Is Umbrella Insurance Worth It For Your Home?

Imagine your child's friend is at your home when they fall and strike their head on the edge of a table, leading to a medical emergency. The child needs surgery and may have long-term cognitive impairment. You probably feel terrible, but you could also be held liable, which means your home insurance may have to cover any costs you're found to be responsible for contributing to, according to Allstate.

Liability coverage is a key component of most home insurance policies, but that doesn't mean your average policy is enough to cover a situation like the one mentioned. There's no way to know when personal liability risks like this could occur, and no matter how safe you keep your home or minimize risk to others, accidents can happen. That's where umbrella insurance could come into play, providing more coverage and protection for your home and personal finances. Is this coverage a necessary investment?

How does umbrella insurance work?

Umbrella insurance is a bigger, more robust policy that offers an umbrella, or blanket, coverage for liability risks. It may help to protect your assets and savings, according to Nerd Wallet. Let's say the family of your child's friend decides to sue you for creating an unsafe environment that led to the child's injury, they claim. Typically, your standard home insurance's liability coverage may cover some of those initial costs. Yet, in a claim like this, the losses could be much more significant.

Umbrella insurance provides extra support for liability claims made against you at home and often with your car insurance as well. If you are found at fault for the damages another person sustains, and your other policies are not enough to cover those losses, this policy could help you. You can choose the level of coverage you desire for this type of policy, providing you with more protection based on your risks. While you may be focused on reducing home insurance costs, there are some times when adding to your policy may make sense.

Do you need it? Is it worth it?

You may be thinking that the risks of something catastrophic like this occurring are minimal, and the added expense of umbrella insurance seems out of place. Progressive states that this coverage may provide protection for your assets up to $5 million or more, depending on the amount of coverage you select to purchase. If you have valuable assets, you may want this protection.

To find out if it is worth it to you, first determine your net worth. To do that, calculate the value of your assets, including real estate, valuable possessions, vehicles, and savings. Then, add up all of your debts. Subtract your debts from your assets to determine net worth. Next, look at your existing home insurance policy to determine current liability coverage. If your assets are above and beyond that limit, buying umbrella insurance may be an important way to protect your assets should a claim be made against you.