What is Umbrella Insurance and Do You Need It?

Umbrella Insurance

Getting an insurance policy is prudent, but unless your policy is unlimited you are never fully covered. There is a limit to every policy’s payout, and some policies cover only common liabilities. But what happens when, say, your dog bites a person and you get sued? Thanks to Umbrella Insurance coverage, unexpected accidents such as these should not cause you a headache. Here is a comprehensive overview of what Umbrella Insurance policy is and reasons why you should consider getting one.

Umbrella Insurance Defined

An Umbrella Insurance policy is designed to cover you beyond your ordinary insurance policy’s limit and cover unprecedented accidents. Unlike most insurance policies that cover common risks such as car accidents, an Umbrella Insurance policy covers risks such as unique lawsuits, injuries to other people when you are at fault, and damage to other people’s property, just to mention a few. However, although an Umbrella Insurance policy does not cover most of the common risks, it nevertheless complements ordinary insurance coverage in that it covers damages beyond the latter’s limits.

Risks Covered by Umbrella Insurance

Although different insurers cover different risks with their Umbrella Insurance policies, there are certain unprecedented risks that are considered common. They include:

Lawsuits

The smallest accidents can result in lawsuits against you or your business, and although insurance policies offer coverage for lawsuits there are certain exceptions. Umbrella insurance steps in to pay your fines in your policy cannot. It also acts as a back-up for your insurance policy if the fines exceed your coverage limit.

Professional Liability

An umbrella insurance not only complements your business insurance policy’s limit but also covers unique risks such as mistakes that result in the loss of a client. It also covers malpractices by you and your employees.

Property Damage

In case you are involved in an accident that results in damages to other people’s properties, umbrella insurance steps in and pays for fines levied against you.

Dog Bites

Dogs can be dangerous when aggressed, and in most cases this results in bites when their natural instinct kicks in. Lawsuits against dog bites can be costly, and in most cases they are not covered by your ordinary insurance policy. Fortunately, these are some of the unique and unprecedented risks that umbrella insurance covers. Other unprecedented risks covered by umbrella insurance policies include injuries sustained by guests when under your accommodation and loss of a job.

How Much Does Umbrella Insurance Cost

Umbrella insurance policies are as affordable as they are convenient. An ordinary policy for about $1 million will cost you about $150 to $200 per month, and many companies are always willing to make better deals. However, you can always opt for higher coverage and pay a bit extra, which is prudent especially if you have valuable assets to protect.

In addition to being affordable, umbrella insurance policies are not usually tax deductible if they are personal. Certain business and property umbrella insurance policies, however, may be deductible depending on what is covered.

Should You Get an Umbrella Insurance Policy?

As mentioned earlier, an ordinary insurance policy is not necessarily fool-proof as there is always a limit to what is covered and for how much. At times, costs incurred or fines levied may be so high that your ordinary insurance policy can cover you up to a certain point, and then you are left to meet the extra liabilities out of pocket. Hence, it is prudent and even necessary to have a personal umbrella insurance policy.

It is even more necessary to have an umbrella insurance coverage if you own a business. Accidents and mistakes do occur that put your business at risk, and lawsuits against businesses usually carry hefty fines. An umbrella policy is important as it covers uncommon risks and backs up your ordinary policy. An umbrella insurance policy is also important for rental property owners as they are vulnerable to a myriad of risks. As a landlord, you are responsible for the safety of your tenants up to a certain point, and failure to ensure this may incur lawsuits or costly damages.

It is important to note that different umbrella insurance policies cover different risks and liabilities. Hence, it is important to make comprehensive consultations when shopping for one to ensure that it is ideal for you both in terms of coverage and cost.

How Much Umbrella Insurance Coverage Do You Need?

There is no question about the importance of an umbrella insurance policy. However, you have the option of choosing a coverage limit depending on factors such as risk levels and the assets at stake. Here are some factors that you should consider when deciding how much umbrella insurance coverage to get:

Risk Levels

People are vulnerable to different levels of risks depending on their professions and lifestyles. For instance, landlords and business owners are liable to greater levels of risks that employees. Hence, people with higher risk levels should go for a higher coverage level.

Value of Assets at Stake

Your assets may be at stake when your ordinary insurance policy coverage reaches its limit; this is especially true if your risk level is high and you are susceptible to high costs or fines. When this happens, you stand to lose a lot of money as your assets may be auctioned. Hence, a higher coverage level should be sought when there are valuable assets at stake.

Bottom Line

Accidents are always expected, but you never know how big they may be or even their nature in the first place. That is why insurance policies are so important. However, smart people do an extra mile to insure the shortcomings of their insurance policies by getting umbrella insurance coverage. With an umbrella insurance policy, even the rarest accidents will be covered to ensure that your financial wellbeing is not compromised. What’s more, you will never have to reach into your pocket to pay extra costs and fines as your umbrella insurance coverage will kick in once your ordinary policy’s limit is reached.

This is what prudence is all about when it comes to planning ahead for risks and liabilities.

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