Welcome to Ask Clark, a column designed to answer your financial questions, by money expert Clark Howard.
What Do You Think About Umbrella Insurance?
Wayne from Connecticut asks: “Your recent article addressed which insurance products you should and shouldn’t buy but it didn’t mention an umbrella policy. What are your thoughts?”
Clark’s Take on Umbrella Insurance
Clark says: “Umbrella policies are important generally for people who are pretty wealthy. It’s people who have a lot of what are known as “uncovered assets”: assets you own free of any debt.”
Umbrella insurance is a type of liability insurance that kicks in when your primary coverage has reached its limit. An umbrella policy covers you “beyond what you have from auto or homeowners insurance,” Clark says.
He adds that major insurance companies including Allstate, State Farm, USAA and Geico all offer umbrella policies “because the risk to the insurance company is so low, the cost of coverage is very cheap.”
For $1 million in umbrella coverage, typically you’ll pay $200,” Clark says. “Each million you add after that is cheaper than the prior million, because the risk that a claim would ever get into those kinds of numbers is so unlikely.”
But again, umbrella insurance is not for everyone.
“It is a very cheap form of insurance,” Clark says, “and highly recommended to anyone who owns their home free and clear and has meaningful other assets.”
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