Umbrella Insurance: The Safety Net You Need
by Amy Lignor
The realm of insurance is just about the most difficult maze to get through. Each and every day it seems the financial and insurance industries are changing. What is not changing, however, is the fact that lawsuits fill up the courts more and more – lawsuits that award cash to third parties even if you don’t happen to have that cash saved. More and more, the words “umbrella insurance” are coming up in both conversation and in advertising on TV. Before getting lost in another “maze,” it is best to look into exactly what umbrella insurance means and why you should consider it for yourself.
Umbrella insurance is a personal excess liability insurance policy; meaning that it protects you above and beyond the limits that already come on your homeowners insurance, car insurance and other personal insurance policies you already own. Umbrella insurance was specifically designed to give you added liability protection, and it is definitely an inexpensive way to protect your financial future or already established assets.
It is added insurance, which means to attain an umbrella policy you first need to have a primary policy in place. Your primary policy would first pay out on a claim before the umbrella coverage would go into effect. Take, for example, a home insurance policy that you own. If something occurs and you are liable (whether it be accident, roof damage, property damage, etc.), your primary policy will pay out. If and/or when the homeowner policy is exhausted or maxed out, the umbrella insurance would kick in, which means there is more protection for you and your family.
Umbrella insurance can help with a great many things, such as litigation arising from property damage or injury, as well as associated legal defense costs if you get sued for damages to other people’s property. People with established assets that they want to protect can lose significant amounts of money in a lawsuit, which means having the extra umbrella insurance gives them more peace of mind.
So…what if you do not fit that criteria? Umbrella insurance is still something to give careful consideration to even if you have no established assets. We live in a world that loves to bring lawsuits, and if you are just starting out, don’t think for one moment that a court won’t award benefits if you are held liable for damages. They really are uninterested how many assets you have; if you’re at fault, you will still be obligated to pay off the damages awarded – which means your future income is already at risk.
And you’re really not talking about a large added cost when it comes to purchasing a personal liability umbrella insurance policy. Depending on how much coverage you decide to purchase, it could cost as little as one hundred dollars annually for 1 million dollars of coverage, and would increase depending on how much coverage you have. It is literally the cheapest “million dollars” you could ever buy. And it is important to note that some companies can double or even triple the coverage you receive, yet the cost of the coverage does not double or triple. Getting quotes from various companies is a must.
When it comes to trying to establish how much coverage you should put in place, there are three very simple questions you need to ask yourself: What are the value of your assets? What is your potential loss of future income? What risks do you think you might face? Once you do this and research policies that are out there, it will be easier to find the policy that will work best for you.
Just remember, in order for the umbrella policy to start paying out coverages, a primary liability policy must be in place, and have maxed out on payments. With the more assets you have, the greater the requirements you have to protect yourself, so make sure that the policy you choose is the right one.
Lawsuits aren’t going away anytime soon. You will need a safety net now and in the future, and the “umbrella policy” is the best net possible.
Source: Baret News