Personal Umbrella Insurance Policy and its Coverages

1.07.2021
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What is Personal Umbrella Insurance?

Personal Umbrella Insurance is a type of insurance that is designed to provide an extra layer of protection beyond existing limits and coverages of other policies such as auto or homeowners insurance.
Umbrella insurance helps you to add extra liability coverage for injuries, property damage, certain lawsuits, and personal liability situations.

How does an umbrella insurance policy work?

A personal umbrella policy sometimes referred to as umbrella insurance may provide coverages to you and your assets in two important ways:

  • When you have exhausted the liability limits under home or auto insurance, Umbrella insurance coverage plays its role and provides extra liability coverages.
  • An insured may have other insurance policies like auto and homeowner but these policies can not cover the claims for situations like false arrest, libel, slander, and liability coverage on rental units you own. Here the umbrella insurance works and provides protection to the insured for the above claims.

What does umbrella insurance cover?

Umbrella insurance is a type of coverage that works beyond the limits of the insured’s homeowners, auto, or watercraft insurance policies. It pays the claims that may not be covered by liability policies. Umbrella insurance generally provides liability coverage for the following situation:

  • If someone got bodily Injuries by your fault.
  • If you have caused damage to someone’s property.
  • Umbrella insurance also protects you in certain lawsuits and in legal processes.
  • It also covers personal liability situations.

An auto or homeowners insurance covers some of these situations, but umbrella insurance insures you with these mentioned points and beyond the limits of those policies. This also covers some situations that are not being covered by other types of policies.

Example of Umbrella Insurance coverage

Here we take the example of bodily injury liability to understand the umbrella coverage benefits: If you have paid for an umbrella policy, you can claim for physical injuries if the damage to any other person happens because of you or your family member’s fault. It will pay for medical bills in the following scenarios:

  • Any harm caused to a person due to your dog.
  • If your guest gets harmed at your place.
  • Any injuries caused to your neighbor’s child while playing in your yard.
  • Serious injuries and damage to a person in a car accident due to your fault.

How can umbrella insurance help to protect you?

The extra liability coverage provided by an umbrella insurance policy is most useful to high-net-worth individuals, who own a lot of assets and are at significant risk. Small businesses can also use an umbrella insurance policy to protect against potential monetary damages arising due to claims.

The premium that an insured has to pay for an umbrella insurance policy may be less or more expensive. It will be less expensive if the policy will be purchased from the same insurer that provided the original auto, home, or watercraft insurance. Depending on the insurer, the policyholder who wants to purchase an umbrella insurance policy is required to have a minimum coverage of $150,000 to $250,000 for auto insurance and $250,000 to $300,000 for homeowners insurance.

Umbrella insurance is generally referred to as excess liability insurance. If a policyholder is sued for damages that cross the liability limits of car insurance, homeowners insurance, or other original coverage types, an umbrella policy helps to pay what they owe. In other words, if the dollar limit of the base policy has been exhausted, the umbrella policy works as a fail-safe, so the insured person doesn’t require to have to dip into savings and other assets.

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