All You Need To Know About Umbrella Insurance

March 20, 2018

 
 

As humans we err all the time. This is why prudent individuals take liability insurance. Liability insurance is meant to protect you and your business from financial ruin in case you inadvertently cause injury to another person or accidentally damage property. Unfortunately though insurance isn’t infallible which explains why an umbrella insurance policy is a necessity.

Also known as an excess liability insurance, umbrella insurance acts as a fail-safe for your assets as well as other savings. If you find yourself being taken to court for damages that go beyond the liability limits of your homeowners insurance, car insurance or other type of insurance, an umbrella policy will help save the day.

Usually, umbrella insurance will provide coverage that is not included in the basic insurance policies.

Who Is Umbrella Insurance For

Unlike other types of insurance, umbrella insurance is not a requirement. People who normally need umbrella insurance share the following characteristics:

  • Own property
  • Are concerned about liability claims when travelling outside the United States
  • Have significant assets or savings
  • Participate in activities that might increase chances of getting sued for instance, being a landlord, coaching kids’ sports, volunteering, serving on the board of a non-profit etc

In fact, just about anyone can benefit from an umbrella insurance because of the overarching protection it offers.

A single law suit could end up with you paying off penalties for many years to come.

Umbrella Insurance Advantages

Some of the advantages you stand to gain from by having umbrella insurance include:

  • Protect you from risks that might not be covered by other insurance policies including slander and libel
  • Covers legal defense costs once the limits of your other insurance policies have been exceeded
  • Umbrella insurance cover start at $1 million which is decent
  • Covers rental items that you might not have an insurance cover for such as a boat
  • Inexpensive compared to the amount of liability protection you will be receiving

How It Works

To have a better understanding of how umbrella insurance works consider this scenario:

You accidentally run a red light at a junction and ram into oncoming traffic. The end result is that you have to meet repair costs of around $50,000 and treatment of the injuries will cost you an additional $200,000. On top of all this, the car you hit belonged to a doctor who got injured in the accident and they’re now suing you for over $250,000 in lost earnings.

If you only carry liability coverage for $300,000, you will have to finance the rest of the amount yourself. However, if you have umbrella insurance, it will cover what you owe after the other insurance policy kicks in.

What To Consider When Purchasing Umbrella Insurance

When buying umbrella insurance you should consider purchasing a cover that can protect your entire net worth. This would include your income, assets as well as savings.

You should be aware that companies will only sell umbrella insurance to you if you already have either property or auto insurance.

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