Umbrella Insurance is a form of liability insurance that will protect your assets and income in addition to any primary insurance policies you may have. That means that it provides cover additional to any property, automobile or watercraft policies you might have. Liability insurance is the portion of the insurance policy that covers for expenses associated with any injured parties and pays for their medical bills, rehabilitation and lost wages.
The term umbrella refers to the fact that the insurance covers all of your assets and income where other policies alone might not provide enough cover – it provides additional cover to all of the policies underneath it. It is different to “excess” insurance because it does not require that all other policies be exhausted before coming into effect.
Usually umbrella insurance is sold in increments of 1 million dollars. As an example of how other insurance policies with with it, if you had an automobile insurance policies which had a liability limit of $300’000, with the umbrella insurance, your total coverage is $1’300’000. If you had a home insurance policy with limits of $500’000, with the umbrella insurance policy it would become $1’500’000.
With some insurance policies, you might not be entirely covered if you acted in a way that voided the policy, but umbrella insurance will often provide coverage. So if you are involved in a automobile accident, and for some reason your primary insurance provider refuses to pay out, you still have $1 million of coverage from the umbrella policy.
In addition, umbrella insurance is particularly useful because our society is so litigious now, and any automobile accident or incident involving your home can turn into a large lawsuit. If you are sued for $1 million dollars and your automobile policy will only payout $300’000, then umbrella insurance can be used to cover the remainder.
The umbrella insurance coverage will provide for legal representation if the matter goes to court. Once you combine an injured person’s medical bills and any legal action they might take, it’s quickly apparent that the standard automobile insurance or household insurance does not include enough liability insurance.
In nearly every state of the United States, there are laws that hold drivers responsible for all bodily injury and property damage should they be at fault, so the risk is very real that you could lose everything without sufficient insurance.