What is umbrella insurance?
Umbrella insurance is a type of personal liability insurance that can be essential when you feel you are liable for a bigger claim than your homeowner’s insurance or auto insurance. If you have a boat, umbrella insurance will also be taken where your watercraft liability insurance leaves.
Umbrella insurance even covers certain liability claims, those policies may not be, such as defamation, defamation, and false imprisonment. And if you own a rental property, umbrella insurance provides liability outside the scope of your rental policy.
What is an umbrella insurance policy?
Do you have any idea about what is an umbrella insurance policy? Here are some examples of things that might include an umbrella policy if your homeowner’s insurance or auto insurance isn’t enough:
- Your dog runs away from the house and painfully attacks the neighbor, who was going for a walk. Your neighbor has sued you for your medical bills, lost wages, and pain and suffering.
- Your daughter fights at school and punches another girl in the nose. The girl’s parents have filed a case against you.
- You have a 10-car accident and your auto insurance property damage coverage is not enough to replace the vehicles of all 10 accident victims. Or your liability coverage is not enough for their medical bills.
- You send sandwiches to your son’s school for field trips. Several students cause food poisoning and their parents sue you.
- Your teenager throws a party at your house when you are out of town. Someone brings alcohol to the party, and a guest is arrested for driving under the influence on the way home. You have been sued.
As you can benefit from these examples, umbrella insurance covers not only the policyholder but also their family or other family members. So if your teenager isn’t the best driver, your umbrella policy covers the medical bill of the affected party so you can get a good night’s sleep if your child is blamed for a major accident. That being said, make sure you understand how your policy defines a family member so you will have the coverage you need.
You may have noticed that although umbrella insurance serves as coverage for your homeowners and auto insurance on and off, this phenomenon does not have to cover your property or your vehicle for your umbrella insurance. You are covered worldwide except for the homes and cars you own under the laws of other countries.
Why do you need umbrella insurance?
The decision to buy umbrella insurance certainly involves a fear factor. Many insurance companies say you need it because of the lawsuit-happy world we live in, where anyone can sue you for anything and ruin you financially. You can find lots of personal liability horror stories in the news, where juries give victims millions of dollars in verdicts that individuals had to pay. But what are the chances of finding yourself in such a situation? Do you need umbrella insurance?
As a general rule, you may hear that you should buy umbrella insurance if the total value of your assets, including general checking and savings accounts, retirement and college savings and investment accounts, and home equity exceeds your auto or homeowner liability limits. The idea behind this advice is that you want to ensure enough liability to cover your assets completely so that you don’t lose them in a lawsuit.
Although this recommendation is not entirely understandable, the jury award could easily exceed the insurance policy limit. The real question you should ask yourself is, am I at risk of suing? Everyone, so in a sense, umbrella insurance is understandable for everyone. It is a small price for extra peace of mind.
However, some people are more likely to need an umbrella policy than others. If you are engaged in something that puts you at risk of extra liability, you are a better candidate for an umbrella policy. Risk factors for personal liability include owning the property, renting it out, hiring family workers, having a trampoline or hot tub, hosting large parties, and being a well-known public figure.
Having a teenage driver in the family also puts you at extra risks, such as owning a dog or owning a home with a swimming pool. The more likely you are to sue, the more strongly you should consider buying umbrella insurance. But anyone who is at risk will sleep better at night because they are protected by an umbrella policy.
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