In the unpredictable world we live in, accidents and unforeseen events can strike at any moment and safeguarding your financial assets is crucial. While insurance policies like auto, homeowners, and life insurance are well-known, there’s a frequently overlooked yet affordable option: umbrella insurance. 

What Is Umbrella Insurance? 

Umbrella insurance (also called excess liability insurance) provides an extra layer of protection beyond the coverage limits of your existing policies. Standard homeowners and auto insurance policies usually include liability coverage between $100,000 and $300,000. But what if you face liability beyond that? 

Umbrella insurance steps in once the primary liability coverage is exhausted, offering additional protection. Moreover, it can cover liabilities that may not be covered under your other policies. Dollar for dollar, umbrella insurance is one of the most cost-effective liability coverage options available. 

Why Is It Important? 

An umbrella policy acts as a safety net if you’re found at fault for an accident. 

For instance, while driving in a city you may encounter bikers on the road. Imagine a scenario where a biker is hit by a car and sustains severe injuries. The injured biker may file a lawsuit seeking compensation for lost wages, medical expenses, pain and suffering, and other damages. A lawsuit could easily cost you $1,000,000+.  

Beyond auto accidents, consider your beloved dog. Should your dog bite someone, you could be held legally responsible in a lawsuit. Similarly, if you host parties and someone attending your party causes damage on their way home, you could be held liable for their actions.  

There are endless ways to open yourself up to a significant liability. In today’s litigious society, an umbrella insurance policy can offer valuable protection.  

How Much Does It Cost? 

The good news is that umbrella insurance is one of the most cost-effective insurance options available. The cost starts at about $20 a month for $1 million of protection. For a cost equivalent to a few Starbucks runs, it’s definitely worth considering. 

Bottom Line 

Umbrella insurance is one of the many ways you can give yourself peace of mind financially. Review your current policies and liability limits, and consider consulting with your insurance agent or financial advisor to determine if you have adequate coverage. The more assets you have, the more coverage you should consider. 


George Maroudas

George Maroudas

Twitter @ChicagoAdvisor

Disclaimer: The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.