Umbrella Liability: Why You Need It

When I got started in the insurance industry, I was fortunate to land a large real estate account.  The owners were two brothers in their mid-seventies at the time who were certified billionaires.  I can still recall one of them remarking to me, “The funny thing about insurance is that those who need it cannot afford it; and those who can afford it, do not need it.”  He had a great understanding of risk transfer and macro insurance ideas and those words have stuck with me.

What is umbrella coverage?  Many people think confuse blanket coverage and umbrella coverage.  Umbrella liability is simple excess liability coverage.  By having it you extend your liability limits for underlying policies (for personal lines that would be home and auto).  So, if you have $300,000 underlying auto insurance liability + a $1,000,000 umbrella, you have a total of $1,300,000.  It is referred to as an umbrella, because like an umbrella that extends outwards on top, it can sit (and extend liability) over various underlying policies i.e. home, auto, boat, plane, etc.

Why do you need it?  If you have personal assets, they are at risk.  An umbrella policy is often the most cost-effective way to protect your nest egg assets you worked so hard to accumulate.  A $1,000,000 umbrella policy can cost as low as a few hundred dollars.  So many people who diligently work hard and save/paying off their mortgage/invest their extra cash are exposed.

They are exposed by having insufficient underlying liability limits.  For example, someone has low auto liability limits and thinks they are squared away as they have better limits on their home.  They were led to believe by the auto insurance company they bought coverage from online that they have full coverage when in fact their limits are $100,000/$300,000/$50,000.

They get into an accident with a three-car pileup deemed their fault.  Their online insurance company pays the $50,000 and hands them the bill for several hundred thousand more.

The concept of insurance is transferring a financial risk you cannot afford to sustain.  If you are like my friends at the beginning of this article who could easily afford to sustain a loss, perhaps you do not need to transfer this risk.  However, if you are like most of us you do.  An umbrella policy is a cost-effective tool you should be using.

Call me directly to get a Miami umbrella insurance quote at (561) 287-6279.