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Umbrella insurance 101
You may have heard the concept of umbrella insurance earlier, but do you know what an umbrella policy is and how it can be relevant to the overall vision when it comes to purchasing insurance?
An umbrella policy can be thought of as an extra layer of security. An umbrella policy is additional liability coverage and helps cover claims that exceed your home or auto insurance limit.
It also includes some liability claims that regular home or auto insurance policies may not cover, such as defamation and false imprisonment. In addition, an umbrella policy can include attorney costs and other fees related to lawsuits.
Who needs Umbrella Insurance 101?
People who may need umbrella coverage are those who face higher risks, own high-value property, or engage in risk-taking activities For example, if you are responsible for an accident that results in a $700,000 lawsuit, and the liability limit on your auto insurance policy is $300,000 Dollars, the umbrella policy will cover the excess amount above the insurance limit thus saving you from paying $400,000 out of pocket to cover the costs of the lawsuit.
Even if you think your risk is low, an umbrella policy can provide additional peace of mind by providing coverage beyond the normal limits of your policy.
Cost of umbrella insurance 101
As for the cost, the price of your insurance policy depends on the level of cover you choose, the circumstances of your residence and the risks you represent to the insurance company. The more items insured such as cars, homes or family members, the higher the risk levels and costs of the policy.
For the coverage it provides, comprehensive insurance may be an affordable investment. According to the Insurance Information Institute, policies worth up to $1 million typically range between $150 and $300 per year.
Additional millions in coverage can cost an additional $50-$75 per year and sometimes, combining a comprehensive policy with a car or home insurance policy may be less expensive, so it is best to speak with your insurance agent or find one nearby to explore the best options available to you. .
What should you consider when purchasing umbrella insurance?
Because an umbrella policy comes primarily as an additional layer after you've exhausted your basic coverage, most insurance companies prefer that you exceed the liability limits on your home and auto policies before offering you umbrella insurance.
This equates to approximately $250,000 of liability insurance on your car insurance policy and $300,000 of liability insurance on your home insurance policy. So, while an umbrella policy may be more affordable on its own you should also consider looking into any additional premium on your home insurance policy. The car or home insurance you'll owe when your liability is maxed out first.
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