Umbrella Insurance – Must Have Home And Car Insurance


Umbrella Insurance - Must Have Home And Car Insurance

Umbrella insurance is referred to as extra liability insurance, which gives you protection from serious lawsuits, and thus protecting your assets and paving the way for you.

If someone is facing a lawsuit, their auto or homeowners policy will give them some liability insurance.

It covers paying their attorney’s fees and the judgments against them.

In spite of this, people should be always ready with another type of liability protection. In this litigious world, a personal umbrella liability policy is exactly what people need.

An umbrella insurance takes over as soon as the underlying liability coverage has been exhausted, such as in an auto, homeowners, condo, or renters policy.

Moreover, it also starts to take effect when you are facing slander and libel.

You can get a $1 million personal umbrella policy at $150 to $300 a year. The next million costs approximately $75, and for every million thereafter, you need $50.

In two ways, it:

  1. Gives extra liability policy over the limits of your insurance policies. This insurance will take effect when the liability on these other policies such as auto, homeowners, and boat have already been used.
  2. Offers protection for claims that may not be included by other liability insurance plans such as libel, slander, false arrest, and your rental units.

Know what the umbrella insurance covers

Are you still unclear about the umbrella policy coverage? Here’s more information about it. This insurance policy covers:

  • Personal liability situations listed below.
  • Damage to property
  • Injuries
  • Certain lawsuits

Even if your homeowners and auto insurance covers some of these cases, the umbrella policy provides protection, exceeding the limits of those coverage and includes certain circumstances that are not protected by other insurance plans.

The rates are also not as costly as you may think.

Given below are examples of umbrella insurance policy coverages and how they protect their members:

Bodily Injury Liability – This shoulders the cost of damages or injuries to the body of another person. For example, liability claims or medical bills caused by these circumstances:

  • A house guest is injured due to an accidental fall.
  • Other people are hurt from a major vehicle accident by which you are accountable.
  • A neighbor’s child is injured from a fall while he is in your property.
  • Other people are physically hurt because of your dog.

Property Damage Liability – This handles the cost of loss or damage to the tangible property of other people. The cost is related to:

  • The accidental damage made by your child to a school property.
  • The damage you created to another person’s property and vehicle due to a car accident.
  • Damage claims sustained to a friend’s expensive rug when your dog tears it to shreds.

Owners of Rental Units – This helps you deal with liability claims if you are a landlord. For example:

  • The pet of your tenant bit another person and you are asked to pay for the injuries.
  • A person trips over a sidewalk crack in your rental property and file a suit against you.

Insurance protection also covers these lawsuits:

  • Imprisonment, detention, or false arrest
  • Libel
  • Slander
  • Shock/mental anguish
  • Malicious prosecution
  • Other personal liability situations

Who Qualifies for Umbrella Policy?

Umbrella Insurance is designed for all. It does not matter if you have your own house or not. Whether or not you have money in the bank, you can be held responsible for damages any time. Your may find your retirement savings, college fund, or earnings at risk.

A costly accident can happen to everybody. For example, a serviceman falls on the stairs of your home, causing a jury award for lost wages and injuries, which is more than your homeowners insurance liability.

Personal umbrella policy includes and extends liability protections and pays for the expenses and damages brought on by home accidents, vehicle accidents, or RV accidents.

How Much Does It Cost?

An umbrella insurance coverage normally starts from $150 to $300 for a $1 million plan. Opting to increase your insurance coverage will cause the premium to go up.

But, if you choose to double the amount of coverage and extend the policy limit up to $2 million, it does not always double the amount of your premium.

Certain limits have to be fulfilled to be able to obtain this policy, since personal umbrella coverage kicks in only when the underlying coverage is already used.

Before an insurance provider will offer you additional coverage of an umbrella liability policy for $1 million, first they will ask for $300,000 of liability insurance on your homeowners policy and $250,000 on your auto policy.

Does It Include Lawsuits?

Many people actually decide to buy an umbrella policy mainly to protect their assets against any lawsuits.

The umbrella insurance typically protect you from liability claims and lawsuits that do not lead to legal action.

The primary goal of liability insurance is to provide protection to you (and your legal defense even when you are not held accountable) if you are found responsible for causing bodily injuries or damage to property.

If you are being sued for the damages you are held responsible for, the person suing you is usually asking for financial reparations.

Your liability insurance will take care of the costs related to the claim after the insurance deductible has been paid, and up to the maximum amount of the liability insurance.

In case the offended party is awarded higher than your basic liability insurance, then the umbrella policy pays out.

Does It Include Flood Damage?

Umbrella insurance typically does not include floods. It only handles physical injury and property damage that you are being held accountable. It also only pays out to a third party.

On the other hand, the umbrella policy might handle cases about water damage.

Here is an example; you live in a condo or an apartment that is above another unit and your bathtub overflows because you forgot to turn it off.

Then, it ruins the expensive furniture of your neighbor downstairs. Basically, the umbrella policy is likely to cover the damages of a major lawsuit or claim.

Does It Include Rental Property?

People who can really benefit from the liability insurance protection are those with assets or who can potentially face a lawsuit.

In case you have a renter’s insurance, you can buy an umbrella insurance in order to extend the liability limits of the standard policy coverage.

If you are being blamed for bodily injury or property damage, your umbrella policy will cover any legal fees as well as help protect your assets.

For landlords, umbrella insurance policy is an ideal investment. If you the owner of a rental property, it is your responsibility to protect all your tenants and visitors from risk or danger.

An umbrella policy provides you with protection in various circumstances, including when:

  • A visitor is injured while in your pool or workout facilities.
  • A visitor suffered a fall because of a broken handrail or step.
  • A former tenant that still has a key burglarizes the apartment unit because you failed to change the locks.
  • A third party blames and sues you for the damages that your tenants created.

Moreover, it is advisable to protect yourself with an umbrella insurance if you have a large amount of personal net worth.

Does It Include Property Damage?

While umbrella policy covers damage to property scenarios, it does not apply to all. Accidents happen all the time, and you cannot say how serious the damage is, unless you ask for an estimate.

If an accident happens and wrecks a few vehicles, it may leave everyone unharmed, yet the property damage to other vehicles may be enough to cost a fortune.

Here’s Another Example

Take a look at this example to understand even further how umbrella insurance can protect you. If you were the cause of a car accident and the bodily injuries it brought on to other people cost you $300,000.

And then, your car insurance has a bodily injury limit of $100,000. The car policy will pay for this $100,000 to cover the damages.

So, who will take care of the $200,000? This is when umbrella policy enters the picture.

It covers the amount that exceeds the limit set in your car insurance, as much as the limit you pick for your umbrella insurance policy. Now, that will definitely give you the assurance you need.

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Written by ratetake


Martin is Head of Real Estate and Finance division at RateTake. He creates content that helps people understand and make the right decisions for their financial future.