bundling it with your existing auto, home, renter, or boat insurance. If you get quotes from outside companies, ask if they offer discounts to new policyholders. Some insurance companies may also offer discounts if you are over 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 the amount of coverage you will need, then apply
Once you’ve shopped around and compared quotes, you can select the insurer that offers the right level of cover for your underlying policies at the lowest premium and submit a request for a new policy. This part can also be done online, over the phone, or in person with an insurance agent.
You can expect your application to ask where you are, your personal identification 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 to ensure that you are providing the correct information to your insurance company.
Once your application has been submitted, your insurer will process your application and you should receive a formal notice of approval or denial. The time this will take will depend on the insurer you have chosen. If you are approved, keep in mind that you will need to renew your policy, just as you would your existing policies. And if your net worth has changed during that time, you might want to reassess whether your coverage amount still meets your needs so you’re still protected.
“Umbrella coverage can help protect the assets you’ve worked so hard to accumulate,” says Boyd. “While most home, auto and watercraft insurance policies come with some liability protection, a single lawsuit could quickly stretch your policy limits.”