29 Jul My umbrella insurance cost spiked. Do I need the policy?

Q. My husband and I have a $5 million umbrella policy on top of our homeowners and auto policies. At the time we took out the policy, both of us were working, I owned my own successful business, and our estate attorney suggested it as protection above our other liability coverage in the event of a lawsuit. Now we are retired and living on our IRA and Social Security. At first the premium was very low, but it has increased by 10% to 15% each year. We just received notification that the carrier has applied for a 48.3% percent premium increase for next year. That means our premium will be approaching $1,000. We can either drop the policy, reduce the coverage amount, or do nothing. Is there a rule of thumb for how much umbrella coverage a couple like us should carry?
— Homeowner

A. You’re experiencing what pretty much all of us are.

Insurance policy premiums — whether for homeowners, auto or umbrella — have been skyrocketing.

Let’s take a closer look at umbrella policies.

This is a kind of liability insurance that provides additional coverage above the limits on your auto and homeowners insurance policies, said Jody D’Agostini, a certified financial planner with The Falcon Financial Group in Morristown.

It only pays out when the limits are exceeded for your other policies, she said.

“The cost depends on the amount you have in coverage and the underlying risks,” she said.

If you have significant savings or have a higher likelihood of being sued, then you should maintain some umbrella coverage, she said.

“Things like having a rental property or renting out your property, owning a dog, owning a swimming pool, might lend themselves to needing additional coverage,” she said. “I would recommend a call to your property and casualty insurance broker to reduce the amount of coverage but maintain some.”

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This story was originally published in July 2024.

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