General insurance protection is often one of the last insurance products a consumer purchases. I understand the reasoning. A family budget is very tight, and we often feel “insurance poor.”
But what if you or a family member (such as a teen driver) is involved in a car accident that insults others? Do you have high bodily injury limits under your auto insurance policy? What happens if the other person becomes disabled or dies? If you calculate a person’s value on that basis, I’ll bet that 99% of consumers who buy insurance have very little protection under their auto policy.
An umbrella policy goes hand in hand with an auto insurance policy and a home insurance policy and costs about $350 or less annually for $1,000,000 protection. This premium varies based on other factors (whether you own rental properties, have RVs, teen drivers).
If you have very little bodily injury protection on your auto policy, what then? Do you sell your house? Do you have 25% of your wages garnished for the next 15 years? Withdraw a 401k, IRA or something else?
When you buy an umbrella insurance policy, keep in mind that you’re protecting your assets and income.
Be especially careful when you have teen drivers on your auto policy. Teenagers have more accidents than all other age groups combined. Consider increasing your deductibles on your auto insurance policy and home insurance policy.
Consider if you have an auto insurance policy or a home insurance policy with a $500 deductible and you have a $750 claim. Will you file a claim for the $250 difference or pay the full $750 out of pocket to keep the claim off your record? Many people will pay for it out of pocket. If this is the case for you, consider raising your deductibles.