DO I NEED AN UMBRELLA POLICY?
Do I need an umbrella policy?
The short answer is...YES!
An umbrella policy is an insurance policy that provides insurance coverage over and above your liability coverage like an umbrella provides protection over and above your body.
In plain English, liability coverage is the car insurance you have that protects you if you cause an accident (or technically protects the person you hit...).
This insurance policy would pay for the bodily injury and property damage of the person you injure instead of YOU having to pay for it out-of-pocket.
In Louisiana, the minimum coverage limits are 15-30-25, which as we discussed here, could leave many drivers on the hook for a lot of money should they cause a major accident.
If you caused aa wreck that resulted in $200,000 worth of bodily injury, but your liability policy only covers $50,000 of bodily injury, that means your insurance policy is not obligated to pay the remaining $150,000.
So who is responsible for that?
Well, you are.
That's where having an umbrella policy could be valuable. It provides an extra layer of coverage that goes beyond what your liability policy covers.
WHY NOT JUST INCREASE MY LIABILITY COVERAGE?
You may be wondering why you would get another policy instead of simply increasing your liability coverage.
In my personal experience, I have found that it costs a lot less to get an umbrella policy than it does to increase my liability coverage. Additionally, the umbrella policy usually provides a lot more coverage than simply increasing my liability coverage would.
It's important to note that your insurance company may require you to buy a minimum amount of liability insurance before you can buy an umbrella policy, which makes sense from the insurance company's standpoint.
HOW MUCH DOES AN UMBRELLA POLICY COST?
Umbrella policies usually start at $1 million in coverage and increase in $1 million increments after that. An umbrella policy typically costs between $150 and $300 a year, which breaks down to about $13 to $25 a month.
So for less than it costs to take your family to dinner, you can buy yourself a whole lot of peace of mind knowing that your finances will be more secure in case you cause a wreck.
So the bottom line is…an umbrella policy is a relatively cheap way to make sure you have plenty of coverage to protect yourself financially in the event of a costly accident that is your fault.