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The Umbrella of Personal Insurance

Chelsey Tucker graduated with a Bachelor of History degree from Metropolitan State University in 2019. She now writes about insurance with her specialty being life insurance and has been quoted...

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Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years. He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella...

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Reviewed byDaniel Walker
Licensed Auto Insurance Agenthttps://res.cloudinary.com/quotellc/image/upload/insurance-site-images/insproviders-live/ca745a12-daniel-walker.png

UPDATED: Mar 19, 2020

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“Personal Insurance” is a term you may have seen while surfing the Internet for auto or home policies. Sometimes the term is used as a broad category that includes auto, home, life, and boat/motorcycle/RV insurance. But the term carries a specific meaning in the industry as a separate and distinct insurance product.

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Also known as personal umbrella insurance, personal insurance goes above and beyond all the policies previously mentioned. It is designed to make up the shortfall if you are ever sued for any type of accident or injury. Personal insurance makes up for the fact that your other insurance policies only provide limited liability.

Reasons for Purchasing Personal Insurance

There are plenty of reasons for purchasing a personal insurance umbrella policy that will protect you against financial harm incurred in a lawsuit. For example, let’s assume you are a regular participant in the sport of Airsoft. Airsoft is a war games sport using gas powered weapons that fire small BBs and pellets. While the likelihood of serious injury from Airsoft is low, it is nonetheless a risky sport.

If you were involved in a rather heated battle against a team you had never played before, and you accidentally injured an opponent through careless or negligent play, you might open yourself up to a lawsuit. You hope and pray this will never be the case, but if it ever is, your health insurance and homeowners insurance policies will only provide so much coverage. Personal insurance goes above and beyond your other policies to provide coverage for the gaps.

Personal insurance might also be a good idea for those who work in high risk professions. Careers in these professions may put you at greater risk of permanent injury or disability which could prevent you from working the rest of your life. Government disability insurance payments only go so far, and health insurance policies almost always have a limit on the amount they will pay over the long haul. Personal insurance also covers these gaps.

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The Cost of Personal Insurance

Personal insurance umbrella policies, like any insurance product, have varying costs from one company to the next. It is understood that most insurance companies require you to already have a certain amount of liability coverage in a homeowners or auto policy before they will issue a personal policy. One of the best ways to get personal insurance at the lowest rate possible is to combine it with your homeowners policy. Insurance companies are more likely to give you discounted price if you bundle all of your insurance needs with them.

Even with the cost variation between providers, as a general rule you should be able to get decent personal insurance for about $100 per $1 million of coverage annually. So, the personal insurance policy with a value of $5 million should cost you in the neighborhood of $500 per year. This may sound like a lot of money, but budgeted throughout the year it comes to just over $40 per month.

Determining How Much Personal Insurance You Need

How much personal insurance any individual needs depends and his circumstances. A person with a large amount of valuable assets will obviously need more insurance coverage than someone with lesser assets. For instance, if you own a primary residence as well as a vacation home on the coast, that vacation home could be a prime target for paying off a settlement or jury award. You would be wise to purchase enough personal insurance to exceed the value of both your homes to protect them from being seized in a lawsuit.

Fortunately, due to the nature of personal insurance and the fact that it provides secondary coverage, underwriters are willing to issue policies in rather large amounts. They generally start in the neighborhood of $1 million but can go as high as 5, 10, or $20 million. At the end of the day, if you have assets that need to be protected and the money to pay the premiums, insurance companies will pretty much write you a personal policy for as high a limit as needed.

Personal insurance is certainly not a product for everyone. But for those engaged in high risk activities, or those with a high amount of personal assets, personal insurance is a good idea. Check with your homeowners and auto insurance carriers to see what they would charge for this type of insurance. Then feel free to shop around a bit.

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