Whether you are a business owner, raising children or living on your own, you are always subject to liability claims. When someone is injured from personal or business activities, legal action can skyrocket your claims if you are found responsible. Luckily there is a policy that protects you from these potential claims, umbrella insurance. An individual may hesitate with acquiring umbrella insurance at first, thinking that it is unnecessary. However, once it is explained and understood, the policy seems like a no-brainer.
The most efficient way to understand this policy is to think of an actual umbrella. The umbrella covers you fully while keeping you dry and shielded from the rain. In this scenario, the raindrops are the potential liability claims that stem from an accident. An umbrella policy was created to provide additional coverage when a lawsuit arises over injuries and/or property damage that you cause exceeds the primary liability limits on your car insurance, home insurance, boat insurance, etc. Umbrella policies offer more than just the money needed to pay a claim, they offer a peace of mind and a sense of security.
If you are sued and do not have enough liability insurance or an umbrella policy, your assets are exposed. Wondering what those assets are? Your house, car, investments, retirement accounts, checking / savings accounts and even your future earnings are all assets. A single accident could leave you with nothing left, if you don't have the correct policies.
The following is an example of not having enough liability and where umbrella insurance is useful - During a vacation, a family rented a boat with an outboard motor. The boat was rated considerably in excess of 50 horsepower. While the father was watching his son water-ski, he hit, and seriously injured another person. His homeowners policy was not applicable because of its exclusion of owned or rented inboard - outboard watercraft of more than 50 horsepower. In this case, a personal umbrella liability is applicable. If the father is without a personal umbrella policy, he could be facing hundreds of thousands to millions of dollars in claims.
Basic Functions of Umbrella Policies
- Provide additional coverage limits above the limits of the insured's underlying policies
- Take the place of the underlying (commercial) insurance when underlying aggregate limits are reduced or exhausted
- Provide coverage at a cost efficient rate for personal and business clients
Personal Umbrella policies typically cost less than two hundred dollars per year for $1,000,000 in coverage. A payment that small could end up saving you a lot of money and stress in the event of an accident. These policies cover anywhere from $1 Million to $10 Million on standard policies.
Consequently the answer is yes, umbrella insurance is for everyone. Make sure you have this policy before you find yourself with facing liability claims!