Insurance comes in may forms: health, life, homeowners, renters, the list is long. However, all of these policies have a commonality. they all have limits on the protections they provide, and those limits can be exhausted given the right (or wrong) unfortunate circumstances. For that, people turn to umbrella insurance.
What Is Umbrella Insurance
Insurance is often thought of as a financial safety net should an accident happen. If a person is in a car accident, auto insurance will cover the cost of repairs. Umbrella insurance can be thought of as a safety net below the safety net. If the same car accident above damages multiple vehicles, it’s possible (even likely) that the standard auto policy won’t cover the cost of all of those repairs, in which case the policyholder is liable for the remainder. This is where umbrella insurance comes in. Umbrella insurance offers additional personal liability coverage to your home, auto, or other liability insurance, should those primary policies not be sufficient enough to cover an accident for which you are at fault.
How Does Umbrella Insurance Work
The key takeaways to understand about Umbrella insurance are:
- Umbrella insurance is a personal liability policy that covers costs in excess of your primary insurance policy
- Umbrella insurance covers the liability of you and your family/household, but does not protect your property
- The primary policy payout must be exhausted before umbrella insurance will pay a claim
Umbrella insurance is primarily used to cover personal liability for injury to others on your property and damage to other peoples property for which you (or a family/household) member are at fault. It specifically does not cover personal injury or damage (accidental or intentional) to your own property.
Umbrella insurance is also subject to the exhaustion of your existing liability insurance, meaning that, if a claim is filed against a policyholder, the primary policy must have a claim filed for the entirety of the policy payout before umbrella insurance can be used. This begs the question as to why additional coverage shouldn’t just be purchased against the primary policy, for the sake of convenience. The answer is cost. Because umbrella insurance enjoys a secondary claim position, it is often made available at rates much lower than those found in a primary liability policy.
When Do You Need Umbrella Insurance
The decision to purchase umbrella insurance can incorporate many factors, some of which are subjective in nature. A common rule of thumb is that when the total value of all of your financial assets are in excess of the coverage afforded by your liability policies, umbrella insurance should be considered. The idea being that, in the event of a catastrophic accident, your assets are protected during a lawsuit. The final decision to purchase umbrella insurance however, is likely personal peace of mind. Policy holders have insurance so that they need not worry about the worst happening, and umbrella insurance provides an extra layer to that security.
To assess your umbrella insurance coverage and ensure you are protected, contact us at 772-287-3625