What Are the Benefits of Umbrella Insurance?
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Most standard insurance plans and coverages help protect you and your family from major disasters, auto accidents, and other events that are often totally out of your control. But what happens when an accident occurs with damages in excess of your standard limit on your insurance policy? Things like car accidents or dog bites aren’t terribly uncommon, but things like libel, wrongful eviction or entry, or even false arrest are all possible and can put a dent in your wallet if not covered properly. If you have significant assets that you fear losing in a lawsuit or just want total coverage, your best bet is to add to your policy. Umbrella insurance can help protect your funds from any event that you’re financially responsible for.
1. What Is Umbrella Insurance?
Umbrella insurance helps you fill in any gaps in either your auto, homeowners, or boat insurance. It’s what’s known as “excess liability insurance”, or more simply, additional coverage. It comes in handy if you’re ever in a situation where any damages to your home, car, or boat are more expensive than your base insurance plans can cover. While your “safety net” may seem capable of handling most accidents or damages, it can only go as far as the coverage you set. But with the right additional coverages, you can rest assured knowing that no matter what happens, your financial future is secured.
2. How Does it Work?
Umbrella insurance doesn’t take effect unless you’ve gone over your base liability limits. Let’s use this example: Say you’re in a severe car crash where multiple people are injured and the medical bills total $500,000, but your auto liability policy limit is only $250,000. With umbrella insurance, that additional $250,000 could be covered and you wouldn’t be on the hook for it. Without the additional coverage, you would have to foot the remaining bill. If one of the people injured in this scenario was a high-income professional and had to miss work for six months, you could be assessed additional damages through court – and then your assets could be on the line as well.
3. What it Covers
While your base insurance policies should cover most “standard” accidents, umbrella insurance can help keep your bases covered in many different areas. Aside from covering excess damages from car/boating accidents and homeowner accidents, it also goes beyond what most base plans usually offer. These additional coverages can protect you against:
- Libel, defamation, or slander (i.e., if you post something inflammatory about someone else online, you could be sued for it)
- False arrest, imprisonment, or detention
- Malicious prosecution
- Wrongful eviction or entry
- Invasion of privacy
Depending on what you feel most concerned about, qualified agencies like Pardee’s can help you determine which coverages make sense and which ones are “nice-to-haves”.
4. What It Won’t Cover
Even though umbrella insurance will cover a lot of things standard policies won’t, it doesn’t cover everything. It will not cover personal injuries or damages to your own property (your health insurance and homeowner’s insurance would help on that front). It also will not cover any business losses, losses due to intentional criminal acts, or losses that stem from oral or written contracts. And while umbrella insurance is an excellent safeguard against drawn-out lawsuit judgments or settlements, there are a few areas where it cannot be used. Lawsuits for intentional harm or injury, or for communicable diseases, cannot be covered by umbrella insurance policies.
5. Finding the Right Balance
When you select your coverages, there are two main factors to consider. First is the value of your assets, a good umbrella insurance policy should at the very least cover the value of your assets. After all, if you’re involved in a lawsuit, those are what you could stand to lose without it! The second factor to consider is your potential future income losses because of any lawsuits or gaps in your coverage. Even if you have a more limited income now, it’s always best to plan for the future – and most policies only add up to an extra $150-$300 a year.
Contact our helpful and talented team today, and we can help you find the best policies for you and your future!