There are some types of insurance that are required by law and lien holders and other types of insurance that just make sense to have. Umbrella insurance falls into the latter category. Nobody will make you buy an umbrella policy, but doing so could save you from total financial ruin.
Umbrella Insurance Explained
Umbrella insurance is a form of liability coverage. It is designed to provide additional liability protection above and beyond the coverage traditionally provided by auto, home, and renter’s insurance. This protection kicks in when you reach the liability limits on your other insurance policies. For example, if the liability limit on your auto policy is $300,000, the deductible on your umbrella insurance policy will most likely be $300,000.
You might be wondering why you would ever need that much liability coverage. The fact is that it is impossible to predict how much a judge or jury may award an injured person. It is not unusual to see judgments in the millions of dollars nowadays. If you are sued for negligence, the current limits on your auto or home policy may not be enough to cover judgments against you or your attorney’s fees. In such cases, your personal assets could be seized to cover the costs of your negligence.
An umbrella insurance policy ensures that you do not need to worry about losing your home, savings, and other assets. The average umbrella policy will pay defense costs and provide coverage for many lawsuits that are not covered by primary auto or home policies. Most umbrella policies will also pay for property damages and an injured person’s medical bills and lost wages that result from your negligence. Other things that may be covered under an umbrella insurance policy include libel, slander, false imprisonment, or eviction.
Umbrella Insurance Myths
There are several myths associated with umbrella insurance. One of the biggest is that umbrella insurance is only for the rich. The truth is that umbrella insurance can provide needed protection for every policyholder. We live in a litigious society. Anyone can be sued at any time. And with judges awarding larger amounts of money than ever before, it makes sense to buy additional liability coverage to protect your assets.
Another misconception is that umbrella insurance is expensive. Umbrella insurance premiums are actually quite affordable, and in most cases, cost less than it would to purchase additional liability coverage on auto and home insurance policies. According to the Insurance Information Institute, $150 to $300 per year can buy $1 million worth of personal liability protection. Every million after that typically costs an additional $50 per year. In other words, umbrella insurance is one of the best buys on the insurance market.
Your current insurance provider will be able to give you an umbrella insurance quote. You can also use comparison sites online to get quotes from several policy providers at one time. Most insurance agents and companies will ask you a range of questions to determine your personal risk and help you decide how much coverage you need.
This is a guest post from Bailey Harris, who writes about home owners insurance and other insurance topics.