This is the easiest insurance question I’ve ever had. The answer is simple: EVERYBODY needs an umbrella policy. Those with the greatest financial need are obviously those with the greatest assets and/or income to protect. However, even someone who currently has limited assets and income might someday have significant assets and income. If that person is hit with a multi-million-dollar liability claim, just because they currently have inadequate assets or income to meet their legal obligation doesn’t mean they’re off the hook. What if their wages are garnished for the next 20 years? What if they come into an inheritance or, over time, simply accumulate greater wealth? That now becomes the property of the person they have harmed.
Think about a premises exposure. If I’m a multi-millionaire and someone is killed on my premises due to my negligence, I’m in some measure of financial trouble if I don’t have ample insurance to protect my solvency. Contrast that with a real-life example of a tenant in a 16-unit frame apartment building whose negligent inattentiveness to a charcoal grill resulted in the complete fire loss to the building and the loss of all the contents of the other tenants. While it didn’t happen in this claim, what if multiple tenants had been killed? In these contrasting scenarios, who has the greatest need for an umbrella policy? From this perspective, a renter with an HO-4 policy potentially has a greater liability exposure than an owner-occupant with an HO-3 or HO-5 policy.
And there is a moral component. We all have an obligation to protect innocent people from our negligence. The more wealth you have, the easier that is to accomplish without insurance. The less wealth, the greater the need for insurance. Needless to say, there are many people who struggle to make their insurance payments. However, if they own a house or an auto, reasonably adequate insurance is one of the necessary operating costs. And, per dollar of coverage, umbrella policies are one of the greatest values. I own a boat and insure it on a boatowners policy that includes liability coverage. I also cover it on my umbrella. What did it cost to add it to the umbrella? $7 a year. For more than $1M in additional coverage.
Umbrellas cover MANY things not covered by underlying home, auto, boat, or other policies and it covers them incredibly cheaply. That peace of mind has value of its own. If you are an agent, ALWAYS offer and encourage the purchase of an umbrella policy. If you are a consumer, get a quote on an umbrella policy no matter what your financial status. Sell/buy that umbrella policy if at all possible.