The average driver assumes that having car insurance on their vehicle is enough to protect them in the case of any accident. However, approximately 13% of liability claims from auto accidents are worth over $1 million, far above the threshold of most insurance plans.
Although 13% may not seem to be a high percentage of claims, it is important to note that certain classes of drivers tend to make up the group of people dealing with such high numbers.
What is An Umbrella Policy?
An umbrella policy is coverage which pays for much higher auto or homeowner’s insurance claims – usually anywhere from $1 million to $5 million – and protects you from freak accidents or major incidents.
Who Should Consider an Umbrella Policy?
There are some categories of drivers who run a much higher risk of seeing expensive claims. Commuters should consider an umbrella policy, as they are on the road daily, and are in close proximity to thousands of other drivers every day. Carpoolers have people not related to them in their vehicle, and run a greater risk of a large lawsuit should something occur. Both stand a greater chance of being found liable in an accident involving others.
Drivers who have many assets, such as business owners, or those with multiple homes, cars, or investments should also consider this type of coverage, as they are often targeted for higher claims if a victim finds out that they have a higher net worth.
Think About It: You may not think twice about driving your friends children to Little League practice, or to dance class. But if you routinely have other people’s children in your car, an umbrella policy is strongly recommended.
How Does an Umbrella Policy Work with my Car Insurance?
The two parts of your car insurance coverage which are most related to the need for an umbrella policy are Bodily Injury Liability and Property Damage Liability. These components of auto insurance deal exclusively with liability, and are in place in order to pay for the cost of damage or injury inflicted upon others by your actions. An umbrella policy is designed to cover you when your bodily injury and property damage limits are not sufficient to cover the damages.
For instance, if you are found liable for a multi-car accident, the cumulative damages could reach well into the millions of dollars. Bodily injury and property damage policies usually cover approximately $500,000 apiece. Any claims over and above these limits would be your out-of-pocket responsibility, which could be financially devastating.
Do I Qualify for an Umbrella Policy?
With a few exceptions, everyone should be able to obtain an umbrella policy. (Many companies will require you to have both homeowners insurance and auto insurance with them in order to qualify.)
Nationwide, the cost of an umbrella policy averages about $100 annually per million dollars of coverage – but there are many variables which can double or triple that number. Your age, region of residence, your career, your driving record, and even your credit score may be considered, depending on your insurance company’s parameters. Also, your coverage limits for your other policies may need to be adjusted.
If you fall into one of the categories listed above and would like greater protection against the unexpected, speak to your local insurance agent regarding a free quote. You may be surprised at just how affordable peace of mind can be.
Anderson & Associates Insurance Group is proud to offer comprehensive coverage to Sarasota and Bradenton area families. Whether you need health, auto, homeowner’s or business insurance – we’ve got you covered.
