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Thinking About an Umbrella

Posted August 22, 2012 in Advice Column

Many people keep an umbrella in the car or office, ready at a moment’s notice if blue skies give way to rain clouds. It’s not an act of pessimism, it’s just common sense.

Likewise, a growing trend in the insurance industry is umbrella liability coverage. Much like a regular umbrella does for rain, an umbrella policy shields its holder against liability claims that go above and beyond the limits of personal insurance policies.

For instance, liability coverage provided by a homeowners or auto insurance policy has set limits, such as $300,000. In the event you or someone in your household is liable for injuries or damages to others, you could be responsible for coming up with any excess funds if a settlement exceeded your liability limits.

That’s where an umbrella liability policy comes into play, providing excess liability coverage and potentially saving you hundreds of thousands of dollars.

You might think that such financial security would come at a high price. In fact, most umbrella policies come relatively cheaply, sometimes costing less than $200 a year for $1 million worth of coverage.

Sounds like a great deal.

But as with any great deal, consumers should consider their individual needs. If you rarely watch television or movies, you wouldn’t buy a new home entertainment system just because it was on sale. Similarly, before you rush out to insure yourself for $1 million or more simply because you can, ask yourself, “Do I really need this?”

A lot depends on your lifestyle factors. For instance, you might have a greater need for increased liability coverage if you have a swimming pool or trampoline on your property, as those items are potentially dangerous and could result in huge lawsuits if a guest of yours is injured.

On the other hand, some people do not have the same risk factors for large claims against them.

In the end, it is each individual’s decision whether an umbrella policy is a wise investment. Your insurance agent can help you identify your risk factors, but the decision is yours.

Information provided by Rebecca Evers, agent, American Family Insurance, 209 E. State St., Centerville, 437-4143.





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