Today we’re going to examine the often overlooked option of umbrella insurance. You already have coverage to protect yourself from circumstances where you’re liable in a car accident or homeowners claim, and that is all the insurance you’re going to ever need, right? Well not so fast, it isn’t always an open and shut case when you’re liable, and we all know insurance policies only cover up to a certain limit or payout. So what happens if the payout for your insurance policy is maxed out but your case or claim isn’t completely settled? The worst case scenario is you could be heading towards financial ruin, but that can be avoided if you look into the extra safety net that umbrella insurance provides. Let’s examine the ins and outs of this often overlooked but increasingly important coverage.
How Umbrella Insurance Works
Umbrella insurance gets its name from its position in relation to other insurance policies. It theoretically “sits on top” of coverage options like auto and/or homeowners insurance, and umbrella coverage usually kicks in once the other policies have reached their payout limits. In this way, umbrella insurance is a supplementary option that is best paired with basic insurance policies. Since umbrella insurance is generally a worst case scenario policy, you can get an extreme amount of coverage, even up to a million dollars, for only a few hundred dollars a year. Yet there are also options with smaller premiums that can still make a big difference for those liable parties who are put in a tough spot. This type of coverage is available to both individual holders and businesses or corporations, but for now we’ll stick to describing how umbrella insurance helps the individual policy holder.
Circumstances Where Umbrella Pays Off
Let’s examine what could happen to the holder of an auto or homeowners policy that would require umbrella insurance. In today’s world, it is very common for a driver or homeowner to be liable for the injury of another. Certainly liability claims can even end up in court, and that can really drive up the costs and impact on insurance policies. The list of circumstances can be quite staggering when you start to think about it, and although most will never encounter the bulk of liability claims that are out there, it pays to be prepared for the uncertain should it occur.
The easiest example of a claim that might require additional coverage from umbrella insurance is a car accident where you’ve been determined the liable party. Depending on the severity of the accident, the other party could require medical costs, physical therapy, lost wage compensation, vehicle repairs, and even pain and suffering payouts. Once your auto coverage limit is reached, you could be forced to dig into your savings or surrender your assets to completely settle the claim. Yet if you have the forethought to invest in umbrella insurance, you could avoid this extremely damaging outcome almost entirely.
While auto claims are the most obvious example of how umbrella insurance can strengthen other policies, homeowners insurance holders face a myriad of scenarios where additional coverage from umbrella insurance can make a world of difference. A lot of things can happen around the home that will leave the owner liable from injuries to guests who are visiting for a holiday party to the delivery man who suffers a bite from the family dog. The owner actually doesn’t even have to be around to incur substantial claims against them. Other unexpected homeowners claims could include your son or daughter’s friend who is injured at a sleepover or damage to other people’s property from your tree that falls during a storm. Once again, you can never underestimate what a claim against you might cost. Since you’ve worked so hard to purchase your home, it only follows that you should do everything in your power to keep it, and there are times where your homeowners policy just isn’t enough.
Aside from the extra coverage for home and auto policies, umbrella insurance can provide added protection for a truly unexpected set of circumstances. You would never think it, but false arrest and wrongful imprisonment happens to innocent people now and then, and such a circumstance can have a serious impact upon one’s personal and business life. Legal fees are a common part of the defense process even if you’ve done nothing wrong, and umbrella insurance can provide this added and sometimes very precious benefit that home or auto policies could never offer.
Extra Benefits Of Umbrella Insurance
Now that we’ve outlined all the primary benefits of umbrella insurance, there are still a few extra perks to consider before you make the decision of whether or not to add it to your portfolio of Square State Insurance policies. First, you can potentially earn bundling discounts simply by adding umbrella coverage to your existing home or auto insurance, and this could translate to a wealth of extra insurance without much of an additional cost. Secondly, many umbrella policies are actually structured to cover less common home or auto claims that the primary policies don’t. If you’re in a situation when an uncommon claim is placed against you, the umbrella insurance could step in to cover this claim that would normally result in large out of pocket costs for holders of traditional home and auto insurance holders.
It turns out that the term umbrella insurance really is very fitting for the type of coverage you get by adding it. Why not contact Square State Insurance today to discuss what it can do for you.
Image two courtesy of Wikimedia Commons.