This excellent protection offers broad coverage, but it’s not a catch-all for every insurance need. Learn what’s safe from a rainy day and what needs its own protection.
In many ways, umbrella insurance is “insurance for insurance.” Its purpose is to kick into action when the limits of a policyholder’s primary coverage have been exhausted. As such, umbrella coverage can be a very valuable backup investment against the most expensive claim outcomes.
The level of foresight required to take out umbrella insurance isn’t as common as it should be, and some will discover (to their cost) that their existing policy can’t go the distance. When that happens, policyholders without umbrella protection will have to turn to personal savings or other painful means of funding expenses.
Umbrella insurance can be added to an auto coverage policy or a home/renter’s policy and may be invaluable in the event of medical expenses. The financial coverage is very impressive for the relatively small cost of putting it in place.
The Insurance Information Institute highlights that while certain liability limits are likely required to be met before an umbrella policy is issued, it can cost only $150 to $300 a year for $1 million worth of protection, with the next million costing around another $75 and further millions roughly another $50 apiece.
What umbrella insurance covers you for
The golden rule of understanding umbrella coverage is that these are liability policies. This means that they won’t provide any extra protection for physical items; at least, not your physical items.
This can be confusing and lead people to wonder what the point of adding it to their auto/home policy is if it won’t protect their car, their property, or their possessions. The point is that umbrella coverage applies its millions to any damage caused to other people or property by your vehicle or that happens via accidents/incidents on your property.
These unfortunate outcomes can lead to lawsuits by affected parties. These alone can be very expensive—the average personal injury suit compensation is $52,000—but repairing another driver’s vehicle and covering the lost wages and medical fees of anyone you’re responsible for injuring can quickly escalate to much more. Should the worst happen, umbrella policies also cover funeral costs.
It’s important to underline those umbrella policies will not protect holders from the consequences of intentional acts of damage or any criminal behavior, nor from any punitive damages which may arise from such conduct.
People who can benefit greatly from umbrella coverage
Any homeowner or renter can benefit from umbrella insurance protecting them from liability claims arising while on the property, but individuals like landlords should especially make this coverage a priority—especially if they lease multiple properties. Such property owners should consider themselves high-risk individuals since there are always several other people who could potentially file a claim against them.
How liable does your job make you? It’s a good question to ask. If you provide any kind of service where another person’s physical safety, health, or wellbeing is involved, umbrella coverage should be part of your insurance strategy. Perhaps you have significant personal assets in the form of savings, property, or investments. Umbrella coverage can help because if the worst happens, those assets will be the first things to go to cover costs.
Business owners can find that having umbrella insurance also protects something priceless: their reputation. These policies can payout for legal defense and court costs arising from lawsuits regarding slander, defamation of character, and libel. Premium rates for business umbrella policies depend on several factors including how many employees the organization has, the state it’s based in, and the size/type of the business.
Business owners should take note, however, that umbrella insurance won’t cover them from professional liability or omissions or errors, nor will it apply to any damages arising from business operations. A business insurance policy is the best bet in those instances.
Deciding on the “right” amount of umbrella coverage
Since most umbrella policies start at $1 million, it’s very likely that’s all most people will ever need. High-net-worth individuals, landlords, and business owners may want to purchase more to ensure the security of their assets in the event of a claim or lawsuit. Like any policy, it’s important to speak to a professional insurance team to review your risk profile. It’s better to be safe than sorry but there’s also no sense in paying more than you need to cover yourself.
The NICRIS team combines our experience in the auto, housing, and health/life insurance sectors to help our clients review their individual circumstances and select the policies that suit them best. Plus, we’re always here to reassess existing coverage if there are any changes to your circumstances such as marriage, moving, or an illness/injury.
Connect with us at the link below for more information on umbrella insurance and any other coverage-based questions on your mind.
NICRIS Insurance focuses on providing clients with the appropriate suite of products to protect them, their interests, and their loved ones. If you need some umbrella insurance advice or would like a free, personalized insurance review just drop us a line.