Understanding Umbrella Insurance
Umbrella coverage provides extra liability insurance coverage that exceeds the policy limits of your car or homeowners’ insurance plans. If your existing liability coverage isn’t enough to fully compensate someone’s damages for which you were at fault, whether it is from a motor vehicle crash or accident in your home, this is where umbrella coverage steps in to avert potential disaster.
Who It Helps?
Regardless of the usual understanding of who this kind of coverage benefits, one does not have to be wealthy to enjoy the benefits of a good umbrella insurance plan. By virtue of owning your own home and being the breadwinner is enough to justify carrying this extra added protection. The reasons for obtaining this coverage are numerous, anything from dropping off while at the wheel and causing a crash, to dealing with that clumsy cousin who falls off your deck and breaks a leg. The fact is, without enough coverage, everything you have worked over the years to secure could all be subject to liquidation. Often, the usual car or home insurance will cover the initial $300,000. However, being personally liable for any dollar amounts that go beyond the standard limits indicates that this kind of coverage can mean the difference between financial stability and potential bankruptcy.
How it Functions
Going beyond the usual coverage protections, good umbrella insurance can protect one from the perils that are not under the purview of the usual homeowner or auto insurance plans. Examples include:
• Slander or Defamation
• False arrest or imprisonment
• Malicious prosecution
• Instigators of mental anguish
If you sued there is little doubt that you will incur often overwhelming legal expenses. Despite prevailing in a lawsuit, these costs can be no small sum. Having an umbrella policy, you can enjoy the peace of mind in knowing that you will have a legal team to you fight for you, while the insurer can also compensate you for such things as court costs and, again, the lawyers too. If you’re found liable for a substantial sum, your umbrella plan will protect you by helping with payments that exceed your standard coverage. (Limited to the level of your umbrella coverage.)
How it Works
Umbrella plans normally provide coverage in $1 million increments. Depending on various factors, the first $1 million of coverage of this kind will usually cost only $300 per year or so. Each additional $1 million of coverage will likely cost another $100.
Keep in mind that it only takes a moment, with one’s eyes off the road, to be distracted and then to hit another vehicle, or let’s say a visitor gets hurt on the property, (the list goes on and on), then you will soon find out how important umbrella coverage can be.