If you own anything of value that you don’t want to lose, chances are you have an insurance policy. The policy is designed to protect you and your asset on the off chance there is damage or injury sustained. What most people aren’t aware of is their liability coverage amount and what will happen in the event of a lawsuit. If someone is seeking damages higher than their current policy covers, the remainder will have to come out of pocket. Unless you purchase an umbrella policy.
What is Umbrella Insurance
Before we dive too far, let’s take a look at what is umbrella insurance. Every insurance policy you have includes liability coverage. The liability coverage is an amount set aside to protect you on the off chance you are sued when you are assumed “at fault” during an accident. These accidents could happen while driving or when someone is at your home. Most plans cap at a certain number. Umbrella insurance expands that number in case the financial damages sought are higher than your current liability covers. It’s an additional layer of protection for your assets and wages. There are many comprehensive policies available that will also cover slander, libel, and false arrest.
4 Important Facts About Umbrella Insurance
1. You Can Obtain Umbrella Insurance for Your Car
There is a lot to be said about liability risk. Regarding auto claims, liability includes any accident where another driver claims you are at fault, even if you weren’t. While you might be a safe driver, others listed on your premium might not be and cause an accident. An umbrella policy will assist you on the off chance you are sued for more than your coverage. Some policies will extend your coverage to about $1 million which is three times the amount of a standard policy.
2. You Can Attach Umbrella Insurance to Your Home
Car accidents contribute the most when it comes to umbrella losses, but there are plenty of opportunities to have an accident in your home. A guest at a party could slip and injure themselves. The policy could help your friend or family member if they decide to sue for money. Any renovation being completed with contractors onsite expands the liability risk. Subcontractors have and could try to sue for workers’ comp or liability if they sustain any sort of injury while on the job.
3. Financial Planners Encourage Umbrella Policies
Anyone who has a substantial network is strongly advised by their financial planner to obtain this type of policy. On average, a settlement in a vehicular accident is $21,000, but there have been cases that hit $300,000. If someone decides to sue and finds out that you have assets, they could try to come after it. A policy such as this should be used to prohibit an accident or lawsuit from being a life-changing event.
4. Premium Costs Aren’t High
It’s easy to dismiss the idea of umbrella insurance if you think of it only as an additional expense. But, the truth is it doesn’t cost much to increase your liability to around $1 million. A typical homeowner can get additional coverage for less than $400 a year. That’s a million dollars in liability for less than $35 a month. Cheaper than most gym memberships. Some financial planners encourage their clients to find policies that cover at least twice the amount of their individual worth.
Who Needs Umbrella Policies?
Umbrella policies aren’t just for individuals with a high net worth. Anyone with a stable income and a good livelihood will benefit from the policy. You’re not only protecting your current assets; you’re protecting your future earnings. The American climate is particularly litigious. You don’t have to be at fault to find yourself in a lawsuit. As we previously mentioned, this extension of your insurance can also help if you are faced with slander and libel charges.