What is umbrella insurance?
An umbrella insurance policy is a type of insurance that extends coverage beyond the limitations and coverages of other insurance policies that you may have. Personal injuries, property damage, certain types of lawsuits, and personal culpability can all be covered by umbrella insurance. Each carrier is different and covers different things.
How does an umbrella insurance policy work?
In addition to protecting your belongings, an umbrella insurance policy can also safeguard your financial future.
- When the limitations of your primary policies, such as those for your house, car, and boat, are reached, umbrella insurance may step in to help pay the remaining costs.
- Claims such as false arrest, libel, slander, and liability coverage for rental units you own are covered by umbrella insurance, which may be excluded by other liability plans.
What does umbrella insurance cover?
An umbrella insurance offers additional insurance protection in the event of a claim that is not covered by a liability policy. Liability protection is provided by umbrella policies in the following situations:
- Injuries
- Damage to property
- Certain lawsuits
- Personal liability situations
Who needs umbrella insurance?
You might be thinking that you’re covered by your car and homeowner’s policies. While this is true to an extent, those policies have limitations in terms of dollar amounts and what exactly is covered. The benefit of umbrella insurance is that it extends your coverage beyond the limitations of your other plans and covers scenarios that aren’t covered by other policies. It’s easier than you think to acquire an umbrella insurance policy and the cost of one may surprise you in how affordable it is, sometimes costing only several hundred dollars per year for a $1 million dollar policy and sometimes if bundled with your other policies, costs even less.
An example of an umbrella policy’s coverage:
Liability for bodily harm extends to those who have been injured as a result of the accident. Injuries that result in medical expenses and/or liability lawsuits are examples of these costs:
- A severe collision with another vehicle, in which you were at fault
- Injury sustained on other people by your dog
- A visitor at your house trips and falls.
- When playing in your yard, the child of a neighbor trips and falls.
Damage or loss to another person’s physical property is covered under property damage liability. Damage to automobiles and other property caused by an accident in which you are at fault might be an example of an example of an example.
There are several benefits to renting out your property to others. Liability claims costs, for instance, might include the following:
- Someone slipping and falling on your rental property’s broken driveway and suing you for damages
- The dog that belongs to your renter attacking someone, and you being held liable for the resulting injuries
Coverage is also given if you are sued for the following:
- Slander: An hurtful spoken word
- Libel: A damaging comment made in writing.
- False arrest, custody, or incarceration
- Pursuit with bad intentions
- Eemotional pain
What is an umbrella coverage not going to cover for you?
In most cases, umbrella insurance will not provide coverage for the following situations:
- Your illnesses, as well as any harm done to your personal property
- An act, whether illegal or deliberate, that causes harm to another individual.
- Obligation that results from your acceptance of a contract
How exactly would purchasing umbrella insurance protect you?
In order to further explain how umbrella insurance might cover you, let’s take a look at an example. Assume you create an automobile accident and cause $400,000 in damages to others as a result of the injuries you inflict. You also have $300,000 worth of bodily injury coverage on your car insurance policy. The $300,000 in medical expenses will be covered by your car insurance. Out of the $400,000 in total damages you owe, since only $300,000 will be paid by your car insurance, that means you will be personally responsible for paying the balance of $100,000 out of your own pocket. Most people don’t have $100,000 comfortably sitting around. You run the risk of getting sued and having your assets seized from you by the creditor to satisfy (pay) that $100,000 balance. This is where an umbrella insurance policy becomes very useful.
Your umbrella coverage will cover you. Your umbrella coverage will cover any sum in excess of your vehicle insurance policy’s limit, up to the level you choose for your policy. Umbrella policies typically start at $1,000,000 and increase in one million dollar increments up to certain limits depending on the carrier. Please contact your insurance broker for information and carriers.
Listed below is a summary of the entire cost, the places where your vehicle insurance limits could be exceeded, and how umbrella insurance can help you protect yourself:
| Total Cost of Car Accident | $400,000 |
| Auto Insurance: Bodily Injury Limit | $300,000 |
| Umbrella Insurance | $100,000 |
Is there a monthly or annual premium for umbrella insurance?
A large chunk of the price of an umbrella insurance is determined by the amount of coverage you choose. Your location, the number and kinds of cars you own, the number of homes you own, and other things can all effect the rates you pay for your umbrella insurance. If you’re looking for an umbrella insurance coverage, contact your local insurance agent or even your current home or auto carrier to speak to them about getting more information. It will be a small price to pay for peace of mind.
