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It's an unfortunate fact of life, but accidents happen. Sometimes, despite your best attempts at being safe, you are the cause of an accident.
With this in mind, it makes sense to have the best insurance you can possibly have to help protect you financially when you cause injuries to others or damage their property in an accident. Umbrella insurance does just that by being an extra level of protection to your car insurance and home insurance liability.
What is Umbrella Insurance?
As the name implies, this coverage acts like an umbrella, providing broad protection against a host of potential financial dangers.
Umbrella insurance coverage works in conjunction with a homeowners and/or auto insurance policy; it gets applied AFTER you've exhausted your liability protection with those policies.
Because umbrella insurance is a form of liability insurance, it does not cover:
- Your own medical expenses.
- Losses to your property.
What exactly is covered by your umbrella insurance depends on your insurance company. Generally, umbrella insurance covers:
- Injuries that:
- You cause in a car accident.
- Someone suffered on your property.
- Property damage that:
- You cause in an accident.
- Your pet causes.
- Your child causes.
Besides providing an extra layer of liability protection, umbrella insurance can also pay for your attorney fees and other legal costs if you're sued. Umbrella insurance is also typically portable, so it will follow you wherever you go―even overseas.
NOTE: Terms of umbrella insurance policies will vary, depending on your insurance company. Contact your car insurance agent to discuss the benefits and restrictions of their coverage.
Umbrella Insurance Limits
Umbrella insurance limits tend to be be very high. Some insurance companies offer umbrella insurance limits into the millions of dollars. Purchasing higher limits will cost you more money, but you might find it is worth it if it offers you more comfort knowing you're adequately insured.
Who Needs Umbrella Insurance?
While it may seem that only those people with a lot of assets are the only ones who really need umbrella insurance, almost anyone could benefit from having an umbrella insurance policy.
Let's say someone is visiting your house, slips on the ice on your sidewalk, suffers severe injuries, and sues you. Your homeowners insurance will protect you―but only up to its maximum limits.
Or let's say you cause a terrible accident that results in a devastating amount of bodily injury and property expenses. Your car insurance policy will only pay for so much, and then the rest is up to you.
In both cases―and many more like them―an umbrella insurance policy can cover the amount that exceeds your coverage, usually up to $5 million. In the process, it can save you from a financial nightmare and having to hire an attorney to help you survive it.
Are Umbrella Policies Expensive?
Considering the extensive protection it provides, umbrella insurance is relatively affordable, as it's unlikely you will have to make a claim on your umbrella insurance. When you're less likely to file a claim, the insurance company faces lower risk, meaning it will tend to charge less for the coverage.
Understand, however, that your specific cost will be determined by:
- The amount of coverage you purchase.
- Your insurance provider.
- Your risk profile and driving record.
For the sake of cost and convenience, it's best to purchase umbrella insurance from the same insurance carrier who provides your home and/or auto insurance.