According to U.S. News & World Report, the average cost of car insurance increases by $872 per year after an at-fault accident. It’s expensive, and more than enough reason to buy a new policy.
Money Talks Newsletter subscriber Suresh V. is experiencing this firsthand, and so he asked Money Talks News:
“I’m looking for auto, home and umbrella insurance. My current insurance (all from Allstate) went up due to an accident. Another insurance company gave me a better rate on auto. But their umbrella insurance is much higher.
Can I stay with the current insurance for home and umbrella and get auto insurance from a new insurance company? The current insurance company may increase home and umbrella insurance costs due to missing some discounts.
What problems might I have with two different insurance packages, especially umbrella insurance?
What is umbrella insurance?
Money Talks News founder and certified public accountant Stacey Johnson has the answers. However, before we get into that, let’s define umbrella insurance for those who may not know.
Umbrella insurance is additional liability protection that sits on top of your existing policies like auto and homeowners.
If you are found responsible for injuries or property damage and the claim is larger than the liability limits on your basic policies, an umbrella policy can help cover the difference, including legal defense fees in many cases.
Trouble with umbrella insurance
Many umbrella policies require that your underlying auto and home policies be with the same company or, at a minimum, meet specific liability limits that the umbrella policy provider can easily verify. This makes it difficult to divide coverage among multiple insurers.
“A lot of umbrella policies require built-in auto coverage to meet minimum limits, and it’s hard to know if it’s the same with another company,” Stacey says.
Not to mention that Suresh will lose out on any bundling discounts, which Stacey says could be as much as 25%.
In other words, even if a company is willing to let you split, you may have to pay more for homeowners and umbrella insurance if the discount disappears. Plus, you still have to meet the liability requirements of the umbrella provider.
Stacey also cautions that approval is not guaranteed when coverage is scattered across multiple companies.
He says, “The new umbrella insurance company might not even accept you. That’s exactly what happened to me. I tried to do that, but my motorcycle was insured somewhere else, and they wouldn’t let me do it.” “You can bundle everything up and leave it where it is.”
Check out Stacey for more of her take Video about Umbrella Insurance.
Bottom line: Get quotes for both situations – one company handling all three policies, and a split set-up. Then compare the total annual cost and coverage. But understand that bundling everything with a trusted insurer can be easier, safer and cheaper.