An umbrella policy is a liability policy that provides coverage in excess of the liability on your existing Renters Insurance or auto coverage. Generally sold in increments of $1 million, umbrella policies are pretty inexpensive. After discussing it around the Effective Coverage office, we couldn’t come up with a single bad reason to have an umbrella policy. When might you need an umbrella on renters insurance?
If you own more assets than your current liability limits, you need an umbrella on your renters insurance. This includes everything from cars to 401(k) plans. Generally speaking, your total liability insurance needs to be equivalent to or greater than your total assets.
You have a high public profile. If you’re well known, even at just the local level, you’re a good target for someone to sue in the interest of a fast buck.
You definitely need an umbrella on renters insurance if you have inexperienced drivers in your household. First, increase your liability limits to the maximum allowed in your state. Properly written, an umbrella on your renters insurance generally covers your (or your young driver’s) liability from an accident and you against someone without insurance or without enough insurance who hits you.
If you anticipate future earnings or a future home purchase, get an umbrella on your renters insurance now. That way you’re protected from liability you incur today that could potentially impact future income or a future home purchase.
An umbrella on renters insurance is a pretty straightforward, simple policy. If you cause bodily injury or property damage to someone else, the appropriate underlying policy, such as auto or renters insurance, will respond first. When the liability limits of that policy are exhausted, then the umbrella on your renters insurance kicks in.
It’s incredibly easy to incur liability just by living your life. By way of example, everyone is aware of the huge cost of medical care today. Let’s say your child has a friend for a sleepover. The child’s friend is taking a shower and slips in the tub. He falls in such a way that water goes directly into his nose and mouth. You hear the thump and yell to ask if he is OK. By the time you realize he is not OK, the child is seriously injured from the fall and has aspirated significant amounts of water.
A few weeks in a hospital for the child can easily exhaust the $500,000 liability limit on your renters policy. From there, an umbrella policy would provide additional coverage for something that you’re liable for, though you may not have directly caused it. Without an umbrella on renters insurance in that situation, you (and your assets) would be on the hook for the difference above your liability coverage.
If you have anything at all worth protecting or think you might in the future, it’s well worth your time to consider adding an umbrella on renters insurance. Effective Coverage can help you evaluate your needs and get the right umbrella on renters insurance to make sure you’re safely covered.