Umbrella insurance has nothing to do with keeping you dry but it might protect you if your homeowners, vehicle, or boat policy doesn’t. Specifically, it is designed to protect you from liability that exceeds the limits of the other policies mentioned. In addition, it can protect from some specific forms of liability like libel or slander as well as injuries to others.
Nobody wants to find themselves facing a lawsuit for leaving a bad review or damaging someone else’s property. Not only is this emotionally stressful, but it puts your assets at risk if the claim exceeds your insurance policy limits, which could be financially devastating.
Thankfully, this is why umbrella insurance exists.
Umbrella insurance is a fail-safe that protects you from financial ruin should you encounter a situation where your base coverage isn’t enough. It provides supplemental coverage to protect your assets while also doling out extra coverage like paying legal fees for libel, slander, or imprisonment.
So, it’s pretty overarching coverage—hence the term “umbrella insurance.”
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When you purchase any insurance, personal, home, auto or boat, and a claim is filed against you, your policy will pay out until it reaches its cap. If the claim exceeds the policy limit, you risk paying out-of-pocket unless you have umbrella insurance, which increases your limits.
Umbrella insurance is available as an add-on to your home, auto, personal, or boat insurance policies.
Let’s take a look at umbrella insurance and when you would use it.
Examples of when umbrella insurance would kick in:
Example of when umbrella insurance would kick in:
Examples of when umbrella insurance would kick in:
Examples of when umbrella insurance would kick in:
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Umbrella insurance, true to its name, covers you when your insurance policies reach their limit; however, it won’t cover everything.
The important thing to remember is that umbrella insurance protects you from liability, i.e., protection from claims against you.
These are some of the things that umbrella insurance won’t cover:
Not everyone requires umbrella insurance, just those at high risk of being sued or for those that want to pad their current insurance policy as a precaution.
These are the circumstances that increase your risk:
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If you’re interested in increasing your insurance policy by adding umbrella coverage, you have to meet some basic criteria first:
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Insurance offers you peace of mind, while umbrella insurance offers you added protection against liability. This is especially important for individuals with high net worths, notoriety, landlords or for people that partake in high-risk activities (owning a pool, having large animals, or hosting big parties) as it protects your assets from lawsuits.
Not everyone needs umbrella insurance, but it can be life-changing for the people who could benefit from it.
To determine the amount of umbrella coverage you need, calculate the value of all your assets (finances, property and investments) as well as your projected loss of income to arrive at how much coverage you need.
Having umbrella coverage is largely dependent upon your needs. If you’re at risk of a lawsuit, having umbrella insurance is well worth the added cost. But for someone with relatively low risk, paying the extra annual fee for umbrella insurance may not be in their best interest.
Jessica Fox Jessica Fox has been a freelance writer for five years, with a specialty in health, wellness, and insurance. During this time, she’s written for some of the biggest B2B and B2C brands from around the world. Jessica is also the mother of two young daughters and loves coffee, writing, and working out.
