To understand umbrella insurance, let us first go through the definition of liability insurance. Liability insurance is the kind of insurance that gives protection to any business or individual from the risk, for which they may be held legally accountable or sued for something like injury, negligence or malpractice. Liability insurance covers legal costs as well as legal disbursements, for which the insured person may be responsible, in case they are found legally accountable. This type of insurance does not cover contractual liabilities and intentional damage.
Now, let us come back to umbrella insurance. This type of insurance gives extra coverage of liability insurance, which goes further than the limitations of the insured’s auto, watercraft or home insurance. It gives an additional layer of security to those people who face the risk of being litigated for damages to property of other people or injuries caused to them in any kind of accident. Umbrella insurance also gives protection against slander, vandalism, libel or invasion of privacy. Umbrella insurance comes to the rescue of the insured if the insurance owner gets sued and he has already exhausted the maximum value of the original policy. This type of coverage is most used by people to have added protection, normally by those who own a large number of assets, or face the risk of being sued often.
Why do you need umbrella insurance?
Risk for an individual increases as their earning power increases along with their value of assets. Therefore, one needs more insurance coverage with time. If you feel that you would require minimum one million dollars of added protection over your present automobile or homeowners liability limits, you can choose to buy excess liability. Umbrella policy or excess liability is required for additional protection if the judgment goes against you and the amount surpasses the liability limits of the existing homeowners or auto policy. Umbrella insurance can be procured for one to five million dollars. Umbrella insurance raises your limits of personal liability by adding protection to the present auto, watercraft or homeowners policy.
How liability coverage of auto policy or homeowners’ policy might not be sufficient
Homeowners insurance gives coverage of at least $100,000. This coverage gives you protection if someone is injured or their property is damaged because of any situation in which the insured or their family is responsible. The insurance coverage varies in different states. But, the normal minimum liability protection is approximately $25,000 per person for auto insurance and $50,000 for accident.
Using both these amounts of coverage, you can buy higher amounts of legal responsibility protection. However, the maximum amount of insurance that can be purchased is either $500,000 in case of homeowners’ policies or approximately $250,000 per person and $500,000 for each accident in case of auto insurance. These amounts may seem too small in today’s environment where judgments pertaining millions of dollars are becoming increasingly common, even for minor situations.
How to buy umbrella insurance?
You can buy this type of insurance from the same insurance provider, from whom you have bought earlier insurances. Before you buy umbrella insurance, you need to ensure that your new policy is actually required and is affordable. This is where Buck & Affiliates comes in. We can go over your current policies and match you with the best provider for your needs.
Is there any risk of lawsuit to you? Scrutinize with all possibilities if you can get sued by someone for getting them injured. For instance, if you have a dog, you are at risk because dog –bite claims are more common these days. If you have a teenage driver at home, or any other such instance, where you think that someone might get injured because of you or your family member you can consider buying this type of coverage.
Do you have any risky assets? If you have assets like homes, brokerage accounts, retirement savings, or cars, you can protect them using an umbrella policy. These assets are covered only partially by other insurance policies.
Determine the amount of extra insurance that is affordable
You need to figure out the extra amount of money that you can afford to pay for additional protection.
High coverage: Almost all insurance companies require to you to have a minimum coverage of $300,000 on their homeowners’ policy and that of $250,000 on the automobile prior to procuring umbrella insurance. If you choose to raise the coverage, you will have to disburse higher premiums on both these basic policies along with the extra premium for the policy. The additional premium cost you around $150 for the coverage of $1 million.
Higher deductible: Many policyholders have coverage of $1 million per incidence if a mishap occurs while driving or at home. One way to avoid paying premiums of umbrella insurance is to increase the deductibles of auto and home policies up to a level that you can pay higher premium if something happens.
Look for discounts: Buy your insurances from a single reliable company to save on policy premiums.
Compare: We will compare multiple companies and help you determine the best route for you to take for your coverage.
Consolidate: Many insurance companies make it mandatory to buy home and car insurance from them to buy umbrella insurance. You can save as much as 20% on premiums if you stick with a single insurer for the basic policies.
What you should avoid doing
You must not commit these mistakes to avoid spending additional money.
Do not ignore trivial things: If you possess a motorcycle, a boat, etc, you will require different insurance policies. Then, you can use them to add to the umbrella policy. Else, if a crash occurs when you are using them, you may go entirely short on money paying for the legal suits.
Do not go too cheap: Once you cross a certain stage, it is not worth skimping on insurance premium. If you require over $1 million for coverage, you will require paying additional $50 every year for an additional million of protection.