There is always a lot of talk about auto insurance, home insurance, and life insurance. However, there is a fourth type of policy that is equally important: personal umbrella insurance.
What Is Umbrella Insurance?
Umbrella insurance is a type of liability policy designed to protect the assets and income of the policyholder. Secondary to auto or homeowners insurance, an umbrella policy works as an extension of the liability limits already included in the first policies up to a set amount. For example, during a catastrophic loss where the liability limits of the first policy are exhausted, the umbrella policy would take over.
What is An Example of When an Umbrella Policy is Used?
A good example of when an umbrella insurance policy is often used is in the event of a major auto accident. This is usually true in situations where multiple vehicles are involved, there are many injuries, and/or a lot of property damage has occurred. When the limits on the policyholder’s insurance are exhausted, the policyholder could be sued by the other parties or those individual’s insurance companies. With an umbrella policy, the liability coverage is extended and helps reduce the chance of being sued.
Another example would be if you have guests in your home who become injured as the result of being at your residence. Dog bites, slip and fall incidents, and other types of injury all fall under this category. While you homeowners or renters insurance does cover for some liability instances, it is usually a lower limit. Again, an umbrella policy would extend the coverage up to a set amount.
Who Should Invest in An Umbrella Policy?
Any homeowner should consider investing in an personal umbrella policy. Business owners should often consider umbrella policies, as not having one can leave them open to personal liability should anything happen at their business location. Those with higher incomes should also consider purchasing an umbrella policy.
Additionally, anyone who has a higher risk should consider an umbrella policy as a necessity. For example, parents of teenage drivers have a higher chance of an accident (big or small) occurring on the road. By having an umbrella policy, they can ensure they are covered for whatever situation their teen encounters while first learning to drive.
Is There a Difference Between a Personal Umbrella Policy and a Business Umbrella Policy?
Not really. The only big difference between the two is that a personal umbrella policy is designed to protect individuals. A business umbrella policy is designed to protect an organization.