Umbrella Insurance And Why You Need It

With lawsuits flying up and down around America, getting an umbrella policy to help cushion or protect against excessive financial loss from unforeseen events such as a car accident, or an accident on or within your property, is very important. An umbrella policy is an additional liability insurance policy which protects you and your assets (both existing assets and future assets) against the cost of losing a large amount of money after being sued and losing a court case. It can be referred to as a secondary policy, which is combined with your primary policies, usually your homeowners and auto insurance policies.

How does an Umbrella Policy work and what does it cover?

An Umbrella policy offers ultimate coverage over all your existing policies and kicks off right where your primary policies stop. For example, if your auto insurance pays $100,000 of medical expenses per accident and your umbrella policy is for $500,000 and there’s a situation where you are sued for $300,000, your auto insurance would pay $100,000, while your umbrella policy covers the remaining $200,000. Umbrella policies can cover as much as $1 million to $5 million of additional coverage, in addition to also covering all the legal expenses involved in you being sued. This could involve hiring a better legal team for you (since the insurance company’s money is at risk when you are sued), paying you if your appearance at court causes you to lose money at work, etc. Along with all these, your umbrella policy also covers accidents caused by your dependent children, accidents that happen on property you own and rent out to other people, and personal injury lawsuits from slander, libel or character defamation.

Who needs an Umbrella Policy?   

Nobody ever plans for disasters occurring to them or their property, therefore having an Umbrella Policy to shield you from large lawsuits may prove to be necessary. Umbrella Policy is most likely to be beneficial to people who fit one or more of these categories;

  • People who often host guests: If you are the kind of person who always hosts parties or events at your house, then you are at a higher risk of having someone slip or fall inside your property, which can get you sued for medical damages.
  • People who own rental properties: When you rent out your investment properties, you are liable for maintenance workers and contractors brought on to your property by you. There is always a risk of an accident causing injuries on your rented property.
  • People who spend time in their cars: The more time you spend in your car moving from one place to another, or going to work and back home, the higher the risk of an accident occurring on the road.
  • People who own small businesses: A large lawsuit is one of the quickest ways in which small business get run down. So in order to prevent you from packing up your business quickly because of expenses from a lawsuit, it is best you pick up a good and befitting Umbrella Policy to have you covered.
  • People who own dogs or other potentially dangerous pets: There is always a possibility of a scenario where your dog or other pet could mistakenly harm someone else in your house, thereby leading to a lawsuit.

In conclusion, previous human experiences have shown that an Umbrella Policy is a should-have for everyone, regardless of whether you have a lot of assets or not. This is mainly because you can never tell when you might get hit with a big lawsuit; therefore it seems wiser to let go of that small price per year in order to protect yourself from a disastrous loss.