Have you every wondered exactly what Umbrella Insurance was? If so, you’ve come to the right place.

What if I told you that there are over 15 Million lawsuits filed in our country every year? That averages out to over 41,000 lawsuits per day.

That means there is a lawsuit filed in our country every 2 seconds.

To say that we live in a litigious society would be a gross understatement.

Every day around the country, courts award hundreds of millions of dollars in damages to mothers, uncles, children, neighbors, business owners, and anyone else who has been financially or physically crippled at the hands of a negligent party.

So why does this matter to you? It matters a lot actually, and luckily for you, there is a super cost-effective way to protect yourself, your assets and your family from situations like these.

It’s called Umbrella Insurance, and I want to explain why most of the advice you hear about it is often times wrong, or misleading.

Before we get too far, let’s discuss what exactly an Umbrella policy is.

What is Umbrella Insurance?


An Umbrella policy is a type of stand-alone insurance policy that you can purchase for personal, or business purposes, that offers an additional limit of coverage which extends over and above the base insurance limits offered by the underlying insurance policy.

Umbrella policies can offer purely excess protection, or, they can contain coverages that “fill in the gaps” where underlying policies have exclusions, conditions, and limitations.

Was that too technical? Let’s explain that one more time, in a simpler fashion.

Umbrella Insurance in Layman’s Terms

An Umbrella policy functions as a reserve, in the event that your base coverages run out as a result of a lawsuit or claim. Think of an Umbrella policy as a 5 gallon can of gas that you keep in the trunk of your car in case your car runs out of gas.

You may never need to use it, but the one time you do, it could potentially save your life.

Make sense?
The importance of Umbrella insurance should not be undervalued, especially when it comes to protecting your financial well being.

After all, the entire point of insurance is protect your assets right?

Being under-insured, is not only risky, but it could be considered down right foolish by those who have an in-depth understanding of financial planning, and/or risk management.

The cost of being properly insured is so minuscule in the grand scheme of things, and at the end of the day, no one is going to cut you a break if you slam into a car filled with seniors or children.

The point of this article is not to scare you with gruesome stories and unbelievable statistics, although they are a plenty.

It’s to shed some light on a serious flaw in how advice is given when it comes to Umbrella coverage.

The problem with most Umbrella insurance advice

risk management

Being in the insurance industry as long as I have, I’ve heard many different explanations of umbrella insurance from a wide range of insurance professionals. Being in such a competitive industry, you get a chance to learn things from your peers, and how they explain certain coverages.

One thing I’ve noticed over and over again is how this extremely important coverage is presented to consumers by licensed professionals.

When an insurance consumer asks about Umbrella coverage, you’ll most commonly hear explanations like the one I mentioned above.

“It fits on top of your home and auto policies”

“It’s an extension of your insurance coverages”

“It goes above and beyond your current policies”

“You definitely want one if you have a swimming pool”

Most of the time these types of answers are given to simplify a product that can actually be quite complex and confusing to the average consumer. There’s no harm in that, but the next piece of advice is where a lot of people are wrong.

“Umbrella policies are for people with assets”

That is as misleading a statement as there ever was when it comes to explaining umbrella insurance. While not totally untrue, it misses an overwhelming reality in that Umbrella insurance is not just for people with assets —

Umbrella insurance is necessary for everyone, including people who don’t have assets.

The knee-jerk reply here from most people who don’t fully understand it is likely, “What do you mean? You can’t draw blood from a stone. If I don’t have anything to protect, why do I need insurance?”

Before I get into the point of this article, where most people are wrong here is they think of assets as money in the bank, investment accounts, etc..

To a court, assets are literally anything that can be liquified into cash. Your house, your car, your electronics, everything and anything. If you have any of those things, you have more than enough to protect with an umbrella policy.

However, that’s a side dish to the important factor that virtually no one talks about when they talk about umbrella insurance and/or lawsuits, and boy it’s a whopper!

You ready? It’s called wage garnishment.

What is wage garnishment?

wage garnishment

As it relates to an insurance claims, wage garnishment is basically when a percentage of your current and future income is withheld in order to pay out damages.

Think of taxes being withheld from your paycheck.

Umbrella insurance is not for money you’ve already earned, it’s for future income that you will earn. So when people say, “I don’t have anything to protect”, they’re not entirely correct. If you stand to earn wages in the future, you most definitely have something to protect.

This is why an umbrella policy makes sense for virtually anyone.
Some people would claim that there are ways around anything as long as you have a good lawyer, and that could be partially true, but guess what, those types of lawyers are expensive, and don’t grow on trees.

In most traffic related court cases, which make up over 50% off all lawsuits in our country, people are left with with representation from a public defender, and while that might not be anything to scoff at, that is not the type of representation that “gets around” anything.

Speaking of traffic related cases, we haven’t even talked about the epidemic that is overtaking our roadways—

The New Epidemic On Our Roadways: Distracted driving

distracted driving

People talk about pools and diving boards as a reason to purchase an umbrella policy, but if there was ever a reason to buy one, it’s distracted driving.

And folks, distracted driving is not just a problem for teenagers, it’s a problem for everyone.

In a country where over 667,000 iPhones are sold per day, and where states have attempted to act swiftly in passing laws against texting and driving, it’s more important now than ever before to be properly insured if you drive.

You are at risk literally every single time you get into your car and drive, that either you will hit someone, or someone will hit you.

Here is an interesting infographic that shows some pretty surprising statistics:

distracted driving

Interesting, and also scary right?

This is why it’s a no-brainer to purchase an umbrella insurance policy.

So the next question is probably, how much does umbrella insurance cost?

How much does umbrella insurance cost?

Here’s the best part about all this — umbrella policies are cheap!

We’re talking on average $170 for the entire year for a $1,000,000 policy. Again, no brainer right? What’s more, all the risk is on the insurance company! I would trade $170 for $1,000,000 any day of the week!

Of course, like any other type of insurance there are several different variables that go into the pricing.

Here are a few things that companies typically look for when you get a quote:

Umbrella Insurance Rating Variables

  • Number of vehicles and drivers in the household
  • Number of properties owned/rented
  • Do you have a swimming pool?
  • Do you have a dog? What breed
  • How many drivers under 21
  • Accident & Violation history
  • Underlying policy limits

Conclusion: Take Action

Now that you know the importance of umbrella coverage and what all is involved, this is a friendly warning or reminder that it’s time for you to take action and protect yourself from the uncertainty that exists in a country where lawsuits are filed every 2 seconds.

To get started on your umbrella policy quote, give our office a call directly, or submit your information online on our quotes page, and we’ll reach out to you as soon as possible to discuss your needs and coverages.

It’s well worth your time and money to at least investigate and ask the question. We’re here to help, so give us a call!