Umbrella Policy 101

by Kristin Smith

You’ve probably heard the term “umbrella policy,” at some point. It’s often used in serious meetings with people that want to talk about your money and your future. If you’re anything like me, you’ve either ignored it, or assumed it was meant for people in the mansion + vacation home + yacht income bracket.

Lately though, this term seems to be following me around. Whether it’s because I just turned 40, I work in the insurance industry, or both; I decided that it was time to get the lowdown on what an umbrella policy really is, and why I might need one. For that, I turned to the pros that see these policies in action on a regular basis, Financial Representatives, Randy Van Fossan and Jim Scruggs.* Here’s what I learned.

What is an umbrella policy? 

Randy: An umbrella policy protects the income that you have coming in, as well as the assets that you’ve accumulated. The umbrella stretches over your home and auto policies and covers any monetary risk that may exceed those policy liability limits.

Jim: I recommend that you have umbrella coverage equal to your net worth. It’s a good way to ensure that you are protected in case you find yourself in a situation where your umbrella policy is needed.

Does that mean the home and auto liability coverage I already have isn’t enough?

Randy: The coverages you get today for bodily and personal injury in your home and auto policies are much better than they were in the past however; what would happen if you were involved in a major accident, with injuries, and you were at fault? Those coverages most likely wouldn’t be enough to protect you from the damages awarded to the injured party.

Bad things can still happen to careful people. If you are involved in an accident where you’re at fault and someone is severely injured, you’d want to do what you can to make them as financially whole as possible.

Jim: For example, I have a client whose family member was at fault for a severe accident. We had increased their umbrella the year before the accident occurred and that was the only reason they were able to keep their property and pay for the damages incurred from the accident. To this day, they still thank me profusely for making a point to discuss the benefit of an umbrella policy. 

Umbrella policies pay out millions of dollars, right? The premiums must be high.

Jim: Believe it or not, it’s the opposite. The cost for $1m of liability coverage could be as little as $20/month.

Randy: The instrument of the umbrella policy is an extraordinary way to protect your assets and address your moral responsibility in the event of a catastrophic loss, at a reasonable price.

There you have it, an umbrella policy helps you weather the storms of life (yep, I went there). Thanks to Randy and Jim, I will no longer zone out when the topic of umbrella policies come up in serious conversations about my money and my future.

*Special thanks to Randy and Jim for offering their time, expertise, and kindness for this article. 

“Think about the darkest night in your life. How are you going to get the sun to come up in the morning? An umbrella policy, that’s how.” ~Randy Van Fossan
“My passion is taking care of my clients. Making sure they have an umbrella policy in place is one way I can do that.” ~Jim Scruggs

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COUNTRY Financial® is the marketing name for the COUNTRY Financial family of affiliated companies (collectively, COUNTRY), which include COUNTRY Life Insurance Company®, COUNTRY Mutual Insurance Company®, and their respective subsidiaries, located in Bloomington, Illinois.

Umbrella insurance policies issued by COUNTRY Mutual Insurance Company® and COUNTRY Casualty Insurance Company®, Bloomington, IL.

This is not a statement of contract. For a complete description of all coverages, options, exclusions, and limitations, please refer to the policy.  Rates and coverages may vary by state. Please note that the information shown above is general. Policies are individually underwritten and there may be other factors and underwriting guidelines that affect the coverage on amount due.