Is Umbrella Insurance Worth the Investment?
The average person may not understand the importance of umbrella insurance, nor even know it exists. But umbrella insurance offers a layer of financial protection that is ideal for a range of situations. In this guide, we’ll take a look at umbrella insurance in more depth, so that you can determine whether or not this type of coverage may be right for you and your family.
What Is Umbrella Insurance? Umbrella insurance is a type of liability insurance that provides additional financial protection over and above what you may already have from a homeowners, renters, or auto policy. Although different insurance companies use slightly different criteria, generally, umbrella insurance kicks in when the primary policy has reached its limit and you still face financial responsibility.
Essentially, umbrella insurance acts as an excess liability policy and gives you access to a greater pool of funds if you’re ever sued for more than the limits on your existing insurance policies.
What Does Umbrella Insurance Cover? Any number of things can be covered by umbrella insurance. Some of the most common types of coverage include:
• Bodily injury liability
• Property damage liability
• Legal defense fees
• Libel and slander
• False arrest
• Invasion of privacy
• Personal injury
Umbrella Insurance vs. Traditional Liability Insurance: As mentioned, the major difference between umbrella insurance and traditional liability insurance is the amount of coverage they provide. Traditional liability insurance covers up to the limits set out in the policy. If there’s a claim over these limits, you’ll be liable for the difference.
Where umbrella insurance comes in is that it offers additional coverage if your limits are exceeded. This can be particularly useful if you’re involved in a serious accident and are deemed to be at fault.
Exclusions to Umbrella Insurance Coverage: Just like any other type of insurance, umbrella insurance won’t cover your entire risk profile. In general, there are a few common exclusions, such as:
• Damages caused by illegal activities
• Damages caused by business activities
• Professional liability
• Property damage caused intentionally
• Property damage that you live in
• Damage caused by employee negligence
• Damage caused by a motor vehicle accident in certain states
Who Should Get Umbrella Insurance? In general, people who have assets to protect or a greater risk of being sued should consider an umbrella policy. This includes people who drive their vehicles or those of their family members, as well as those who own rental properties or operate a business as a sole proprietor.
Plus, anyone who is regularly active in situations where a lawsuit might be likely, such as coaches and volunteer organizations, should certainly consider umbrella insurance.
How Much Does Umbrella Insurance Cover? The level of coverage you can expect from umbrella insurance varies, depending on the insurance company and the terms of the policy. Some plans start at $1 million in coverage and can go up to $5 million.
How Much Does Umbrella Insurance Cost? The cost of umbrella insurance will depend on the limits of coverage you choose. Generally, it will cost around $150-$300 a year for $1 million in coverage. For $5 million in coverage, the cost will be around $400-$800 annually.
Why You Should Consider Investing in Umbrella Insurance: Having umbrella insurance can provide you with extra peace of mind and ensure that you have protection in case of an emergency. It’s an inexpensive way to top up your existing liability insurance and enjoy greater financial protection in case of a judgment greater than what your policy covers.
In addition, by carrying umbrella insurance, you can ensure that you have sufficient coverage for loss of wages, personal injury, or medical bills that you may not be able to pay out of pocket.
Umbrella Insurance Conclusion
Umbrella insurance is a great way to supplement the liability limits of your existing insurance policies and protect you from financial ruin if a major claim is made against you. It provides additional coverage of up to $5 million, so it’s worth considering, especially if you have assets, rental properties, or own your own business. At a cost of around $150-$800 a year, umbrella insurance is an inexpensive, yet highly valuable, addition to your insurance portfolio.
Frequently Asked Questions About Umbrella Insurance
- What is Umbrella insurance?
Umbrella insurance is an additional liability insurance that provides extended coverage beyond your primary insurance policies.
- What are the benefits of having Umbrella insurance?
Umbrella insurance provides additional protection and peace of mind, it covers you for unexpected incidents, and can help you avoid financial ruin.
- What kind of incidents does Umbrella insurance cover?
Umbrella insurance covers a wide range of incidents, such as personal injury or property damage liability claims, libel, slander, and defamation claims, false arrest, and invasion of privacy.
- How does Umbrella insurance work?
Umbrella insurance kicks in once your primary insurance policy limits have been exceeded. It provides additional coverage up to its limits.
- Is Umbrella insurance expensive?
Umbrella insurance is generally affordable, considering the additional protection it provides. Prices vary depending on the amount of coverage needed.
- Do I really need Umbrella insurance if I have sufficient coverage on my primary policies?
Even if you have sufficient coverage, certain incidents may still exceed those limits. That’s where Umbrella insurance comes in.
- Who should consider Umbrella insurance?
Anyone who wants to protect themselves and their assets from unexpected situations should consider Umbrella insurance. It’s especially important for high-net-worth individuals and those with significant assets to protect.
- How much coverage do I need with Umbrella insurance?
The amount of coverage you need depends on your lifestyle and assets. A qualified insurance agent can help you determine the right amount of coverage for your needs.
- Does Umbrella insurance cover incidents outside of the United States?
Most Umbrella insurance policies do cover incidents that occur outside of the United States, but it’s important to check your policy for specific details.
- Is Umbrella insurance worth it?
Yes, Umbrella insurance is definitely worth it. The added protection it provides against unexpected incidents is invaluable and can save you from financial ruin.