Umbrella insurance policies are often referred to as excess liability insurance policies. This kind of insurance policy provides you with an extra layer of protection beyond the limits of your primary insurance policies such as homeowners or auto insurance. This coverage kicks in when the limits of your primary insurance policies have been exhausted.
The purpose of an umbrella insurance policy is to protect you and your assets from various types of liability claims, including bodily injury, property damage, and personal injury. It can also provide coverage for situations that are not covered by your primary insurance policies, such as libel or slander.
How Does Umbrella Insurance Work?
Umbrella insurance policies work by providing excess coverage above the limits of your primary insurance policies. For example, if you have a liability limit of $500,000 on your homeowner’s insurance policy and a liability claim is filed against you for $1 million, your homeowner’s insurance policy will cover the first $500,000, and your umbrella insurance policy will cover the remaining $500,000. Also, if you have a car accident and are found to be at fault, your auto insurance policy will pay up to its limit for any damages or injuries that you cause. If the damages exceed your auto insurance limit, your umbrella insurance policy will kick in and provide additional coverage.
Are you a right fit for Umbrella Insurance?
Umbrella insurance policies are not just for the wealthy. Anyone who has assets that they want to protect should consider purchasing an umbrella insurance policy. It can be particularly useful for the following types of individuals:
- High net worth Individuals: Individuals with a high net worth may be at a higher risk of lawsuits due to their assets and financial resources.
- Business Owners: Business owners may face a higher risk of lawsuits due to the nature of their business activities.
- Landlords: Landlords may face a higher risk of lawsuits related to tenant injuries or property damage.
- Homeowners: Homeowners may face a higher risk of lawsuits related to accidents or injuries that occur on their property.
- Drivers: Drivers may face a higher risk of lawsuits related to car accidents.
Additionally, if you have a high-risk job or engage in activities that could result in a lawsuit, such as owning a rental property, you should consider purchasing an umbrella insurance policy. Even if you do not think you are at risk, accidents happen, and it is better to be prepared.
Benefits of Umbrella Insurance
- Umbrella insurance policy provides additional protection beyond your primary insurance policies. If you are sued for an amount that exceeds your primary insurance limits, your umbrella insurance policy will cover the excess amount, up to the policy limit.
- It provides coverage for situations that are not covered by your primary insurance policies. For example, if you are sued for libel or slander, your umbrella insurance policy may provide coverage, whereas your primary insurance policies may not.
- Umbrella insurance policies are relatively inexpensive when compared to the potential cost of a lawsuit. For a few hundred dollars per year, you can purchase millions of dollars in additional liability coverage.
Umbrella Insurance Policy Coverage
Umbrella insurance policies can provide coverage for various types of liability claims, including:
- Bodily Injury Liability: This covers the cost of medical expenses, lost wages, and other damages related to injuries caused to someone else by your actions.
- Property Damage Liability: This covers the cost of repairing or replacing someone else’s property that you damage.
- Personal Injury Liability: This covers the cost of damages related to non-physical injuries, such as libel, slander, and defamation.
- Landlord Liability: This covers the cost of damages related to injuries or property damage caused by tenants in a rental property.
- Business Liability: This covers the cost of damages related to lawsuits filed against your business.
How Much Does Umbrella Insurance Cost?
The cost of umbrella insurance policies can vary depending on various factors, such as the amount of coverage, the type of coverage, and the individual’s risk profile. Umbrella insurance policies typically provide coverage in increments of $1 million. The more coverage you need and the riskier you are, the more you can expect to pay for your umbrella insurance policy.