If you’re wondering what an umbrella insurance policy is and how it works, you’re not alone.
Unlike, say, auto insurance or life insurance, umbrella insurance is lesser known. Many of our clients have coverages that protect their assets and loved ones but don’t know how an umbrella insurance policy can help them.
This post will let you know what umbrella insurance is and how it works. Read on!
What is Umbrella Insurance?
Also known as excess liability insurance, umbrella insurance is designed as a supplementary coverage to your existing coverages such as auto and homeowners’ insurance.
Think of it as a safety net that kicks in when the policies you have in place reach their coverage limits.
How Does Umbrella Insurance Work?
If you’re found liable for a claim that’s larger than your existing insurance policy can cover, you’ll have to cover the rest out of your pocket.
That could mean that your assets, such as vehicles, homes, investments, or even life savings, could go toward compensating the other party. That’s where umbrella insurance steps in.
Say you cause an accident that leads to the damage of 15 cars. Your auto insurance can only replace four vehicles, including your own. And your liability insurance can cover the medical bills of 3 victims.
Your umbrella insurance policy will purchase the rest of the vehicles and the medical bills, protecting you from losing your prized assets. Umbrella insurance is able to pay for these by increasing your liability coverage limit by up to $5 million.
What Does Umbrella Insurance Cover?
If you’re liable for damages to others and their properties, umbrella insurance can protect you beyond your existing coverages. It covers situations such as:
Auto accidents
Damages to properties
Bodily injuries
Legal fees
Libel and slander
Defamation
Medical expenses
And many others
The good thing is, umbrella insurance coverage extends beyond you, the policyholder. It covers your spouse, children, and other household members, including your dependents. It also covers incidents that do not involve your property and those that occur abroad.
Who Is an Umbrella Insurance Policy for?
Umbrella insurance is especially great for wealthy individuals that are the targets of lawsuits, such as public figures, members of a board, and owners of many properties.
But you don’t have to be wealthy to have an umbrella insurance policy. If you’re a homeowner, a renter, have a swimming pool, own a car, boat, or RV, you should have an umbrella insurance policy. If you have any assets worth protecting, umbrella insurance is for you!
Protect Yourself!
You’re thinking, “I already have personal liability insurance and don’t need additional coverage.
The truth is that courts are awarding multi-million dollar compensations now more than ever before.
Yes, you may not find yourself in a situation where you need to rely on your umbrella insurance policy. But if you do, you could lose everything you’ve worked so hard for. You don’t want to take that risk. Protect yourself today.