Don't think you need an umbrella policy because you're not wealthy or have a lot of assets? Well, if any of the following applies to you, you may want to reconsider:
The fact is an umbrella policy is a good idea for most individuals these days given the nominal cost and the greatly increased protection that one can provide. Anyone who's been in a legal dispute or in the hospital for any length of time knows that it can be very expensive. Should a serious accident occur, the costs for medical, legal and other related expenses can quickly surpass the average home or auto policy's limits.
The protection of an umbrella insurance policy is two fold; it provides needed coverage if you are found at fault in an accident AND it can provide coverage if you are injured and the party at fault is underinsured or has no insurance.
In a serious accident, whether your fault or that of another party, without proper coverage, your retirement funds, investments, future earnings and even your home are at stake. If you have an umbrella policy, once you have exhausted your standard insurance funds and/or those of the party at fault, the umbrella insurance can provide additional coverage.
For as little as a couple hundred dollars a year, an umbrella policy can provide millions of dollars in additional insurance coverage. Here are a few examples of how an umbrella policy may work:
Let's say you are found at fault in a serious car accident where the injured party's legal and medical expenses end up costing $500,000. With your standard auto insurance only covering $300,000 per accident, your umbrella policy will kick in to cover the additional $200,000.
A second example of the value of having an umbrella policy is if you're seriously injured and the at-fault person has insufficient insurance coverage. An umbrella policy can provide additional coverage above and beyond what the at-fault person has in insurance coverage. Under Wisconsin law, the minimum amount of insurance coverage for automobiles is $25,000. Unfortunately, too many people purchase the minimum amount of coverage. Consequently, a person with a significant injury would likely receive no compensation for pain and suffering and/or lost wages unless they had purchased a comprehensive umbrella policy that provided coverage for the negligent acts of others.
Each insurance company and umbrella policy may differ, but in general, for the amount of protection provided, an umbrella policy is a good idea for many people.
Some points to consider: