Umbrella insurance is a type of personal liability insurance. Sometimes a claim will exceed the coverage of homeowners or auto insurance. This policy specifically covers cover costs those other insurances will only cover portions of.
Normal insurance policies will cover car crashes or damages to a home. Umbrella insurance will cover scenarios that protect you against bodily harm, property damage, or personal injury. The differences between insurances may be confusing here are a few common examples of what the policy covers.
Examples of Umbrella claims
Defense Costs
If you find yourself in the unfortunate situation of being sued this policy will help cover attorney and processing fees. A civil case averages $5,000 – $36,000 in total fees and if the case proceeds to trial you are looking at upwards of $109,000. Umbrella insurance will help with these fees so you can defend yourself in court without the worry of losing money.
Even if you are found guilty in a civil suit the policy will continue to pay for any remaining expenses if you did not use your full defense budget.
Indirect Liability
A common indirect liability scenario: You have a friend over. You both drink and become intoxicated. Your friend decides to drive home and gets into a car crash. He is arrested. Depending on the state in which you reside you may be indirectly responsible and charged. This policy will help you with your legal fees and protect you. This is something homeowners insurance does not cover while Umbrella insurance does.
Homeowners liability
Your child invites his friend over to spend the night. In the middle of the night, you wake up to your child screaming for help. The two kids decided to sneak downstairs for a midnight snack but the friend fell down the stairs and broke his arm. The homeowner would be liable for any medical expenses if the family decided to press charges.
Homeowners insurance does cover these types of claims however only for a small amount. The policy will cover the rest of the costs that homeowners insurance does not.
Pain and Suffering
If you get into an altercation and are found guilty then the defendant could sue for Pain and Suffering. The psychological pain that they had received due to the incident affects their day-to-day lives and they will want compensation. You may have to pay hundreds of thousands of dollars directly to the defendant. Umbrella insurance will cover the costs and you will feel safe knowing that they cover up to $1 million.
Why Buy It?
The choice to buy this specific insurance policy is a difficult decision to make especially since you already have other insurances in place to help you when you are in need. Many insurance agencies will guarantee that you need it due to the litigious society we all live in. The fact is, anyone can sue someone for damage and money, even for the smallest offenses. You must ask yourself, with your lifestyle, are you someone who would benefit from this insurance policy?
Are you a public figure or hold some standing in your community? Are you someone who may find themselves in a situation where others could benefit from your assets? Do you have a family you need to protect? These are all questions that you must consider before buying a policy. It’s not as simple as knowing that one day a car crash is inevitable, or a broken pipe might flood the basement. Umbrella insurance is here to protect you for legality purposes. There is no way of knowing what the future holds and if you will be sued. However, if you gather all of your assets together, rationalize your position in your community, and realize what actions your families may cause then Umbrella insurance may be for you.
