By definition, insurance protects you from unforeseen behaviors of people or nature – fires, floods, deaths and taxes. Yes, taxes—people with large amounts of property buy life insurance to pay estate taxes when they die, so their children and spouses don't have to make a rash decision to sell the business or assets to pay the estate tax.
But considering another form of insurance that is not common in practice is very important – a personal umbrella insurance policy.
Personal umbrella insurance protects you from excess liability claims. This is what it means. Your car, home and rental properties have specific liability insurance – property damage, theft, uninsured motorists and more. But in our litigation society, a crucial responsibility is excess responsibility. This is where umbrella insurance provides you with protection.
We assume that you rent the property to the tenant. There is a gas leak – fortunately it detects it in time and does not explode, but your tenant breathes gas. He will definitely consider suing you, except for health costs and property damage, if any. If you are found to be liable and the damage exceeds your tenant property insurance, then he can recover your other assets, even in civil cases.
A friend has a fender bender – in fact, his car just pushes another car in traffic. The two drivers got off the bus and looked at their car and agreed that there was no need to inform the police because there were no dents or marks on either car. My friend is back home, thanking his star is not so fast! Two days later, he received a call from another driver saying she suffered neck pain, whipping, and was seeking treatment from an expensive specialist. Once again, fortunately my friend, his policy ceiling does not violate health insurance. But what if it has? What if a neurosurgeon has an expensive diagnosis and treatment? My friend will fight the lawsuit and a large number of damage claims, which can only be met through his personal savings, because the car policy has been exhausted.
Unfortunately, we live in a society where lawyers, some of whom are not all, make a living by chasing ambulance claims. This includes trauma, mental injury, accident impact and other claims without any physical damage, but may cost hundreds of thousands of dollars.
A good personal umbrella policy is one of the cheapest forms of insurance to protect against catastrophic damage claims and rewards. When your specific damage policy is abandoned, they will begin to cover you.
Some experts have suggested opposing the personal umbrella policy. Their logic is that if the other party knows that you have a large umbrella coverage, they will be even more excited even if they are boring accusations. I disagree. Most practicing ambulances first act as lawyers, that is, suing, and then worry about how much they can collect. You don't want to risk personal greed and personal savings.
Then how much insurance should you have? I recommend adding the maximum coverage for all policies. Then add up your total assets. Multiply the total assets by 150%, deducting the maximum coverage, and if the result is positive, then the amount you should bear. Why 150%? Because your assets will grow over time, your maximum coverage may not. You can also give up some policies.
Keep in mind that while buying any insurance, cost is a factor, but it should not be the most important factor. Instead, look for a reputable A+ level insurance company and make sure your policy covers negligence.