Protect Your Assets With an Umbrella Insurance Policy

A $1 million policy can cost as little as $150 per year.

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Who should think about getting an umbrella liability insurance policy, and how much does it cost? --J.S., Phoenix

CALCULATOR: How Much Umbrella Insurance Do I Need?

Most people with income, property and some savings should consider getting an umbrella policy of at least $1 million, which can protect your assets and future earnings from lawsuits. “An umbrella liability policy is one of the most overlooked but important ways to limit your financial risk,” says Mari Adam, a certified financial planner in Boca Raton, Fla. The coverage kicks in if you injure someone or cause property damage and are sued for more than the liability limits on your homeowners or car insurance.

A $1 million policy can cost as little as $150 per year if you have a home, two cars and no other major risks, says Sarah Brown, an independent insurance agent in Shrewsbury, Pa. “The more exposures you have—more cars, a motorcycle, a boat, young drivers, etc.—the higher your premium,” says Brown. Before you can add an umbrella, you must usually have at least $500,000 in liability coverage on your home and car insurance, which will pay out first.

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If you have more than $1 million in assets, consider a larger policy. Doubling the coverage generally won’t double the premiums, says Brown.

Kimberly Lankford
Contributing Editor, Kiplinger's Personal Finance

As the "Ask Kim" columnist for Kiplinger's Personal Finance, Lankford receives hundreds of personal finance questions from readers every month. She is the author of Rescue Your Financial Life (McGraw-Hill, 2003), The Insurance Maze: How You Can Save Money on Insurance -- and Still Get the Coverage You Need (Kaplan, 2006), Kiplinger's Ask Kim for Money Smart Solutions (Kaplan, 2007) and The Kiplinger/BBB Personal Finance Guide for Military Families. She is frequently featured as a financial expert on television and radio, including NBC's Today Show, CNN, CNBC and National Public Radio.