Insurance liability and your umbrella

You have your umbrella to shield you amidst the harsh weather conditions. Why not buy umbrella coverage to protect your properties as well?

What is an umbrella policy?

An umbrella policy provides additional insurance protection in case your home, auto or renter’s policy fails to do so. It is an extended branch of liability coverage that conventional insurance policies come with.

When will you need an umbrella policy?

Your primary insurance policy will provide limited liability coverage. Since an umbrella coverage promises extra protection, it’ll be helpful in the following circumstances:

1. If you own multiple properties like vehicles, second homes, personal watercraft or boat etc.
2. If you have a teenage driver in your home
3. If you own a pet in the house, for e.g. a dog etc.
4. If you have a swimming pool within your property.
5. If any visitor gets accidentally inured within your premises.
6. If you cause any damage to your neighbor or his property.
7. If a fire in your condominium spreads into the surrounding units.
8. If you’re being sued for false claims and intentional acts such as libel, slander and vandalism by minors. It also offers coverage for false arrests, wrongful entries, and/or invasion of privacy. The policy will bear the costs of attorneys as well.

Are there any limitations for an umbrella policy?

An umbrella policy provides an extra layer of liability coverage along with the regular insurance policies that you may have. There are hardly any specific limitations to buy surplus protection. However, the insurers may impose some limitations as mentioned below:

1. The insurers may refuse to provide an umbrella coverage if you don’t have both your home and automobile insured with them.
2. The insurers may also ask you to maintain certain limits of liability coverage under your home or auto insurance policy for protection against bodily injury, accidents and/or property damage.

How much protection will you need?

You may buy as much excess liability coverage with an umbrella insurance policy, as you want. However, the current assets that you have and their potential net worth are usually taken into account while deciding on the limits of coverage. It is advisable to buy more than the net worth of the assets, since you never know how you’ll be held liable for a damage or loss.

What will be the cost of coverage?

An umbrella insurance policy is quite affordable, if you consider the extent of liability coverage that it offers. You may end up paying $300 per year for the first $1 million in coverage. However, rates for the next $1 million coverage might be as low as an additional $100 per year. You may end up paying out of your own pocket if you don’t have adequate liability coverage. The extra bit of insurance protection promised by umbrella coverage is particularly crucial to protect your assets as well as your future financial income, if you face similar situations.