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Return To: Umbrella Insurance – The Ultimate Guide
Getting insured is one of the smartest investments anyone can make in their lives. The premium you pay every month for your insurance is worth it as this protects your income from unexpected events, keeps your emotional health in check as you’ll have peace of mind, and gives you the power to look after your family even if you’re not around anymore.
Your life can significantly improve when you’re insured, but it’s important to understand the terms before you get a policy. This information will help you to determine the kind of insurance to get, manage your expectations, and make the most out of the insurance you end up getting.
What Is an Umbrella Insurance Policy?
Umbrella insurance is one type of liability insurance that is in excess of other policies, such as the insured’s auto, homeowners, or watercraft insurance.
Umbrella insurance coverage provides an additional or extra layer of security for people at risk of facing legal repercussions for damages to other people’s properties or injuries and medical bills often caused by accidents.
Personal umbrella insurance coverage can also protect an insurer from the invasion of privacy, libel, slander, and vandalism.
An umbrella insurance policy is useful to individuals who have a lot of assets under their names but are at risk of being sued.
Small and startup business owners also utilize an umbrella insurance policy as a means of guarding themselves against monetary damages that can arise from the claims of their employees, shareholders, and other personalities in the business.
Ideally, umbrella insurance coverage is cheaper if acquired from the same insurance company that provided the car insurance, home insurance , or watercraft insurance.
Generally, insurance companies will require you to have a base insurance coverage of at least $150,000 for auto insurance and at least $250,000 for homeowners insurance before you can get an umbrella insurance policy.
How Can Umbrella Insurance Protect You?
Some people neglect the importance of getting umbrella insurance, thinking that this will only cost more money from their pockets. However, this isn’t true because umbrella insurance can provide countless benefits that reduce stress in your life once emergencies occur.
This section will explain how umbrella insurance can provide protection to you that is outside of your other insurance.
Imagine yourself causing a severe auto accident that inflicted serious injuries to another driver. The cost of these injuries was around $500,000, but the bodily injury limits stated in your auto insurance are only up to $300,000. In this situation, your auto insurance will cover $300,000 for the other driver’s injuries, but how can you pay for the remaining $200,000? This is where umbrella insurance comes in.
With an umbrella insurance policy, acquiring debt or applying for loans just to pay the remaining $200,000 won’t be necessary. An umbrella insurance policy will cover the amount that is above the limit set of your auto insurance policy, depending on the limit you choose for your umbrella policy.
The additional coverage that your umbrella insurance provides will surely save you from a lot of stress, especially when confronted with financial emergencies.
What Does Umbrella Insurance Cover?
As mentioned, umbrella insurance provides coverage for claims that are beyond the limits of your insurance policies. This kind of insurance includes liability coverage for the following:
- Damage to property
- Injuries
- Specific lawsuits
- Personal liabilities
While some auto and homeowners insurance covers some or all of these situations, these types of insurance don’t provide the same coverage as an umbrella insurance company.
To give you a clearer picture of what umbrella insurance covers, take note of the examples below:
| Type of coverage (under umbrella insurance) | Definition | Examples |
| Bodily injury liability | This will cover the costs of damages inflicted to another person’s body. | You’re at fault for a serious auto accident that caused severe injuries to other parties.Your dog bit or harmed other people.One of your guests fell down the stairs when visiting your home and incurred serious injuries.A child from your neighborhood fell and was hurt as he or she was playing in your yard. |
| Protection against liability for owners of rental units | This will cover liabilities you’ll face when you become a landlord. | A tenant slipped because of a leaking pipe inside your rental property, and is suing you for the damages.Your tenant’s dog attacked someone in the neighborhood and you’re being held responsible for their injuries. |
Umbrella insurance also provides coverage for false arrest, imprisonment, detention, and mental anguish.
What Does Umbrella Insurance Not Cover?
Although an umbrella policy provides broad coverage, keep in mind that there are still some exclusions. Just like other types of policies, umbrella insurance doesn’t cover everything.
Listed below are some of the things that an umbrella policy doesn’t cover:
- Damages to your own property: As mentioned, an umbrella insurance policy is a type of liability policy, which means that it will only provide coverage if you’re held responsible for causing damage to another person’s property. If you want to protect your own assets and property, it’s best to have updated and sufficient homeowners insurance.
- Damages that you or another covered member of your household caused on purpose: If you pushed any of your guests down the stairs or purposely damaged the pipes in your rental property to hurt tenants, your umbrella insurance won’t cover the cost of any lawsuits.
- Liability incurred in professional activities or business: Your umbrella insurance policy will not provide any coverage once you’re sued against claims of negligence. If you’re a doctor or accountant and a previous patient filed a case because of your negligence or malpractice, your umbrella insurance policy won’t help. In cases like these, you’ll need business liability insurance for better coverage.
- Liability related to armed conflicts or situations relating to war: Any financial damages associated with armed conflicts or war aren’t covered by umbrella insurance.
Start Looking for Providers
If you think an umbrella insurance policy meets your current needs and future goals, start looking for the best provider. An umbrella insurance policy is generally useful, but the insurance provider you choose today can impact the number of benefits you’ll experience in the future.
If you don’t know where and how to start your search, check our website. We, at ALLCHOICE Insurance, offer different types of insurance, along with a reasonably-priced umbrella insurance policy.