A Factual Guide on Umbrella Insurance and Why you Need One

Nobody is perfect, and nobody expects you to be perfect. But there are going to be things out of your control. 

Say for instance:

• a car accident,

• a fire at your home,

• a serious illness or injury

that may cost more than you have saved up in savings and investments.

And if this occurs, what will you do?

Approximately 25% of Americans don’t have enough money saved for a $500 car repair or a $500 sudden medical expense. This is where an umbrella insurance policy comes in handy.

So what exactly is Umbrella Insurance?

People generally buy insurance to protect their assets and loved ones. But they don’t realize that besides standard policies they may require additional coverage. This additional coverage is what an umbrella policy gives.

An umbrella policy doesn’t take care of those holiday dinners out every night at the Cheesecake Factory, or those big-screen TVs that most people think they need to have. But it is designed to cover you for those legal defense costs that may come up. It’s also known as extra liability coverage. So if you have a rental property or are someone who has potential exposure to lawsuits, this is an insurance policy that should be looked into. An umbrella policy covers large risks which are above and beyond the coverage your homeowners’ policy already provides for.

Simply put, an umbrella insurance policy provides additional liability coverage that can protect your assets in case you accidentally cause harm to someone else or their property.

What does Umbrella Insurance Cover?

There are two basic reasons to have personal umbrella policies. First, it provides coverage on top of the liability limits you already have with your auto policy and homeowners/renters insurance policies.

And second, umbrella insurance protects you in cases where the limits on your standard policies are inadequate. For example, if you cause an accident and injure someone, or damage another person’s property, your standard auto insurance policy will pay up to the liability limits of that policy. But say the injuries sustained are severe enough that they exceed those coverage limits.

What happens then? In most cases, there is no additional protection available under your basic insurance policy. But, umbrella insurance kicks in after the limits of your standard insurance policies have been exhausted. Which means you would get coverage for expenses such as medical bills and pain and suffering.

In addition to umbrella coverage, there are other types of policies that come into play as well – such as 

• Umbrella auto insurance

• Commercial umbrella insurance

• Excess liability policies

Umbrella Auto Insurance

This is very similar to “umbrella” coverage for your personal assets. It’s an additional policy that extends the limits of liability for your car insurance. This provides you with protection should you be liable for a serious accident or fatality. For example, if your car is damaged in a storm and you are not at fault, but the other person is under-insured or doesn’t have insurance at all, then you may be able to file a claim with your auto insurance company for reimbursement.

If they don’t reimburse you 100%, then your umbrella coverage will come into place. It’s important to note that the umbrella policy only comes into play when your standard insurance is exhausted.

Commercial Umbrella Insurance

A commercial umbrella is a form of liability insurance that extends the limits of liability on your commercial insurance. If you have a business small or big, this is an essential type of coverage – if for no other reason than to protect yourself from lawsuits that may arise as a result of injuries or damages caused by one of your employees.

Excess Liability Policy

Excess liability insurance provides you with additional protection beyond your other policies. This is a great policy to have if you do anything for a living that might be deemed as risky by others, such as being a contractor or conducting business in an industry where there might be some danger associated with it.

What Does Umbrella Insurance NOT Cover?

Umbrella insurance will not cover intentional acts or criminal acts that resulted from a deliberate and premeditated plan. So if you were involved in a hit-and-run, this is something your umbrella policy won’t pay for because it was not an accident. And of course, neither umbrella nor any other type of insurance policy will protect you if you are negligent. For example, if you were out drinking and slammed into another car, your umbrella policy won’t protect you.

How much does Umbrella Insurance cost?

The cost of umbrella insurance varies depending on a number of factors, such as the location where you live, your driving record and credit history, and the limits you want to carry. But generally, it is fairly affordable – even if you can afford only a modest plan, it’s better than not buying any coverage at all.

How much Umbrella Insurance do you need?

Umbrella Insurance is like home insurance – you can purchase as much or as little protection as you want. If you have a family and assets to protect, it’s best to get enough insurance to avoid financial hardship if something were to happen.

Of course, there is no one-size-fits-all policy that applies to everyone out there. It’s an individual decision, and it depends on your income, assets, lifestyle, and many other factors.

To calculate how much coverage you might need, figure out how much is the value of your assets and liability coverage you would require to cover everything you own. However, be sure to discuss your options with qualified insurance providers who can answer any questions or concerns you might have.

Umbrella Insurance is for Me?

If you have assets that are important to you, if your income is dependent on your ability to work, or if you simply want the peace of mind that comes with knowing that your family will be taken care of should something really bad happen, then yes – umbrella insurance is for you.

Of course, even within these basic guidelines, there are a number of factors that go into determining how much insurance you need. Get in touch with reliable homeowners insurance companies in Texas that can help you assess your individual needs.

To Wrap It Up:

Umbrella Insurance has its share of advantages and disadvantages, but it’s still an excellent way to protect yourself from catastrophic loss or unexpected situations. And now that you know what umbrella insurance covers. And how it  is a very important part of any homeowner’s or renter’s policy, you can decide if the cost is worth the value. 

In the end be sure to take the time to research and compare homeowner’s insurance quote from different insurance companies in order to get the best price for your potential policy.