Perhaps someone suggested that you need an umbrella insurance policy to protect you from loss, but do you really need one? More importantly, do you understand what it is and what it can do for you?
Most people don’t, so let’s examine precisely what it is and how you can use one to ensure that you’re properly covered.
What Is A Personal Umbrella Policy?
An umbrella policy provides liability coverage beyond what your Rhode Island auto insurance or homeowner’s insurance policies offer. For instance, if your liability coverage isn’t enough to cover medical expenses and lawyer’s fees if someone has an accident on your property, the umbrella policy takes over when your homeowner’s policy reaches its limits.
How Does It Protect You?
Let’s look at an example. Perhaps you’re in a car accident and you’re responsible. You’ve seriously injured the other driver and they end up in the hospital. Your automobile insurance coverage covers you for liability up to the dollar amount on your policy. For instance, you may have $250,000 liability insurance coverage. Unfortunately, long-term medical bills could easily exceed this amount.
In this case, the driver could sue you. This puts your personal assets at risk unless you have additional coverage. Just imagine how quickly the costs will accumulate if the person needs several surgeries, multiple medications, and they cannot work for many months. It’s not difficult to imagine a total cost of over $1 million.
Your automobile policy pays the first $250,000 and then whatever other costs you need to pay would come from the umbrella policy. Otherwise, you might find yourself selling your home, emptying your bank account, and even selling your car to pay off these expenses.
How to Buy an Umbrella Policy
Most companies sell umbrella policies in million dollar increments, some up to $10 million.
You may assume that you don’t need a policy because you do not have $1 million to lose, however lawsuits may include your retirement funds, investments, savings and even your future earnings. Including an umbrella policy as part of your financial plan to protect your assets makes sense.
You should review your situation with your insurance agent so that they can help you figure out just how much coverage you need. They can also make you aware of any available discounts.
Do You Really Need It?
Most umbrella policy claims stem from auto accidents, but not all. They also offer protection against accidents that occur at your home, such as someone falling down your stairs or slipping on a wet floor.
Many insurance companies demand additional coverage if you have a pool or trampoline on your property, because of the additional risk for children. Someone could injure themselves while you’re away vacationing, and you’d still have coverage with your umbrella policy. The policy may also protect you from lawsuits claiming slander or defamation of character.
If you own assets, an umbrella policy is an excellent way to protect them. The cost of an umbrella policy is very reasonable and it can save you years of stress if you’re sued. Lawsuits seldom end quickly and many settlements are well-above what your auto and homeowner’s policies normally cover. Most people would be wise to invest in a policy to protect against the unexpected.