What is Umbrella Insurance?
Umbrella insurance is an extra layer of protection that covers you and your assets in the event that a lawsuit or claim exceeds the limits of your existing insurance policies. It can provide coverage for a wide variety of liability claims including bodily injury, property damage, defamation, and more. It’s called “umbrella” insurance because it acts as a protective shield over your existing policies.
How Does Umbrella Insurance Work?
When you purchase umbrella insurance, you are essentially buying extra liability coverage that goes above and beyond the limits of your existing policies. While most insurance policies have coverage limits, umbrella insurance provides additional coverage, usually up to $1 to $5 million dollars. If a claim or lawsuit is filed and you are found legally liable for the damages, your umbrella insurance will kick in to cover the costs that exceed your existing policy limits.
What Is the Difference Between Liability and Umbrella Insurance?
Liability insurance provides coverage for a specific type of claim, such as bodily injury or property damage, up to a certain limit. In comparison, umbrella insurance covers a broad range of claims and provides additional coverage beyond the limits of your existing policies. Umbrella insurance is designed to protect you from catastrophic losses that could wipe out your savings or force you into bankruptcy. Think of it as an extra layer of protection for your financial well-being.
Is Umbrella Insurance Worth It?
The answer to this question depends on your personal circumstances and level of risk. While you may never need to use your umbrella insurance, it provides peace of mind knowing that you are protected in case of a catastrophic loss. Consider the value of your assets, potential risks, and prior claims history when deciding whether to purchase umbrella insurance.
If you own a home, have a high net worth, or hold a high-profile job, you may be at higher risk for a lawsuit.