Umbrella Insurance – Do I need a policy?

Like all other insurance policies Umbrella insurance is not at the top of minds of most of the investors. One of the top most reasons is that it is quite boring and most of people think they don’t actually need it.  It is super economical for what is meant to cover; however, it is one of the least utilized kinds of insurance.

What is Umbrella Insurance?

Umbrella Insurance provides protection against unexpected event. I know you must be thinking it is true for all the insurance policies but what makes it different is that it covers you from the loss that may cause due to litigation against you. Principally, it protects you from the loss from fault for damages to the assets or people beyond your motor and home insurance liability.

For example if you get into a car crash and fortunately didn’t get hurt although the other car gets serious damages and had C class executives travelling in the car. And you lose the case in the court and need to pay them a huge amount in penalty. Instead of selling your house, assets or equity will not even fulfill the damage. So here comes the Umbrella Insurance which swoops in the situation and covers the amount of damages.

Since, we live in a society prone to litigations where Umbrella Insurance offers you little peace of mind.  By distinction, Umbrella Policy is the only thing which covers most of your unforeseen financial damages. It is meant to protect you from lawsuits. With most of the auto insurance the maximum liability cover that you can get is either $400,000 or $500,000 per accident but damages could add to millions.

What Does Umbrella Insurance Cover?

With an addition to insurance liability coverage’s Umbrella insurance covers you in the mention areas-

·                  Property Damage

·                  Body injury

·                  Legal Fees

·                  Violation of privacy rights

·                  Landlord liability (for owner’s of rental units)

·                  False Arrest

·                  Malicious prosecution

·                  Other types of lawsuits

 

Attorney fees, defense amount with the expenses of the lawsuits even though the lawsuit is groundless are also covered.

 

Who is covered by an Umbrella Policy?  

 

·         The spouse, if the spouse is living with the insured

·         Household residents under the age of 21

·         Anyone using a vehicle owned by the insured

·         Resident relatives

·         Any person or organization that is legally responsible for the insured

What Does Umbrella Insurance Not Cover?

·         Worker’s compensation

·         Business pursuits

·         Malpractice

·         Damage intentionally caused by any insured

 

What Umbrella Insurance Costs?

Generally, Umbrella Insurance is sold in units of $1 million in coverage.  The smallest policy is of $1 million, the next one will be of $2 million which further continues to climb in $1 million increments.

There are many factors which actually decide the amount you pay like your job, pets, hobbies, previous lawsuits and driving record.  There are companies debating on how much you need to invest for the Umbrella Insurance like Farmer Insurance claims that Umbrella insurance policy would cost “approximately $250 to $600 a year”, Liberty Mutual states $1 million policy costs “about a dollar a day which would be $365 a year, and GEICO says $1 million coverage would come under $300 a year.

These figures are just roughly estimates but the actual may certainly depends on lots of things like like your job, pets, hobbies, previous lawsuits and driving record.

To derive an actual figure call to an insurance company and get the quote over the phone or email.

How can someone qualify for Umbrella Insurance Policy Coverage?

There are some companies which do not sell insurance in few states. In many of the cases you will not qualify for an Umbrella Insurance unless you own huge liability coverage on your auto and home insurance. Like GEICO offers Umbrella Insurance to them who are already covered with minimum $300,000 of bodily injury and $100,000 of property damage on their vehicle insurance with at least $300,000 in liability coverage on their home insurance.

Do I actually need something like Umbrella Insurance Policy?

The whole concept of Umbrella Insurance Policy lies under the fact to protect your assets from lawsuit if you have any, however in a broader perspective it is good as an investment who have more assets but less liabilities. I don’t have any uniform prescription for all but I’ll have some indicators. Since Umbrella Insurance is attached with vehicle and home and if you own either you are prone to risk. If there are people who use your vehicle apart from you there is higher propensity of risk. The same goes for the number of home visitors as well.   For example if you have $6,00,000 in assets and vehicle insurance covers only $4,00,000 per accident, then Umbrella insurance will cover your rest of the assets.

On the contrary if you don’t own a home or vehicle the propensity of risk is much lesser. Even with the less risky profile the cost of Umbrella Insurance also goes lower.

It is highly advisable to take Umbrella Insurance if you own either a home or vehicle.

In short, in just few dollars you can save your millions of assets which are prone to any unexpected lawsuit. So don’t wait and think how much liability coverage do you have?