Is Umbrella Insurance Necessary for Homeowners?

As a homeowner in California, you likely have homeowner’s insurance to protect your home and belongings in the event of a disaster, theft, or other covered event. However, many homeowners overlook the importance of umbrella insurance to protect their financial future.

Umbrella insurance is a type of personal liability insurance that provides coverage above and beyond the limits of your other insurance policies. For example, if you are found liable for damages in a lawsuit and your homeowner’s insurance policy has a limit of $500,000, but the damages exceed that amount, your umbrella insurance may provide additional coverage up to the limit of your policy.

You know how a raincoat can keep your clothes dry when it’s raining outside? Well, umbrella insurance works in a similar way. Having an umbrella policy is like wearing an extra raincoat to protect you from getting wet, in case your first layer gets soaked through. If you have fancy clothes (aka a large net worth), an umbrella policy is critical because you have more at stake if your first layer of protection is too thin.

Umbrella coverage is extra insurance that can protect you from things if your regular insurance coverage limits are exceeded so you don’t have to pay as much out of your own pocket. After the limits on your underlying insurance policies are exhausted, your future wages, home, and other assets may be targeted. It’s always a good idea to have extra protection, just in case something unexpected happens.

Why is umbrella insurance important for homeowners in California?

1. High Cost of Living and Valuable Property: California is known for having a high cost of living. Our state is home to some of the most expensive real estate in the country and a high concentration of high-priced luxury vehicles. This means that if you are found liable for damages in a lawsuit, the potential financial damages could be significant and devastating. 
2. Litigious Environment: California is known for being a litigious state, with a high number of lawsuits filed each year. If you are sued for damages, it’s important to have adequate liability protection in place to help cover the cost of legal fees and potential damages. 

When considering umbrella insurance, it’s important to work with a knowledgeable insurance agent like the ones at Ludwig & Fawcett who can help you determine the right amount of coverage for your needs. You must consider your assets, risk factors, and potential liability exposure when choosing your coverage limit. Umbrella policies are written with limits in increments of $1M.

In order to qualify for an umbrella policy, you must maintain minimum coverage limits on all of your underlying policies. Typically, companies require a minimum of $300,000 in personal liability coverage on all property insurance policies. For vehicle policies (auto, motorcycle, RV, boat, etc.), most carriers require a minimum of $250,000 per person and $500,000 per accident for bodily injury liability and a minimum of $100,000 for property damage liability coverage. When you request an umbrella quote, it is important to advise your agent of all owned property (in or out of the state/country and partial ownership) and vehicles (cars, motorcycles, and recreational vehicles) that you own to ensure the most comprehensive coverage option is quoted.

Knowing that you have adequate protection in place can help you feel more secure in your home and in your daily life. Please reach out to us if you are interested in getting a quote for one of these peace-of-mind polices! There are stand alone and bundled options available.