Umbrella Insurance: What you Should Know
Umbrella insurance is a kind of liability insurance that complements the basic liability policies. It covers a higher limit and can go above and beyond the claims that directly relate to other basic plans. The primary purpose of this policy is protecting your assets from any unforeseen events like accidents. This is even more crucial if you happen to be responsible for bodily injuries or damages.
It offers additional coverage above the limits of the basic policies and will protect you from physical, and property liability claims So, when someone files a claim against you, your insurer will pay for the damages you’re responsible for legally, up to the limit of your policy. They also help to cover false arrest, legal fees, slander, and libel.
How it works
Your umbrella policy plan will come into play when you are found responsible for certain damages, and you need to make the necessary payments, or if you are sued and you are required to pay legal fees. This policy only pays if the basic liability limits are exhausted or when a claim isn’t included in the primary liability coverage. When a case is made against the policyholder by the wronged party, your insurance company will pay the required amount up to your coverage limits. If your insurer can’t cover the full settlement amount, you will be required to pay the remaining amount from your pocket.
What to consider
As you choose your coverage limits, it’s important to consider these three things:
Risks you are likely to face
Value of your assets
Potential loss of your future income
Your house, car, retirement, and investments accounts including the usual savings and checking accounts are all considered as assets. It’s essential to know that in case you are sued for a large amount of money, and you don’t have adequate liability insurance or even an umbrella policy for covering those costs, your assets will be exposed. Most people opt for umbrella policies because they would like to prevent the likelihood of financial ruin caused by an unforeseen accident. An umbrella policy will offer protection and avoid such an outcome.