When it comes to protecting your assets, you probably know that you need insurance. There are different insurance policies available, designed to protect your assets in a number of situations.
Most policies include some kind of liability coverage.
The liability coverage with these policies pays for injuries to others, and can even provide protection if you are sued.
But what happens if you reach your limit of liability coverage with your other insurance policies? What happens then?
You don’t want to have to pay out of pocket, so it makes sense to have extra coverage.
This is where umbrella insurance comes in.
What is Umbrella Insurance?
The point of umbrella insurance is to provide you with extra liability coverage. Most umbrella policies are for between $1 million and $5 million of coverage.
Realize, too, that this coverage doesn’t take effect until after your other coverages have been exhausted. So, if you are in a car accident, and you have $500,000 of liability coverage on your policy, your umbrella policy wouldn’t pay out until after the $500,000 was taken care of.
If you have $2 million in umbrella coverage, and the person who you hit settles for $1.5 million, the first $500,000 is covered by your auto policy. The remaining $1 million is covered by the umbrella policy.
Umbrella coverage is designed to provide an extra layer of protection in liability cases. It’s possible to buy policies that include, home, auto, watercraft, motorcycle, and other situations.
Talk to your insurance agent about the possibilities, and make sure you are clear about what you want covered.
Business umbrella/liability insurance will probably need to be purchases separately, and you should check into a home business endorsement if you want protection for your home business.
How Much Will You Pay for Umbrella Insurance?
The cost for umbrella insurance varies, according to different factors, including how much coverage you want. One of the common policy costs is about $150 a year, plus $50 for every additional $1 million in coverage.
You can actually get $10 million or more in coverage, if you are willing to pay for it.
Many insurance companies can add umbrella insurance to your package, and the policy is added to your current premiums.
If you are worried about paying the umbrella insurance premium, it’s usually possible to increase your homeowner’s deductible, or some other deductible, in order to drop your regular premium to offset the cost of the umbrella insurance.
Who Should Buy Umbrella Insurance?
If are concerned about protecting your assets, umbrella insurance might be right for you. Consider your financial situation. Do you have a large amount of assets? Are there risks to you from the possibility of someone getting hurt on your property?
Many people with trampolines or pools choose to buy umbrella insurance because of the increased chance of injury. Someone who is known for wealth might also want umbrella insurance, since more assets can sometimes be an incentive for others to sue.
Carefully consider your financial situation, and decide whether umbrella insurance makes sense for you.
A lot of people could benefit from one of these policies, because you never know what’s going to happen. Because these policies are so affordable, a lot of people buy one, just in case.
There are some people who are more likely to need one compared to others. One of those is if you have your own business. You probably have other policies, but an umbrella plan is a nice way to protect yourself and your business from the unknown.
Also, you have rent out property, or you just have a lot of guests in your home, it’s probably a smart idea to invest in one of these plans. For the cost, why not get additional protection.
What Does Umbrella Insurance Cover?
This is a difficult question to answer.
The purpose of umbrella insurance is to provide protection for just about everything you other plans doesn’t or to beef up the protection. There are a million different situations where your umbrella plan could kick in.
One common claim on umbrella insurance plans is usually in regards to liability.
Let’s say you have some friends over for the weekend. While they are staying, one of them slips in the kitchen and takes a fall.
Depending on how bad the fall is, the hospital bills and fees could be astronomical. If you’ve ever had to go to the ER, you know the bills can be through the roof.
But, your homeowner’s insurance policy will cover those bills, right?
Your homeowner’s insurance should cover a lot of those bills, but they have limits. If the bills exceed those limits, you would have to pay for those out-of-pocket. If you have an umbrella insurance policy, this is where the coverage would kick in.