If you’re looking for added protection in case someone sues you for damages for which you are liable, a personal umbrella insurance policy gives you extra asset protection at an affordable cost. Umbrella insurance offers several advantages but pays out only if you have a standard policy in place that includes liability coverage. You must also exhaust the limit of your primary policy.
Learn more about umbrella insurance and why it can be a good fit for you.
How Umbrella Insurance Works
Your standard auto and home insurance coverage pays for damages and defense costs up to the liability limits listed in the policy. But sometimes the limits you select for your standard policy may not be enough in the case of a large liability claim or judgment filed against you. In addition, you may face overwhelming legal costs.
Unless you invest in umbrella insurance, any costs — including the defense costs for a liability lawsuit — above those limits are your responsibility to pay out of pocket. Considering how much harm that can do to your financial situation, the premium for an additional $1 million dollars in coverage may seem inexpensive.
A personal financial crisis, such as a liability lawsuit, can harm your financial security. Damages in a personal injury case for which you are found responsible may include compensating the injured person for the cost of medical treatment, rehabilitative services, loss of income, and property damage. In some cases, the injured party may be entitled to compensation for emotional distress and pain and suffering.
You will also have the defense costs of a lawsuit. These include attorney fees, court costs, filing fees, and expenses related to conducting investigations to find evidence or the presence of negligence or liability on your part.
What Umbrella Insurance Covers
Since standard insurance policies generally include exclusions, an umbrella policy helps cover personal liability risks not covered by your primary policy. Umbrella coverage takes effect once your standard policy has paid up to its liability limits.
Personal umbrella insurance generally covers personal injury, bodily injury, landlord liability, and property damage. An umbrella policy does not cover personal property. Nor does personal umbrella insurance pay for damages to your own property due to your negligence.
It also won’t pay for liability related to an oral or written contract or a situation that occurs as the result of illegal behavior on your part. When it comes to business losses, personal umbrella insurance typically doesn’t pay for damage to your business property or for losses related to the interruption or suspension of the operation of your business.
For business losses, you need a business umbrella policy — even for a home-based business.
How Much Coverage You Need
How much umbrella insurance coverage you need depends on the total value of the assets you own. Include the value of your home and any other real estate you own, your vehicles, bank account, investments, pensions and retirement accounts, and future job earnings.
If the total of all your assets is more than the liability limits on your standard auto or home insurance policy, an umbrella policy offers an additional amount of protection. The minimum coverage limit is $1 million at an annual cost of about $150 to $300 for a policy.
Should you need even more asset protection and can afford the premiums, you may be able to buy an umbrella policy that offers millions more in additional coverage. The amount of umbrella coverage different insurance companies offer varies.
Even if you have few or no assets, you can still be sued. If the court awards damages to the person who initiates the lawsuit, you may have to pay off the damages with the income you earn in the future.
If you’re considering purchasing personal liability umbrella coverage in addition to an existing policy, contact the agents at Lanham Agency. We are happy to help you determine your level of risk and individual insurance needs.