Evaluating Your Need For Umbrella Insurance
When choosing coverage options, it may seem like the insurance company is trying to convince you to pay more to add vague, non-essential options. However, you may want to consider these extra options, as they're likely a form of umbrella insurance.
What Is Umbrella Insurance?
Umbrella insurance is a lot of different things. In general, it's extra liability protection that goes beyond what your basic liability options cover. Umbrella insurance can also work as an extension of other forms of insurance, such as your homeowners insurance. In that sense, these extra options can help cover things that neither your auto or homeowners insurance will cover.
How Umbrella Insurance Works
The most common form of umbrella insurance coverage involves protecting you from lawsuits. That's what liability insurance in general is for, but liability insurance comes with limits. For example, if your liability coverage maxes out at $100k, what do you think happens if the insurance company must pay more than that on your behalf?
If you're in a car accident that causes over $100k in bodily damage, the person suing your insurance company will then have to sue you to try to collect the rest of what they're owed. The insurance company's responsibility ends when they pay out your policy's limit.
If you have umbrella insurance, it will kick in once your main insurance policy reaches its limit. To continue with the previous example, the lawsuit ends with your insurance company owing $133k in damages.
Your insurance company only pays out the $100k. You have $50k in additional bodily damage coverage from your umbrella insurance. That extra coverage will kick in to cover the remainder. In that way, you will have protection from a personal liability lawsuit.
Broken Down to Specifics
Different insurance companies offer different kinds of packages. Some offer umbrella insurance in bundles, while others offer each type of coverage piecemeal. The most basic forms of umbrella coverage include the following:
Personal injury – When someone receives an injury on your property or in an accident. This pays for medical bills, and some liability as well.
Property damage – Damage to property caused by you or someone in your household. This pays for fixing or replacing that property.
Personal liability - When you or someone in your household causes an accident, damage, or injury. This pays for lawsuits against you.
While the insurance company can split the options up to different named packages, they all fall under one of these categories.
Choose Your Options Carefully
Knowing what the extra insurance covers helps, but another concern is what the insurance doesn't cover. There are specific things the insurance may not cover, may only partially cover, or may not cover depending on the circumstances.
Conversely, there are things the umbrella insurance may cover that your regular insurance doesn't cover at all. That's why it's important to choose your umbrella options carefully.
Only you will know if you need any additional insurance or not. More insurance doesn't hurt if you can afford it, but you don't need every option the insurance company offers. Speak to an insurance company like Axiom Insurance Agency to learn more.
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