The Benefits of Umbrella Insurance: Why Extra Coverage is a Smart Move

EVA
All right, so today we’re diving into something that I think a lot of people kind of gloss over. You know, it’s this thing called umbrella insurance. And I feel like it’s one of those things like you’ve heard of it, you probably even at some point thought, I wonder if I need that. But then it’s like, next we’re moving on to other things.

MAX
Right, it gets put on the back burner.

EVA
Yes. So we are taking it off the back burner. We’re diving deep and spoiler alert, it might be way more important and way more affordable than a lot of us think.

MAX
Absolutely. You’re definitely right about that. It’s one of those things that I think a lot of people maybe aren’t aware of or maybe they don’t think they need it, but it can really make a huge difference when it comes to, you know, protecting your financial future.

EVA
OK, so first things first, elevator pitch. What is umbrella insurance in a nutshell?

MAX
So imagine this. You’re in a Fender Bender, somebody gets hurt, and they sue you, and they sue you for an amount that is beyond your car insurance limits. Yeah, that’s where umbrella Insurance kind of swoops in like a superhero and covers those costs above and beyond your other policies to kind of protect your assets that you’ve worked so hard.

EVA
For OK, so it’s like that extra layer of protection just in case things go like really, really S exactly. But it’s not just for car accidents, right ’cause I know in the research we were looking at like dog bites, somebody tripping and falling on your property. It seems to cover like a lot of stuff like oops moments.

MAX
Exactly. Yeah, it’s anything liability, really. So any time that you could be held responsible for somebody else’s injuries or, you know, damages, that’s when umbrella insurance would come into play.

EVA
So it really is about Peace of Mind I guess because life is unpredictable. Like you just never know. So who should be seriously considering this type of coverage? Is this just for like the Super wealthy?

MAX
Not at all. And I think you might be surprised to learn how many people actually would benefit from having umbrella insurance. If you own a home, if you have savings or investments even, you know, a decent salary, you have things to protect, right? So I always think of it as like, OK, imagine somebody sues you for, you know, a significant amount of money. What would be at stake for you? And I think that’s a good starting point kind of to think about, you know, do I need this type of coverage?

EVA
That’s a really good way to frame it, because it’s not even necessarily about how much you have, it’s just about rotecting what you’ve worked for, whatever that is.

MAX
Exactly, exactly. And, you know, one of the scenarios that I think really hits home for a lot of people is like, what happens if a teenager in your household causes a serious accident?

EVA
Right.

MAX
Those liabilities can be huge, and you know, umbrella insurance can literally be the difference between keeping your home or losing it in some cases.

EVA
Oh, wow, OK, Mic drop moment for sure. Because that’s, I feel like a lot of times we think about it like protecting our stuff, but it’s really protecting your family’s future. Absolutely. That’s a really good point.

MAX
Yeah. And I think it’s important to remember too, that, you know, it’s not just protecting the assets that you have today, but it’s protecting future earnings as well because those could be at risk in lawsuit. So, you know, if you have a high earning potential, you know, that’s something to consider as well as maybe having, you know, even more coverage.

EVA
I never thought about it that way. That’s a really good point. So it’s not just about like right now, this is about like your earning power going forward. OK, wow, so the why is making a lot of sense. Good. Let’s talk about the logistics, then say someone’s listening. They’re like, OK, sold. I need one of these magical umbrellas, right? What’s step one?

MAX
So step one is you’d want to reach out to your insurance agent and they’re going to want to know about your existing coverage. So you know your car insurance, your homeowners or renter’s insurance because your umbrella policy kind of needs a foundation to build on.

EVA
So you can’t just be like, skip all that, give me the umbrella. You got to have those other things in place.

MAX
Exactly, exactly. Most umbrella policies are going to require you have a certain amount of liability coverage on those other policies first.

EVA
OK.

MAX
So you kind of think of it as like making sure you have like, you know, strong walls before you put the roof on the House.

EVA
Yeah. Gotcha. OK.

MAX
These kind of work in tandem.

EVA
So that’s actually really important because I think some people listening might think like, oh, I can just go get this umbrella policy, it’ll be fine. But you’re saying you have to make sure your other things are like up to a certain standard first.

MAX
Exactly. You’ve got to have that base level of protection 1st and then you add the umbrella on top of it.

EVA
So before you even start shopping, you got to make sure that what you’ve got is solid, yes. Otherwise, it’s like trying to order dessert before you’ve even had dinner.

MAX
Exactly. You’ve got to have that foundation. It’s a really good way to look at it. Yeah. That foundation, yeah, must to be strong.

EVA
Once you’ve got the foundation, how do you figure out how much of this umbrella you need? Like $1,000,000 sounds like a lot, but is that enough umbrella?

MAX
That’s a great question, yeah. And there’s no like one-size-fits-all answer, right? It really depends on your situation, but I think a good rule of thumb is to think about your net worth, OK? O you know, add U the value of your home, your savings, your investments, OK. And that kind of gives you a ballpark figure for what you need to protect. OK. And then you can always, you know, fine tune that number with your insurance agent.

