As many families face financial strain in 2020, there is another troubling trend that is emerging. Umbrella insurance rates are rising, and this is leading many people to drop the coverage. Yet now at a time when finances are tight, liability claims can be all the more devastating. Let’s dig deeper into why you still need umbrella insurance, why the rates are rising, and how you can adapt to this new trend.
What Is An Umbrella Policy?
First thing is first, for those not familiar with umbrella insurance, we need to define what the coverage is. Umbrella insurance gets its name because it goes above and beyond normal insurance like auto and homeowners. It primarily covers liability issues where you may be sued for negligence. Umbrella insurance only kicks in when an insurance policy like auto or homeowners reaches the policy limit. For example Colorado mandatory auto coverage amounts for one accident are $25,000 for bodily injury or death for one person, $50,000 for bodily injury or death for all persons, and $15,000 for property damage. Now keep in mind many policies generally have higher limits than that. But if you think about the rising costs of insurance settlements due to accidents, and those limits are not nearly enough.
Why Do You Need Umbrella Insurance?
If you are sued for injury or damage and the settlement exceeds your policy limits, you are responsible for the difference. This can be financially devastating and impact your house, investments, retirement fund and even your monthly paycheck. When you think about this scenario, it’s easy to see why umbrella insurance can be a prudent investment. One of the big selling points for umbrella policies is the monthly cost. For $100 a month or less, you can get up to $1 million in umbrella insurance. For many, this is a preparation well worth taking. Yet now that umbrella insurance rates are rising, many may rethink buying umbrella coverage each year. We do not recommend this, but to understand why the costs are rising, let’s look at the factors involved.
Reasons Why Umbrella Insurance Rates Are Rising
So let’s take a closer look at why umbrella insurance rates are rising in the first place. Generally an insurer raises rates because they see an increase in claims and payouts associated with them. For umbrella insurance, the trends are rising dramatically. According to Safeco insurance, umbrella claims have doubled from 2010 to 2020. On top of that, payouts have increased by 67% in that same period to meet an average of $500,000 for each claim. This will make it harder to find lower rates like a cup of coffee a day for umbrella insurance in the future.
Personal Injury Lawyers
Most umbrella claims stem from auto accidents, and this creates problems as well. First, there are more vehicles on the road than ever before, which unfortunately means more accidents. Unfortunately, distracted driving has become a real threat for everyone on the road as well. Now that legal representation is widely advertised on TV for automobile accidents, more and more people are hiring lawyers. Should a case go to a jury, the idea of a million dollar award is commonplace in today’s cultural awareness. Even without a jury, settlement costs have ballooned in the past few years.
Other Liability Risks
Auto accidents aren’t the only liability claims you should worry about. Accidents on your property or even incidents caused by your children can lead to a claim. Social media was once a harmless medium to connect with people, but now internet libel and slander claims are a real consequence for some people. Even dog bite settlements are up 134% since 2003 according to Safeco. All these things may mean good things if you’re the victim in an accident, but counteractively they will drive up your monthly umbrella premiums.
Umbrella Insurance Is More Important Than Ever
As you can see, there is a lot of complexity involved with umbrella insurance. When you look at the circumstances, it’s no secret that umbrella insurance rates are rising. However, this absolutely does not mean you should skip it. What you should do is get smart with how you shop and bundle your umbrella insurance. The best way to do this is to work with an independent insurance broker right here in Colorado. We can shop genuine umbrella coverage that isn’t stripped down like some companies are doing in response to the rising rates. We even may be able to bundle your umbrella insurance with other products to keep your premiums as low as before. Contact us today to learn more and get started with a quote. Truly given the rise in liability claims, you can’t afford not to add or keep this important coverage.