Umbrella insurance is there to protect your assets in the case of an accident. These accidents, without significant coverage, can increase your debt very quickly. Thankfully, umbrella insurance can avoid lengthy lawsuits and issues in the long run. It sounds, expensive, but it's fairly reasonable. How much does it cost?
Keep in mind that this is the general cost of umbrella insurance. Each company may charge their own price. To get a better understanding of how much each umbrella insurance company will cost, call an insurance agent.
What is your net worth?
Before you figure out how much your umbrella insurance is going to cost you, you need to figure out the cost of your net worth. This isn't how much you're worth as a person. Instead, it's the total assets and property you own minus any liability and debt that you have. This is used to estimate the value of an individual or business's net economic position. The higher your net worth, the more coverage you need to protect yourself and your assets.
If you're having an issue with this process there are several tools you can use online to find out your net worth. BankRate has an excellent calculator where you can input your annual asset growth and annual liability growth. From there, you input your assets and liabilities. Finally, it will give you your estimated net worth for the following ten years.
What other factors determine cost of umbrella insurance?
Unfortunately, net worth isn't the only factor that is used to find out how much you need in coverage. An umbrella insurance policy also factors in a few other things to find out your estimated need. These are some things that will be asked when you're inquiring about a policy:
- Your net worth.
- Your location.
- Your credit history.
- Driving records of everyone in the household.
- If you have teenagers.
- Your risk profile.
Your risk profile is determined by several things. If you own a dog, if you own a trampoline or a swimming pool, or if you frequently throw parties, your policy can increase in price. This is because your liability increases.
Overall, a final factor that matters is which company you choose. Combining insurance policies with a single company will create discounts. You already know that if you combine auto, renters, or homeowners insurance, it will be cheaper than if you had individual policies with different companies. Many insurance companies also provide umbrella insurance policies.
How much does umbrella insurance cost?
Finally, we're down to the cost section. Because all of these factors are involved, umbrella insurance policies can range from $200 to $1,000 per month. If you have a high net worth and have a high-risk profile, then your monthly cost will increase significantly. However, if both of those factors are low, your monthly cost will be at the cheaper end of the spectrum.
At this point, we're going to do a lot of estimation to give you some general prices. For this, we'll assume that you own a single home, with two cars and two drivers:
- $383 per month for $1 million in coverage.
- $474 per month for $2 million in coverage.
- $608 per month for $5 million in coverage.
- $999 per month for $10 million in coverage.
Remember that these are all generalizations and is not the price for every umbrella insurance policy. Working with an independent agent will help you figure out the exact cost based on the factors that were listed above.
