'Umbrella' covers if claims exceed other insurance


April 09, 1995|By SUSAN BONDY | SUSAN BONDY,Creators Syndicate

Q: Can you explain "umbrella" insurance policies? What are they? Who should have one? What is the cost of such a policy? What advice would you give to a retiree on this subject?

A: The major purposes of an umbrella insurance policy are:

* to allow people with assets to protect those assets from lawsuits;

* to let them carry lower underlying limits of liability insurance on other policies;

* to fill in the cracks.

It also allows people to increase the coverage amounts for a lower cost than in the policies themselves.

An umbrella policy picks up payment when your underlying coverage limits are exhausted. It also provides coverage of most liability exposures, even those excluded in other policies. Most umbrella policies also include worldwide coverage, so you are insured regardless of where the claim originates.

Premium rates vary widely depending on your geographical location, number of children and their ages (especially teen-age drivers), number of cars, boats, houses, etc. In general, rates are about $100 to $500 a year for the first million dollars of coverage and usually half for each additional million.

Although these policies are designed for "affluent" people (whatever that means), I recommend this type of coverage for anyone whose net worth exceeds $500,000.

Susan Bondy founded her namesake financial services company 1980 to provide financial planning and asset management. She is a frequent guest on "Good Morning America," the "Today Show" and National Public Radio. She is the author of "How to Make Money Using Other People's Money." Write to Susan Bondy in care of The Sun, 501 N. Calvert St., Baltimore, Md. 21278. All letters will be treated confidentially.

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