Umbrella insurance is an insurance policy that provides an extra layer of liability coverage when you need it. Homeowners seek such coverage to handle significant claims and to thwart lawsuits. Your homeowners insurance can only go so far, while an umbrella policy offers added coverage.
An umbrella policy effectively raises your liability coverage provided elsewhere e.g., your home, your cars and your boat. Umbrella coverage kicks in once your liability coverage has been tapped elsewhere.
Should you get sued, your umbrella policy would handle claims made against you. This can include someone falling down on your property, a libel suit and coverage for claims made on property that you rent out.
Besides the coverage mentioned previously, an umbrella policy can cover the cost of injuries someone sustains when they are in an automobile accident and where you are at fault. Your auto insurance provides bodily injury liability, but there are limits. An umbrella policy goes beyond that to cover medical bills and lawsuits.
An umbrella policy also covers loss or damage done to another person’s tangible property. If you hit a house with your car and it catches fire and burns down, you are covered. If your pet jumps in your neighbor’s car and manages to disengage the parking brake and it rolls into the street hitting another car, you are covered. If your son or daughter damages someone else’s personal property, such as a garage, you are covered.
What You Said
The term “umbrella policy” suggests more comprehensive coverage than typical insurance. That assumption is correct.
For instance, if you trash your neighbor in a written statement to the newspaper editor and that information is published, you can be sued for libel. If you perform a citizen’s arrest on someone with false pretenses, you may be charged with a false arrest. Slander, shock and mental anguish are some other reasons why you can get sued. And for big bucks too.
Real Life Example
An umbrella policy may not be fully understood or appreciated until it is needed. But, why wait until then? You need to know what it covers and whether your need a policy for yourself.
Now back to the bodily injury example given earlier. If your coverage is for $500,000 and someone is injured and your personal fault is determined, then your auto insurance would kick in. However, if the medical bills exceed the limits, let’s say totaling $1,000,000, then you are responsible for paying the $500,000. Unless you have an umbrella policy. In that case where the one insurance is exhausted, the other picks up the slack.
Most insurers offer an umbrella policy and coverage amounts typically begin at $1,000,000 and go up from there. Your insurer can talk to you about risk, recommended amounts and the coverage that is right for you. Yes, you can find coverage for $5 million, $10 million or more. And you will usually need to have your homeowners and auto insurance underwritten by the same company offering you umbrella coverage.
Can you do without umbrella coverage? Should you? That answer is a resounding no if you have assets and want to protect yourself from the unexpected. And the unexpected is what insurance coverage is all about.
Stephen Catalano knows about home insurance. He likes to share his advice by writing for blogs. Click this link homeinsurance.com/rates-in-your-state/ for a quote and more info.