Umbrella Insurance: Are you looking for an insurance scheme to protect you against hopeful or unforeseen loses? Umbrella insurance is a good recommendation. Umbrella insurance is a type of insurance that provides protection above and beyond what other insurance policies offer.
This insurance is a secondary type of liability insurance that covers your personal liability above and beyond the standard liability you have taken on your home owner policy. Umbrella liability can cover you on multiple properties and cars depending on what coverage you select.
Umbrella insurance is also known as a personal excess liability insurance policy. This type of policy is not a stand-alone policy which is why it is known as a secondary policy. Umbrella insurance gives you added liability protection for lawsuits and claims that rise against you.
Cost of Umbrella Insurance
Depending on how much umbrella liability coverage you decide to purchase, it could cost as little as $100 a year for 1 million dollars of coverage. It is inexpensive, especially compared to the value of the coverage get.
It is necessary to know that umbrella insurance policy are generally sold in units of $1 million in coverage. That is, the smallest possible policy is $1 million, the next smallest is $2 million, and coverage continues to climb in $1 million increments from there.
However, the best way to get an accurate price on this insurance policy is to contact the insurance company directly. Many companies can give you a quote over the phone or by email. Though this policy is great, there are factors that affect it.
Factors that Affect the Cost of an Umbrella Insurance Policy
There are many factors that can affect the cost of an umbrella insurance policy, including:
- The level of risk you present.
- Those in your household.
- Your net worth.
- The amount of coverage you buy.
- Your credit history.
- Your location.
Some persons are often concerned with how much of the insurance they need. Let’s look at how much you need.
How Much Umbrella Insurance Do I Need?
Deciding how much umbrella liability coverage you need must be based on your personal situation. It helps to have an understanding of what you stand to lose, and what risks you personally face.
It may interest you to know that this policy does not cover all your losses. Thus, while going for this policy, always try to know what it covers and what it does not cover.
What Umbrella Insurance Covers
The following are some types of damage covered by an umbrella policy:
- Bodily Injury
- Property Damage
- Legal Damages
What They Do not Cover
It is necessary to know that, although umbrella insurance protects you against most types of lawsuits, there are certain kinds that umbrella policies do not cover:
- Malpractice lawsuits.
- Workers compensation claims against employers.
- Damage caused by a business, or by any business-related activity.
- Damage that you cause intentionally to any person or property.
Some Importance of Umbrella Insurance
It is an inexpensive way to protect your financial future or established assets. As such, it is important for people who have substantial assets, savings, or high incomes. If you get sued, umbrella insurance can help you avoid out-of-pocket losses even if the claim is very expensive.
Also, it’s important to note that umbrella insurance protects you from being sued for damage to other people. However, how do you a person who needs this policy?
Who Needs Umbrella Insurance?
Those who need umbrella insurance are:
- Who have Substantial Assets
- Those who have a High Income
How to Buy Umbrella Insurance
Many companies sell umbrella insurance but you will need to have underlying insurance coverage to be eligible. In other words, you need to already have auto insurance coverage because umbrella insurance is secondary or supplementary insurance, not primary insurance.
Some umbrella insurers will require you to carry more primary coverage than what the law mandates. A typical umbrella insurance policy provides at least $1 million in coverage.
Policies offering $1 million are usually the most affordable, with annual premiums ranging from roughly $150 to $300. You can buy more than $1 million in coverage, but the more coverage you buy, the higher your premiums will be.
The Required Coverage of Umbrella Insurance that You Need
Though it is difficult to determine exactly how much umbrella coverage you need to buy because the appropriate amount of coverage depends on your individual situation, some of the factors to consider include when buying are:
Your level of risk
If your chances of a car accident are great then you should that the more risk you have, the more coverage you’ll want to purchase.
Your net worth
Since the wealthier you are the more vulnerable you are to being sued then you need a larger insurance policy. It is important when you have a high net worth because you have so much more to protect.
The Amount of Coverage you can Afford
Also, always consider what you can reasonably pay in premiums each year in exchange for the peace of mind the insurance policy can provide.
Since the insurance is relatively affordable, it is smart to err on the side of caution and buy more coverage, rather than less.
This is because, accidents can happen to anyone, no matter how careful you are, and you do not want to lose everything you have worked so hard for because in the event of a tragedy.
Also know that insurance has both strengths (advantages) and weakness (disadvantages). It is important that these strengths (advantages) and weakness (disadvantages) be discussed so as to keep you more informed about the policy.
Advantages of an Umbrella Insurance Policy
You can usually get around $1 million in umbrella coverage for just a few hundred dollars per year. This is a small price to pay for a whole lot of protection.
You don’t have to worry about losing your property in the event of a large claim against you if you have substantial umbrella coverage.
You also don’t have to worry about having wages garnished due to a large judgment against you if you’re found at fault.
The Disadvantages of an Umbrella Insurance Policy
You may be required to increase underlying coverage
Your umbrella insurer may require you to buy more than the minimum in auto liability coverage, further increasing your overall costs.
You’ll be paying premiums for another insurance policy
Although a few hundred dollars a year may not seem like much, this is in addition to policies you’re already paying for, including auto insurance and your homeowner’s policy.
The insurance may not cover all losses
For instance, if you are sued for an error you make in your business dealings, your umbrella policy may not provide coverage even if your underlying policies do not fully cover you, either.
Please note that Umbrella insurances supply you with added protection in the event you hit the liability limits of your primary insurance plans.
Thus, if you have a substantial income or lots of assets, you should look for a personal policy to make sure you are as safe as possible from big losses in case claims are made against you.
However, as with all insurance policies, you should carefully read the fine print to understand what is covered and always endeavor to make sure you shop for umbrella policy that offers the most comprehensive coverage at a price you can afford.