Personal umbrella insurance is a type of insurance that provides additional liability insurance designed to provide backup coverage for your other insurance policies. Most people believe that having liability coverage for their homes and cars are enough. Record judgments and jury awards, not to mention an increasingly litigious society, over the past several years have proven otherwise.
How does Personal Umbrella Insurance Coverage Work?
In essence, an umbrella policy works to protect your financial interests when your existing liability coverage isn’t adequate for judgments made against you. It typically only provides added protection for liability coverage you’ve already purchased.
For instance, if you are in an auto accident and the judgment against you exceeds the limits of your auto liability coverage, you would be personally liable for the remaining judgment. This means you would be left to pay the remaining award out of your pocket, by selling your home, or even by cashing out retirement and college saving plans to come up with the funds. Your wages may even be garnished in order to pay off the judgment against you.
If you have personal umbrella insurance coverage, though, that policy will kick in to provide additional protection once the coverage from your auto liability policy are exhausted. All insurance policies have limits. An umbrella policy serves as a backup when the limits of your other liability policies have been exceeded.
Why Not Just Purchase Additional Insurance Coverage?
It is certainly wise to consider additional liability insurance protection – especially when it comes to auto insurance as Time Money reports that auto accidents and incidents account for more than 80 percent of all umbrella insurance losses. However, the beauty of an umbrella policy is that it isn’t limited to auto insurance liability protection. It extends to homeowners insurance where you might find yourself liable for your building contractor’s lack of workers’ compensation coverage or a tree limb falling on your neighbor’s ridiculously expensive and meticulously restored classic car.
The best thing you need to know about umbrella insurance coverage is that you can get a lot of protection without shelling out a lot of cash to get it. While every company and policy is different, you can typically get one million dollars in personal umbrella coverage $400 or less per year. When you look at the big picture, the protection and peace of mind that coverage provides is well worth the small price tag associated with it.