Who should think about getting an umbrella liability insurance policy, and how much does it cost? --J.S., Phoenix
CALCULATOR: How Much Umbrella Insurance Do I Need?
Most people with income, property and some savings should consider getting an umbrella policy of at least $1 million, which can protect your assets and future earnings from lawsuits. "An umbrella liability policy is one of the most overlooked but important ways to limit your financial risk," says Mari Adam, a certified financial planner in Boca Raton, Fla. The coverage kicks in if you injure someone or cause property damage and are sued for more than the liability limits on your homeowners or car insurance.
A $1 million policy can cost as little as $150 per year if you have a home, two cars and no other major risks, says Sarah Brown, an independent insurance agent in Shrewsbury, Pa. "The more exposures you have--more cars, a motorcycle, a boat, young drivers, etc.--the higher your premium," says Brown. Before you can add an umbrella, you must usually have at least $500,000 in liability coverage on your home and car insurance, which will pay out first.
If you have more than $1 million in assets, consider a larger policy. Doubling the coverage generally won't double the premiums, says Brown.
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