Umbrella insurance is a type of insurance policy that is designed to provide protection against excess liability not covered by other policies. The term “umbrella” is used because it can cover these excess damages for any type of policy, including home insurance, boat insurance, auto insurance, and so forth. It also covers against liabilities not specified in other policies.
Who it is for?
This type of coverage is ideal for anyone who wants to safeguard against the high costs of lawsuits or against types of liabilities that are not covered under their other insurance policies. In addition to legal fees that are often related to lawsuits, umbrella policies can also cover against false arrest, slander, and invasion of privacy.
How it works?
Umbrella policies are used to protect finances and assets that could be otherwise at risk. Retirement funds, investments, savings, material assets, and even future earnings can be at risk, for example, in the case of a lawsuit. In order to receive coverage under this type of policy, there are certain prerequisite insurance policies that must be met. Usually, you must be covered up to a certain amount for property damage and bodily harm on both your car insurance and homeowners insurance.
Different types of coverage in existence
Coverage limits range upwards of $1 million, and are based on your qualifications. Each policy’s premium and coverage limit is determined by several factors, including your preexisting policies and your financial assets. The average annual premiums for a coverage limit of $1 million is often around $200 a year.
This type of insurance is useful to protect against catastrophic financial loss, costly legal expenses, and gaps in other insurance policies. Originally, this type of insurance was created to protect against lawsuits that pushed liability over the limits of an existing policy. Lawsuits can exceed standard policy protections by hundreds of thousands of dollars, and the peace of mind offered by this protection is one of the major advantages offered by umbrella policies.