What is umbrella insurance and how does it benefit you?

Do you have enough liability coverage that can cover the costs if you’re sued for causing an accident because of your negligence? In such a situation, an umbrella insurance policy can provide added protection. When you purchase this insurance policy, you actually buy a broader insurance coverage with high liability limits in comparison to your primary policies.

How umbrella insurance helps you

This insurance is designed to provide you with added liability protection above and beyond the limits of your existing insurance policies, such as, your homeowners insurance, auto insurance, etc. Depending on your insurance company, you can add additional 1-5 million liability coverage to your insurance policies. This additional coverage comes to your help when the liability limits on your existing policies get exhausted.

As for example, suppose you have home insurance and auto insurance with liability limits $400,000 and $600,000 respectively. With a million dollar umbrella coverage, you can increase the above limits to $1,400,000 and $1,600,000 respectively. Umbrella insurance covers liability claims from all the insurance policies under it.

Types of umbrella insurance

Based on the purpose it serves, umbrella insurance can be primarily divided into 2 types, which are discussed below.

1. Personal insurance: As already discussed, if you have personal umbrella insurance, then you can get extra liability protection over and above your personal insurance policies, such as, auto insurance, home insurance, etc. Thus, you’ll get coverage if a tree in your compound suddenly falls down and damages your neighbor’s home or car. The insurance will cover the liability costs even if it is more than the mentioned limits in your homeowners liability coverage.
2. Business insurance: You should purchase this policy if you have a business of your own. As the name suggests, business umbrella insurance provides additional coverage for your business in certain issues of liability. This policy covers the costs when your business liability insurance gets exhausted. Thus, you may need umbrella coverage if you manufacture a product that can injure people or cause damage to their properties

1. Myths about umbrella insurance

   There are certain myths regarding umbrella insurance. Many of you think that it is only for the rich, the premiums are highly expensive and it is quite difficult to coordinate this policy with your existing ones. However, in reality, this insurance is quite affordable and it can be easily coordinated with your existing policies. Moreover, anyone may require it regardless of his/her economic status as a lawsuit can shake your financial stability if it is more than your existing insurance liability limits.

   Exceptions of umbrella insurance

   Before purchasing the insurance policy, you should know that there are certain exceptions to it. Firstly, these policies vary from one state to the other; therefore, your umbrella insurance may not provide you with the coverage for anything and everything you may be sued for. As for instance, you may not get umbrella coverage if you’re sued for punitive damages, which are meant to punish people for their bad conduct. Intentional acts are also not covered under this insurance policy.

   When you purchase umbrella insurance, it is essential to talk to your agent and understand the coverage details so that you don’t get unpleasant surprises in future.