June 15, 2012

Benefits of Personal Umbrella Insurance

After several months of deliberation, I finally decided to get a Personal Umbrella policy through Costco Ameriprise Insurance. If you have read my past blog posts, you probably know that I am a big fan of Costco because its membership benefits outweigh its costs significantly. Read Benefits of Costco Membership for more information.

What is Personal Umbrella Insurance


Personal Umbrella insurance provides you with liability protection beyond the protection provided by your car and home insurance policies. While your existing policies cover some liability costs, there are usually limits. A personal umbrella policy will help you cover the difference in liability. Think of the umbrella insurance as additional insurance protection above your current auto and homeowners policies. The Personal Umbrella policies are extremely affordable than most people realize. Read below for the maths.

How Personal Umbrella Coverage Works


Let's assume you run into an auto accident OR a somebody falls off on your property with an injury. You are found guilty (or liable) for this accident. This accident has caused a serious injury to the other person. You are sued for $1 million. But your insurance only covers up to $300,000 in liability claims. If the court proceedings do NOT go in your favor, then, you will be ordered to pay the remaining difference of $700,000.

If you have a Personal Umbrella policy, then the policy will pay the remaining $700,000 leaving you with no liability. If you do not, then your assets such as home, investments, your retirement savings, etc. may be ordered to be taken away.

The scenario I painted above is not uncommon. There are lots of multi-vehicle accidents on the highways every day. If you are found guilty, chances of getting sued are much higher. Even a slippage on the ice can cause an accident, or accident on a foggy day or rainy day can cause an accident. Even if you are a safe driver, you can't control external conditions such as a weather or other drivers. Therefore, a Personal Umbrella policy is a form of defense that can protect you.

Why I Finally Made the Decision


I personally think that your home, retirement savings, and college fund are too precious to risk by not getting proper insurance coverage. If you are not adequately insured, it only takes one auto-accident or one incident on your property to ruin your financial life. Knowing that I have adequate insurance coverage lets me sleep peacefully at night. You have already worked so hard to achieve your financial dreams, so why ruin it by savings few dollars every month.

I already have gotten car and homeowners policies at competitive rates from Costco Ameriprise insurance. These savings can pay off the entire bill on Personal Umbrella policy. Here is the math:

Before Costco Membership:
Geico Auto: $325
Geico Homeowners: $750
AAA Roadside: $60

After Costco Membership:
Costco Ameriprise Auto: $143 (Roadside Assistance Included)
Costco Ameriprise Homeowners: $450

Total Savings: $500
Personal Umbrella Policy from Costco Ameriprise: $130
Total Net Savings: $370

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