What Is An Umbrella Policy and What Does It Cover?

Umbrella insurance is a wide-ranging liability coverage that's purchased to provide excess liability protection above and beyond that which is provided by your basic insurance policies. Its primary purpose is to protect your assets in the event that you're subject to a large liability claim. Such a large claim might otherwise exhaust the normal liability coverage limits for your other policies, such as homeowner's, renter's and automobile coverage.

Like any liability protection, umbrella insurance pays off in the event that you are responsible for a loss of property damage, bodily injury or life from a third party. In addition, its benefits kick in only after your other, basic liability coverage limits have been reached.

Why Should You Consider Umbrella Insurance?

The primary reason to consider adding an umbrella policy to your regular insurance coverage is to protect your assets. If you are found legally responsible for liability claims surpassing the limits of your basic homeowner's or vehicle liability coverage, you may be financially wiped out. Umbrella coverage limits are much higher, often $1 million or more. You may need this level of coverage if, for example, you cause an accident where several people were seriously injured and who required comprehensive medical care and rehabilitation. Often, auto insurance liability coverage limits out at $250,000 or less.

Major Assets Require Protection

Being held financially liable for losses caused to another or being successfully sued for a large amount of money could literally wipe out your accumulated assets, as well as those you have yet to acquire. This may include your:

• Home and other real estate
• Personal property, including personal vehicles
• Investments
• Retirement accounts
• Bank accounts
• Future income

In addition, umbrella insurance can provide broader coverage, including repayment for costs associated with legal fees, a false arrest, or being charged with slander or libel. Having an umbrella policy in place is one way to prevent against financial ruin that may occur as the result of one unforeseen incident. As a landlord, you need it to protect against being sued by a tenant or one of their guests. As a homeowner, it protects you from someone being injured on your property and coming after you for a huge settlement beyond the limits of your homeowner's coverage limits. In the grand scheme of things, the cost of umbrella coverage is insignificant when compared to the amount of protection you receive.  For more information about Umbrella Insurance, call Tom Needham Insurance at 336-855-1223.