Is An Umbrella Policy A Waste Of Money? Debunking The Myths

You know that famous line: Nothing is certain in life except death and taxes. Here at Marble, we’d add one additional truth: if it exists, it can be insured! On that one hand, that’s great: it means you can protect everything from your body to your Bentley. On the other hand, it might leave you wondering how much insurance is too much insurance. That is, at what point are you just making your insurance provider wealthier and your bank account, well, a little less than?

That’s often the question that folks have when it comes to umbrella insurance. Is it just some random policy with high premiums and low payoff? Or is it a financial lifeline that’s actually relatively affordable?

In this article, we’ll break down some of the common misconceptions surrounding umbrella policies and get down to the facts. After all, umbrella insurance’s liability coverage offers a ton of financial protection that can keep you financially solvent and safe — so it’s worth knowing more about!

What is an Umbrella Insurance Policy?

Umbrella insurance is intended to protect you from all kinds of stormy weather (sorry, we couldn’t resist the pun!). It’s a unique excess policy that offers extra protection when a standard policy isn’t enough. 

It’s often easiest to understand when umbrella insurance comes in handy by looking at an example. So let’s say you’re in a big car accident, and the insurance companies have determined you’re at fault. The other driver and passengers were injured, plus there’s a whole heck of a lot of property damage. Before you know it, you’ve maxed out the liability limits on your auto insurance policy. 

Now, understandably, the other party wants you to pay for all outstanding bills (medical and otherwise), which puts you on the hook for a lot of money. In fact, it might mean that your assets will need to be liquidated to make those payments. Talk about a worst-case scenario.

But here’s the good news: you were thinking ahead and you purchased an umbrella policy with sky-high coverage limits years ago. Now, your umbrella policy will step in to cover the rest of the bills associated with your car accident. 

Is an Umbrella Policy a Waste of Money? 

There’s no guarantee you’ll be in an accident like the one outlined above, but also, who’s to say you won’t? We aren’t in the business of fortune telling over here, and in fact, that’s kind of the whole point of insurance — no one can predict the future.

That said, some people may benefit more from having extra liability protection with high policy limits:

• Public figures who risk defamation suits and high legal fees
• Landlords
• Homeowners

And if you don’t fall into one of the categories above, you still might want an umbrella policy if any of the below scenarios are true for you: 

• You’re a dog owner
• You have a trampoline or swimming pool on your property
• You play group sports
• You’re a parent of teenagers

Truth be told, there are hundreds of situations where an umbrella policy could make the difference between stability and financial ruin. 

Common Myths About Umbrella Policies

Despite the fact that umbrella policies can come in handy in a number of scenarios, most people still have concerns as to whether this coverage really makes sense for them. Here are some myths people worry about — and the reality:

• A standard policy already provides the same level or more protection: You should always have standard, also known as traditional, policies in place. From home insurance to auto insurance, these policies are absolutely vital. That said, they almost never provide the same coverage as an umbrella policy. In fact, they have much lower limits — which means in the case of a bad accident, you’ll quickly blow through your standard coverage.
• It’s too expensive: In reality, an umbrella policy is pretty affordable. How much does it usually cost? About $200 to $400 per year, which isn’t bad! 
• It’s only available to the wealthy: Not true at all! Most individuals can take out an umbrella insurance policy, and it’s in no way restricted to the uber-rich. 
• You can’t have traditional insurance and excess liability coverage: You can, and, when applicable, should have both. Investigate existing policy details to ensure the two are compatible.  
• It only covers fancy jewelry: This is an odd myth, especially since umbrella insurance doesn’t cover personal property. For that, look to your renters or homeowners policy (or coverage specifically designed for jewelry). 

The Real Benefits of an Umbrella Policy

According to Forrest Gump, life is like a box of chocolates, and you never know what’s coming next. That can make life fun, and it can also make it unpredictable, for better or for worse. Since we can’t know what’s coming in the future, umbrella policies provide excess coverage that can make a huge difference in keeping our finances protected.

Here are some of the particular benefits of umbrella insurance:

• Increased liability protection
• Coverage for legal expenses
• Protection against various events not covered by a standard policy
• Coverage for damage caused by a child
• Coverage for slander
• Coverage for libel 
• Coverage for false arrest, imprisonment, or detention
• Coverage for malicious prosecution
• Coverage for mental anguish or shock

Umbrella policy limits typically start at $1 million and go all the way up to $5 million — and the typical policyholder will pay around $40 per month for all that coverage. That’s a ton of extra coverage for not much money. 

A basic umbrella policy should offer enough coverage if your net worth is less than $1 million; if it’s more than that, you’ll want to work with an agent to get enough coverage for all your assets.

Don’t Get Caught Without Coverage – Safeguard Your Future With Marble

Have we got you convinced? We hope so! And when you’re ready to shop for an umbrella policy, Marble can help you browse coverage, compare quotes, and store your policy documents — all while earning rewards. Sign up today!