Have you thought of the all potential risk you are exposed to? If you hold a party and one of your guest falls down your stairs and is seriously injured. Maybe your daughter is involved in a car accident where people are fatally injured. There are many areas we are exposed to on a daily basis. Unfortunately, with our litigious society it is possible a law suit will come and damages will go above what your insurance coverage allows.

La chica de la bici / The Girl on bike
Juan José Aza via Compfight

Do you think you are properly covered for an accident? An excellent way to protect against car or home accidents is by using an umbrella policy. Below we will look at the benefits of an umbrella policy, when you should use one and what type of cost is involved.

The starting place to determine if an umbrella policy is needed is to look at all of your assets. This includes cash, stock, bonds, equity and retirement funds. Once we have an understanding of our level of assets we can easily see the level of exposure we have.

The way an umbrella policy works is you are provided additional coverage beyond your existing policies. For instance, if your home insurance goes up to 300k and your auto insurance extends to 500k an umbrella policy will provide coverage above both these limits.

The starting place for most umbrella policies is in $1 million increments. So a $1m Umbrella policy will provide home insurance coverage up to $1.3M and auto insurance coverage up to $1.5M. We all know how hard we worked building our assets, the peace of mind an umbrella policy provides should be an addition we all look to make at some point in our lives.

The main benefit an umbrella policy will provide is additional protection that your auto and homeowners policies are not in the position to provide. It is also a good idea to review your existing coverage levels and low cost auto insurance strategies as you start to analyze an umbrella policy.

When should you look to add an umbrella policy? As your net worth gets close to your current maximum liability limits it will be a good time to start looking for an umbrella policy. If an accident were to happen, you could be liable for the amount of assets you hold if damages go beyond your existing liability limit. In addition, if damages are proven beyond your coverage limits it is possible the court will award a portion of your future earnings in a settlement.

Another good time an umbrella policy makes sense is when you have inherited money. A quick increase in your net worth can also leave you with assets that are not protected. An umbrella policy is an excellent investment in protecting and providing peace of mind your assets will always be safe. Typically, the cost of buying an umbrella policy only runs about $200-$300 per year or less than $25 on a month to month basis.

Tom Richards is a risk management specialist who provides tips on finding the right car insurance protection at Cheap Car Insurance Outlet.

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