EVA
So it’s like, what would be financially devastating to lose if, God forbid, you were found liable for something?

MAX
Exactly, exactly. And here’s something else that I think people maybe don’t consider. Yeah, future earnings.

EVA
Interesting.

MAX
So like, if you’re somebody who has a very, you know, high earning potential, you might want to consider even more coverage. Oh, wow. Because, you know, that’s.

EVA
Thought about that.

MAX
That’s income that could potentially be at risk as well.

EVA
Yeah, yeah. So it’s not just what you have, but it’s what you could earn going forward.

MAX
Exactly, because it’s all about mitigating risk.

EVA
Right, right.

MAX
And you know, nobody wants to think about the worst case scenario happening.

EVA
Of course not.

MAX
But that’s what insurance is for. That’s what.

EVA
It’s there for.

MAX
Exactly, exactly to.

EVA
Protect us.

MAX
Hope for the best, but prepare for the worst, I guess. Right, exactly. So are there any, like, I don’t know, specific situations or like life events that would maybe trigger someone to be like, oh, maybe now’s a good time for me to like look at my umbrella coverage again?

EVA
Yeah, absolutely. And I think, you know, life is full of transitions, right? Right. And those transitions often come with new risks and new liabilities. So getting married, having kids, buying a bigger house, even starting a side hustle.

MAX
Oh wow.

EVA
Those are all really good times to kind of re evaluate your insurance needs and make sure that you have adequate coverage, including umbrella insurance.

MAX
So it’s not a set it and forget it kind of thing like that gym membership that’s, you know, sitting there like judging you.

EVA
Right, right. Exactly.

MAX
Gathering dust. It’s definitely something that you want to review, I would say at least annually, OK. Or anytime you have a major life change, you know, and don’t be afraid to ask your aging questions, right? You know that’s what they’re there for.

EVA
They’re a resource, right? A lot of times people forget that, right? It’s like they’re speaking another language sometimes when you talk about insurance, yeah.

MAX
Yeah, for sure. It’s.

EVA
Like wait, what?

MAX
Does that mean exactly they can help you navigate all that?

EVA
So Speaking of kind of, I don’t know, demystifying some of the more complicated things, like what about the cost? Yeah, Because one thing that we saw in the research was that umbrella insurer can actually be really, really affordable. It can, yeah, which seems counterintuitive. Yeah, ’cause you’re talking about so much coverage.

MAX
I think that’s a big misconception out there, yeah. People assume it’s going to be this huge expense, right? But it’s often much more affordable than you might think. Like we saw examples of $1,000,000 in coverage for like $15.00 a month.

EVA
Really. Yeah. Wow, that’s less than a lot of streaming services.

MAX
Right. Exactly. Wow. So it really puts it into perspective, I think when you when you kind of like break it down like that.

EVA
Totally, totally.

MAX
But of course, you know, the actual cost is going to vary depending on a lot of different factors. Yeah, your location. Yeah, your kind of risk profile.

EVA
Like if you have a swimming pool or like.

MAX
Exactly if you have a swimming pool or trampoline.

EVA
Right, right.

MAX
Those things might increase your premiums a little.

EVA
Bit, yeah, yeah.

MAX
But overall, it’s a very affordable way to get a lot of Peace of Mind.

EVA
Right. OK. So we’ve talked about why it’s important, who needs it, even like how much it might cost, right. There’s one more kind of crucial piece to this whole thing, which is like when.

MAX
Yeah. When do you get it? When?

EVA
Do you get it?

MAX
Yeah, that’s so important. And this is, I think where I see a lot of people make a mistake, OK? They wait until it’s too late and you can’t buy insurance after something has happened.

EVA
Right. You’re not going to buy a fire extinguisher when the house is already on fire. The.

MAX
Perfect analogy, right? You got to get that umbrella before the storm hits, not after.

EVA
So if you’re thinking about, you know, getting married, buying a house, even just like, oh, wow, I have some assets now, that’s a good time to at least have the conversation.

MAX
Absolutely, absolutely. I think it’s all part of just being financially responsible.

EVA
All right, great.

MAX
And protecting the things that matter most to you.

EVA
This has been so eye opening. I feel like, you know, a lot of times we think about umbrella insurance and it sounds like this fancy thing that’s only for the Super wealthy. And what we’ve learned is like, no, it’s actually, it can be really affordable. And it can literally be the difference between, you know, weathering a storm and being, like, completely drenched.

MAX
Absolutely. And I hope that, you know, our listeners now feel a little bit more empowered to at least have those conversations with their insurance agent and really kind of, you know, take control and make informed decisions.

EVA
Because knowledge is power, especially with this stuff. So as we kind of like wrap up our deep dive on umbrella insurance, what’s the like one thing you want listeners to remember from all of this?

MAX
Don’t wait. Yeah, you know, review your insurance needs, explore the options that are out there, and just make sure that you have the coverage that you need to protect yourself, your family, you know, no matter what life throws your way.

EVA
I love it. Don’t wait, protect what matters. And on that note, we’ll leave you with this. What steps can you take today to gain a little bit more Peace of Mind when it comes to your financial future? Until next time, stay curious.