How Much Umbrella Insurance Coverage for me?

Dear Insurance Adviser,

How do I decide how much coverage to buy in my umbrella insurance policy? What is the logic?


Dear Bedo,

When people think of umbrella insurance, they think of policies that will cover them against large lawsuits that exceed their auto insurance liability limits for car accidents or their home insurance liability limits for home injuries.

But an umbrella policy is much more than extra coverage. The better policies protect you from lawsuits related to activities that aren't covered by automobile or homeowners policies. Those activities might involve vacation rentals of boats, jet skis, snowmobiles or other recreational vehicles. The policies also might cover liability assumed in contracts, such as a wedding reception contract in which you agree to be responsible for any injuries to guests, even if you don't cause those injuries. A good umbrella policy can cover these and many more liability risks for which you may not have coverage under your automobile or home insurance policy.

A personal umbrella insurance policy is by far the best buy in the insurance business. A $1 million policy will cost you between $150 and $200 a year. Where else can you buy $1 million worth of anything for that price? Each additional million dollars' worth of coverage will cost you about $100 a year. For that little amount of money, you can afford to be well-protected.

You asked for guidance on how much umbrella liability coverage to buy. Considering the bargain price, buy $1 million more than you think you'll need. Just as important, make sure to buy an umbrella policy that covers the liability insurance gaps in your personal life. An insurance agent who really knows the coverage idiosyncrasies of umbrella policies can identify those activities in your life that are not already covered and help you select an umbrella insurance policy that will protect you from potentially uninsured lawsuits.

Good luck!

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