• SDL Insurance Solutions

Umbrella Insurance 101

Updated: Apr 23, 2019

How do you know if an umbrella policy is right for you?



What is an Umbrella Policy?


An umbrella policy is a supplemental form of liability insurance that goes above and beyond what your basic liability policies would typically cover. An umbrella policy covers a much higher loss limit, and is meant to protect your assets in the event of an unforeseen accident or lawsuit in which you could be held responsible for damages to someone’s body or property.



Who Needs an Umbrella Policy?


At SDL Insurance Solutions we believe that everyone should carry an umbrella policy. Beyond personal property like a home, car or boat, your investments, retirement savings, and even future earnings and inheritance are all considered assets that can be exposed in the event of a lawsuit. People also tend to be exposed to more risks than they are aware of. ACE Private Risk Services has developed a Personal Liability Risk Scorecard to help you determine just how many risk factors are at play in your life.


One mistake or unanticipated accident shouldn’t mean total financial devastation, and that is precisely why we recommend protecting your assets, both large and small, with an umbrella policy.


How Much Umbrella Insurance is Recommended?


The Personal Liability Risk Scorecard above is a great place to start to determine how much coverage you should carry. When approaching your agent about an umbrella policy, you should be sure to discuss your current risk factors, the value of your physical and financial assets, and your future earning potential.


Umbrella policies are typically sold with $1 million minimum in coverage. That may sound like a lot, but liability claims can add up fast, especially when there are medical or legal fees associated. You may currently be struggling financially while putting yourself through law school, but what will your life look like ten years from now? Discussing these factors with your agent is the best way to determine how much umbrella insurance you should carry.


Umbrella Policies in Action


Your umbrella policy can cover anything from dog bites to auto accidents and from a slip on a wet floor to a fall off a trampoline. Let’s look at a case study of how an umbrella policy might work to protect you in the event of an accident.


Your seventeen-year-old son has been in an auto accident in which he is at fault. There were two other vehicles involved with six passengers between them. There are some critical injuries, and each of the six passengers requires some form of treatment for medical problems ranging from head trauma to a broken wrist. You do carry auto insurance, but the bodily injury limit on your policy is capped at $250,000 /500,000 which is considered good coverage. Unfortunately for you the total cost of the medical care for the six passengers totals over $800,000. Your auto policy will cover what it is meant to at the $500,000 limit, but what about the other $300,000? If you don’t have an umbrella policy, the financial burden could fall on your shoulders in the form of a judgement against your current assets or possibly future earnings.


Can you put a price on peace of mind? A typical 1 million umbrella is very affordable. To discuss a new umbrella policy or set up a review of your existing policy, call SDL Insurance Solutions at 224-241-8646 or submit a request on our website.

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