Imagine this: you’re driving down the road, minding your own business, when all of a sudden a pedestrian jumps out in front of your car and gets injured. You’re found liable for their medical expenses, but there’s a problem: the damages exceed the limit of your auto insurance. You could be on the hook for a huge bill that could put your financial future in jeopardy.
Enter umbrella insurance, the superhero of the insurance world. It’s like a safety net that catches you when your regular insurance coverage falls short. In a nutshell, umbrella insurance is extra liability coverage that kicks in when you’re faced with a lawsuit for damages that exceed the limits of your homeowners, auto, or watercraft insurance.
In this article, we explain a bit more in detail what umbrella insurance is and how it can protect you from devastating risks.
How does umbrella insurance work?
To get a better sense of how umbrella insurance works, consider this second example:
Imagine that you are held liable for an accident involving five cars. The cars need $200,000 in repairs and treatment of injuries totals another $250,000.
The driver of one car is a dentist with a broken arm. He won’t be able to work for four to six weeks and sues you for another $100,000. This means you’re liable for a total of $550,000 of damage.
If you carry only $300,000 of liability coverage, the remaining $250,000 would be out of pocket. Umbrella insurance would pay the difference.
Umbrella insurance typically covers the following:
- Claims beyond coverage limits of homeowners, auto, or watercraft insurance for injury or damage to people or property
- The policyholder and members of the household
- Wrongful entry, invasion of privacy, and malicious prosecution
- Libel, slander, and false imprisonment
- Attorney expenses and legal fees
Umbrella insurance typically does not cover the following:
- Damage to property owner’s property
- Damage or injury that the policyholder causes intentionally or criminally
- Damage or injury caused during business or professional activities
- Liability assumed contractually
- Liability related to armed conflict
Do you need it?
Many insurance companies encourage you to purchase umbrella insurance because of the litigious world we live in. Unfortunately, anyone can sue you for any reason and ruin you financially.
Before you purchase umbrella insurance, consider how likely you are to find yourself in this situation. The experienced agents at YourPolicy can help you understand this type of insurance and find the best options. If you are a person that is at a greater risk of being sued you’re more likely to need umbrella insurance.
Below is a list of a few examples that might make it worth buying an umbrella policy.
Consider umbrella coverage if you:
- Own property
- Have assets that exceed the liability limits of your insurance coverage
- Own items that can put you at risk for injury lawsuits (pools, trampolines, guns, or certain types of dogs)
- Are a landlord
- Have an inexperienced driver in your household
- Post reviews of products and businesses
- Participate in sports that could injure others (hunting, skiing, surfing)
- Are a public figure
What is the cost of umbrella insurance?
According to WalletHub, you can expect the current annual cost of $1 million of umbrella insurance coverage to be $150 – $300 annually. Each additional $1 million in coverage will cost $50 to $75 per year.
This type of policy is relatively inexpensive for the following reasons.
- It supplements your other policies. In most cases, you have to carry the maximum liability coverage available before you can purchase an umbrella policy.
- It covers circumstances that are highly unlikely.
How do I purchase umbrella insurance?
Most major insurers offer umbrella insurance. Some will require that you purchase your umbrella coverage with the same company that carries your auto and home insurance. In any case, your home and auto policies must contain coverage for the maximum liability limits.
Talk with the licensed agents at YourPolicy to determine whether umbrella insurance is right for you. They can help you to understand your options and find the right policy for your needs and your budget.
Umbrella insurance is not required by law, and it’s unlikely that most people will find themselves in this situation. Even so, it’s wise to protect yourself from a devastating monetary loss.
Think of it like this: you have an umbrella to protect you from rain, and you have umbrella insurance to protect you from financial downpours.
If you’ are thinking about protecting your assets from financial risks, umbrella insurance might just be what you need. But before you make a decision, it’s important to speak with experts who can guide you in the right direction. That’s why we recommend reaching out to your financial advisor and contacting a YourPolicy insurance agent today.
These professionals can help you understand how umbrella insurance works, in more detail, and assess whether it’s the right fit for your unique needs. Don’t wait until it’s too late—take the first step towards safeguarding your financial future and get in touch with us today!
If you have any questions or would like to get covered today, please don’t hesitate to reach out to a YourPolicy insurance agent at (866)236-0203. Each of our agents can help you find the best coverage options at the most affordable rates.