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What is umbrella insurance
What is umbrella insurance? As a former insurance agent many of my client would see our posters advertising umbrella insurance and ask this question. In this article I will explain what umbrella insurance is, how it works and if you need it.
In this world of SUE crazy lawyers an umbrella policy could be a easy way to protect all your assets, physical and financial. The first question is what is umbrella insurance? A umbrella policy is designed to cover your liability exposure beyond your auto, home, and watercraft liability insurance limits.
Your liability is the coverage that covers you for negligence toward someone’s expenses such as the injured persons medical bills, rehabilitative therapy, and lost wages due your negligence. The liability portion of an insurance policy also covers a legal defense representative if the negligence would happen to land on you in the court room. After adding up all of the medical expenses for the injured and your legal fees, the standard liability in one’s homeowners or auto policy is often not enough.
The typical auto liability caps out at 500,000 but most only carry 50,000. The typical home liability policy caps at the same but most people only carry 100,000. So you can see that medical bills and legal fees and easily surpass these amounts.
Depending on the company you purchase your umbrella policy from you can get an umbrella to cover you from one million up to five million. This is the amount that would be paid up to beyond your auto, home, or watercraft liability limits.
So how does umbrella insurance work? I will give you an example that I experienced in my former agency. A middle aged woman, lets call her Mary, was headed home from work as she approached an intersection she was talking on the phone and did not recignize that the light was red. She hit a family of three and caused some serious injuries. She only had one hundred thousand on her auto liability limit, the hospital bills exceeded 630,000 lucky she had taken my advise and purchased a million dollar umbrella three years earlier. So once the auto policy paid out the one hundred thousand she was left with 530,000 in medical bills to be paid. This is where the umbrella policy can in to play, since she was covered up to one million it covered the additional 530,000.
If she did not have the policy they would have taken her to court and seized all of her valuable position to pay the debit and if it was not enough the could put a draw on her personal accounts.
The typical umbrella cost between 200 - 800 a year depending on your personal risk factors. Young drivers and watercraft can drive the rate up.
I hope this give you a better understanding on the question, what is umbrella insurance? | | | | | | |  | |  |
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