Umbrella insurance is extra liability insurance that is designed to protect you from major claims and lawsuits. This is coverage that goes above your auto or homeowner/renters policy. This type of insurance kicks in once you've reached the limits on your other policy. Umbrella insurance also covers various claims that may not be covered by other policies. So, this insurance makes sure that you're covered no matter what happens in your life.
What does it cover?
Umbrella insurance covers a wide range of things. This is what most insurance policies cover:
- Bodily injury liability: Covers damages done to another person such as medical bills or liability claims like auto accidents, pet bites, and falls in the home.
- Property damage liability: Covers damages done to someone else's property like your pet breaking something or accidental damage done to school property.
- Owners of rental units: Protects you against liabilities as a landlord. A tenant falling on a sidewalk is an example of this.
- Slander: Someone saying a false statement, damaging your reputation.
- Libel: Someone publishing a false statement, which damages your reputation.
- False arrest: Being taken into custody without probable cause.
- Malicious prosecution: Intentionally pursuing a legal action that is without probable cause or was dismissed.
- Shock or mental anguish: Certain types of suffering that may include distress, anxiety, fright, depression, grief, or trauma.
How much does it cover?
Depending on how much you want, the basic umbrella insurance package will cover up to $1 million in damages. This is what most people opt in for. However, the more you pay per month will offer you more coverage in the chance of a claim. The amount of coverage you should purchase varies from person to person. Usually, your net worth is used to determine how much coverage you should need more than the $1 million mark. Net worth is everything you own minus any liabilities or debts you currently have.
What is the benefit?
Well, as mentioned earlier, it covers quite a bit that normal policies don't cover. If you're in an auto accident, you'll have your existing auto coverage plus your umbrella coverage. So if you have a $500,000 auto policy and a $1 million umbrella policy, you'll have $1.5 million in coverage. This will cover any medical bills or lawsuits you may see as a result from the auto accident.
No matter how careful you are, sometimes accidents happen. You could randomly be sued by someone that's entered your house or your pet may bite someone. These types of situations can quickly become very costly. Having umbrella insurance will give you peace of mind as well as a secure situation should a claim need to be filed.
