You may wonder why you need a Rhode Island umbrella insurance policy when you already have automobile and homeowner’s insurance. This article explains what an umbrella policy does and how it fills the insurance gap for many people. Whether you buy one as an endorsement on your existing policy or buy a separate policy, it does provide added protection. Here’s how.
Minimizes Financial Risk
Your homeowner’s or automobile insurance policy has a coverage limit and it may not protect you sufficiently. Even if you have a $250,000 limit, you can quickly surpass it if there’s a serious accident.
If you’re responsible for a car accident and injure someone or if someone is hurt on your property, you’re responsible for their medical care. Normally, your insurance would cover these expenses, but if the costs exceed your insurance limit, you’re responsible for any amount above it. Medical costs and lawyer fees can devour your coverage quickly and you could find yourself in hot water.
If costs exceed your coverage limits, the other party may sue you for any additional medical expenses, lost wages, and other damages – and you’ll need to pay your defense costs, too. If the other party is seriously injured and cannot work for an extended period of time, you could owe tens or hundreds of thousands of dollars.
If you do not have the cash to pay for this, the court may issue a judgment against you. You could lose your home, car, savings, investments, and anything else of value to pay it off. You could even have your future earnings garnished.
Tailored to Your Earnings & Assets
Generally, insurance companies offer standardized automobile and homeowner’s policies to suit most people. However, many do not offer sufficient liability coverage.
Consequently, most insurance agents recommend a minimum umbrella policy of $1 million. However, those who earn more than $100,000 per year or those who have many assets will probably need more. Some agents recommend twice your net worth and even more if you have rental property, because you’re at higher risk.
Umbrella policies only come into effect once you’ve reached your automobile or homeowner’s insurance policy limit. Even though they offer coverage in increments of $1 million dollars, they’re quite affordable. If you want additional coverage, but worry about the premium, you can consider increasing your deductible
Peace of Mind
Including an umbrella policy as part of your financial plan protects you from risk and provides peace of mind. No one knows when an accident might happen. Someone could trip and fall on your property or you could lose concentration for a split second while driving. That’s all it takes.
If you have a trampoline or pool on your property, you should definitely have additional coverage. These items attract children, increase risk, and can jeopardize your financial security if you do not have proper coverage.