Cost is a key factor when you are shopping for umbrella insurance. When looking for the lowest cost policy or ensuring you have the best value on the policy you already hold, it’s a good idea to understand the factors that go into the cost of your umbrella insurance premium.
An independent agent in the Trusted Choice® network can answer any questions you might have. Independent agents are devoted to helping you to get your questions answered so you can make an informed choice. Your agent can compare policies, options and quotes from several insurance companies and help you choose the right umbrella insurance for you. Contact an agent today to get started.
Umbrella Insurance Cost vs. Benefit
You may want to set up a “cost-benefit analysis” as you start to compare umbrella insurance policies. Here is some data to help you get started:
- 13% of personal injury liability awards and settlements are $1 million or more
- An estimated 1 in 5 people with considerable wealth do not have umbrella coverage
- An average cost of about $380 per year can provide $1 to $2 million of protection
As you can see, there are several ways that an umbrella policy can help protect you for a relatively low cost.
Factors Affecting Umbrella Insurance Cost
So, you’ve decided that spending extra money for excess liability coverage is a worthwhile investment to protect what you’ve earned. There are a number of factors that may affect your umbrella insurance costs, including:
- Your net worth: Basic umbrella insurance policies begin at $1 million. Ideally, your policy should be equal to or greater than your net worth. If you need to determine the amount of assets you have, consult a lawyer or financial advisor.
- Your location: Insurance rates vary considerably by state. The cost of umbrella insurance in Louisiana may not be the same price for the same coverage in California.
- Your credit history: If your credit history is less than stellar, your umbrella insurance cost may not be as low as you’d like. Normal liability policies examine your credit history to determine how risky you are to insure. If you’ve improved your credit score after buying your umbrella policy, be sure to speak with your agent about reducing your insurance costs.
- Driving records in your household: Because your umbrella policy costs are based on everyone in your family, your family’s record of driving infractions, speeding tickets and accidents may affect your umbrella insurance costs.
- A teenager in your household: If you have one or more teens that drive, you’re already aware of how teens affect your auto insurance rates. Umbrella insurance costs will be similarly affected. But because teens are more prone to accidents, now is a perfect time to purchase additional liability coverage.
- Your risk profile: Do you own a dog? Is there a trampoline, swimming pool or zip line in your backyard? Do you frequently throw parties? Do you own a boat, personal watercraft or high-powered vehicles, such as a snowmobile or ATV? Discuss what kind of things put you at risk with your independent agent.
- Insurance company you choose: If you don’t compare policies, you may end up paying too much for coverage. Combining your policies with one insurer can earn you a significant discount.
How to Calculate the Cost of Umbrella Insurance
The cost of umbrella insurance can range from $200 per year on the low end to over $1,000 for a high limit, such as $10 million worth of umbrella liability coverage. How can you determine your costs?
The first step is to assess your net worth. Determine the value of your assets, including liquid assets, investments, retirement funds, properties and annual income. You may need to consult an investment advisor or attorney.
Next, review both your risks and whether you may be a “target” for liability lawsuits. If you are a high profile person or have considerable assets that an attorney will find inviting when defending a client, you want to factor this into your costs.
Finally, choose an amount of coverage that can protect you from potential lawsuits that could threaten your savings and standard of living. By many recommendations, the coverage amount should be at least equal to your net worth, but that may just be a starting point for you. A report by ACE Private Risk Services, for example, pointed out that judgments in severe cases have run $14 million to $49 million.
The ACE report provides these typical annual costs:
- $383 for $1 million in coverage for a household with one home, two cars and two drivers
- $474 for $2 million in coverage for the same household
- $608 for $5 million in coverage for the same household
- $999 for $10 million in coverage for the same household
- $1,578 for $10 million in coverage if the household also has 2 more homes, 2 more cars, a boat under 26 feet, and a driver who is under 25
Working with an independent insurance agent can help you get the information you need to determine the right amount of coverage for your family. Additionally, your local agent can help you compare multiple quotes and look for discounts on your policy.
Finding the Best Umbrella Insurance Value
Buying umbrella insurance is a balancing act – you must find the amount of coverage that can secure your assets at a cost that makes sense for you. Umbrella insurance can protect your life savings, but finding the best policy at the best price for your needs and budget can be a challenge because no two insurance companies are alike.
Working with an independent agent in the Trusted Choice network can make your search much easier. Local member agents have access to quotes and policy options from multiple insurance companies and can help you find an affordable umbrella insurance policy that will help cover your risks. Contact a local member agent today for personalized assistance.
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