Umbrella insurance policy protects the user and his assets from lawsuits. Consider it an excess liability coverage. Its purpose is to provide liability protection above the standard car, homeowner, or boat insurance. The policy might also cover you from the claims excluded by other liability policies.
How Can It Help?
To understand why buying an umbrella insurance policy is necessary, it’s important to understand what’s covered by this policy. Let’s have a look at scenarios it can help:
- Property Damage
Let’s say you are at fault in a car accident and you have destroyed another vehicle or property. And on top of that, the liability of your standard auto insurance policy is exhausted. Here, an umbrella policy can help.
- Bodily Injury
If a guest falls off your balcony or they are accidentally bitten by your dog, a standard home insurance liability will be insufficient to cover the costs related to this damage.
- Landlord Liability
If a tenant gets hurt because of an injury sustained while they were renting your property, they could file an expensive lawsuit. Here again, the umbrella policy will have your back.
How Does Umbrella Insurance Work?
Umbrella insurance policy covers the hefty legal fees for defending you in a lawsuit as well as the portion of settlement/judgment that exceeds the limit of your home or car insurance liability. If you don’t have this coverage, you will have to pay for the additional costs out of your pocket.
And let’s suppose if you can’t pay, then you will have a lien placed on your property. You might also have to use your savings or retirement funds to meet the expense and this could shake your financial stability down the road.
How Does It Cover the Expense?
The process of filing for an umbrella insurance claim differs depending on the type of claim. Let’s suppose you were involved in a car accident. In that case, inform your insurance company ASAP so that they may get started with the claim. Your auto insurance will cover for the expense up till the coverage allows. It’s likely that you still owe money. The total that exceeds the insurance policy will be handled by the insurance company from which you have bought the umbrella insurance policy.
The umbrella insurance will cover the damages exceeding the limit of your auto insurance. Usually, the limit of the umbrella insurance policy is between one million to 5 million dollars.
Who Needs Umbrella Insurance?
Can’t figure out whether or not you need an umbrella insurance policy? Not everyone would be at the stake of getting sued and that makes it hard to decide whether this plan is for you or not. If you have established assets that you would like to protect from losing because of a lawsuit, then this policy is for you. In fact, it’s for anyone who has assets or future savings that might be at risk.
Now that you know why this insurance policy is important and how can it protect you from draining a significant portion of your savings or assets, find an insurer with the best plan.