Have you been advised to get Umbrella insurance, but you are unsure what it is, what it covers, or why you even need it? If the answer to this is yes, then you are in luck! In this post, we will answer the question: “what is umbrella insurance”, how does it work, who needs it, and other important information about it. So read on!
What Is Umbrella Insurance?
Umbrella insurance is a form of liability insurance that provides additional coverage to what is offered in the underlying policy. It is primarily used to protect the insured from unforeseen circumstances such as lawsuits, natural disasters, and other events that could cause significant financial loss that goes over and above your other insurance policies.
For example, let’s say you’re involved in a car accident, and the other driver is suing you for $1 million. If your auto insurance covers the first $500,000, your umbrella policy insurance will cover the other $500,000.
How Does An Umbrella Policy Work?
Here are some instances to help you better understand how an umbrella insurance policy works:
If you own a pet that furiously attacks a passerby, the victim can sue you for medical expenses, pain and suffering, loss of wages, and others.
You invited people over for dinner, and there was a case of accidental food poisoning that affected numerous guests; the affected guests can sue for pain and suffering, medical bills, lost wages, trauma, and others.
While you’re out of town, your teen hosts a party at your home, and one of the party guests comes in with alcohol. When one of the party guests was driving home, he was arrested for drunk driving, and you were sued for the damages.
If your teenage child had an auto accident that involved several cars, the victims could sue you for the damages.
Let’s say one of these scenarios requires you to pay a $500,000 insurance claim. Your liability insurance or auto insurance plan covers $300,000; the remaining $200,000 will be an out-of-pocket expense. However, if you have an umbrella insurance plan, you won’t have to use your savings or other means to cover the outstanding expenses. Your umbrella insurance policy will cover the outstanding $200,000.
In addition, if you take a closer look at the scenarios stated above, you will notice that the umbrella coverage protection you’ll get is not restricted to damages caused solely by your property; it can cover the damages caused by your family members’ property. Umbrella insurance also offers worldwide protection with exemption to your automobile and homes acquired in accordance with the laws of other nations.
Who Needs An Umbrella Insurance
Umbrella Insurance policy is suitable for persons with significant assets or at a higher risk of being sued. It could be beneficial to have umbrella insurance if you fall into the following categories:
One of your family members is an inexperienced driver
You coach children’s sports
Concerned about potential liability claims when visiting foreign countries
You own properties that have the potential to cause damage, such as weapons, pets, pools, trampolines, and others.
Generally speaking, many people are now aware of their legal rights, and the internet is flooded with legal knowledge. Although a good development, it still means anyone with the right knowledge can make you pay significantly for any damage done to them. So it is only wise to be well prepared for situations like this, especially if you have a lot to lose.
Generally, experts advise that a person should consider buying an insurance umbrella policyif the total value of their assets is more than the limits on their homeowners’ liability, auto insurance, and other liability insurance plan. This recommendation is to help people obtain sufficient liability insurance to completely protect their assets so that they won’t lose them in a lawsuit.
How Much Does Umbrella Insurance Cost?
The cost of umbrella insurance depends on factors like the size of your policy, the state you live in, and your personal risk profile; however, according to the Insurance Information Institute, a $1,000,000 umbrella policy costs between $100 and $300 a year. Umbrella insurance typically comes at a reasonable cost, given the high coverage limit. However, if you have to increase your liability insurance to satisfy the minimum levels necessary for umbrella insurance, you might also have to pay extra for your other Hanover insurance plans.
However, it would be best to note that before you can purchase an umbrella insurance policy, you must purchase at least a minimum of liability insurance on other policies such as homeowners insurance, auto insurance, renters insurance, and others.
What Is Not Covered By An Umbrella Policy
Umbrella insurance is an important type of coverage that provides extra protection for you and your loved ones. But it’s not all-encompassing, and there are some things it doesn’t cover. For instance, it doesn’t cover the injuries you sustained or property damage. So if you’re hit by a car and injured, your umbrella policy will not pay for your medical expenses. That’s something that your health insurance policy would cover.
Furthermore, unless you have commercial umbrella insurance rather than a personal one, it won’t cover liabilities related to your company or business. Also, umbrella insurance doesn’t cover intentional criminal acts, damages to personal belongings, and liability resulting from agreements you’ve made.
In conclusion, umbrella insurance is the policy that reinforces your insurance plan. However, it’s important to shop around for the best rates and to read the fine print so you know exactly what is and is not covered by your policy.
Contact us at Miller-Hanover New Oxford Office for more information about the umbrella insurance policy. We offer top-notch insurance policies such as homeowners insurance, auto insurance, and many more. Our team is always ready to listen to you and provide you with answers to all your inquiries.