Our clients naturally wonder if they have the right amount of coverage. We’re often asked if the current amounts are enough or too much. The answer is “that depends”. We’re not being difficult. It’s just that there’s no single answer for everyone.
How much coverage you need is very specific to your individual circumstances. When you are insuring against”loss”, “damage” or “harm”, you’re insuring against not only your own losses but losses suffered by others and for which you might be held liable.
From that perspective, factors such as your age, liquidity, your asset base, and net worth will influence the amounts of coverage you should arrange.
Similarly, there are a number of risk factors that need to be evaluated. Do you have a pool or trampoline? These are things that are associated with risk themselves but also may attract groups of kids to your house. Do you have young drivers in your house? What is your ability to handle loss if you were in an accident with an uninsured driver (yes, they are out there)? This is important since, in such a situation, you’d need to rely on your own coverage and the umbrella provides a higher limit for your own benefit, too.
Generally, if you have a higher net worth or have additional risk factors, you’d want to arrange increased coverage.
When we refer to “Liability Limits”, these are the specified limits for an underlying policy – an auto or home policy – which covers up to a particular amount for covered incidents.
“Umbrella policies provide coverage for losses above the limit of an underlying policy (or policies). “While an umbrella applies to losses over the dollar amount in the underlying policies, terms of coverage are sometimes broader than those of underlying policies”, according to the AM Best website.
In the context of insurance coverage, “Umbrella” policies and higher limits of liability protect you to a greater extent if there’s ever an incident – in your car or home, anywhere that you’d be liable.
Finally, arranging for additional coverage in the form of increased limits or an umbrella policy, is fairly inexpensive relative to the cost of the coverage you’re already paying for. They tend to be good value and are options that you’ll want to discuss with us.
