Insurance companies provide individuals a wide range of plans that they can choose according to their needs.UMBRELLA INSURANCE is among such plans. It is an extra liability insurance coverage that provides an additional layer to those individuals who are at risk for being sued for losses/damages to other's property resulted due to an accident.This type of insurance is very helpful in case insured is sued and the dollar limit of the regular policy has been exhausted.It provides extra benefits to those who own lot of assets or very expensive assets that are at prominent risk for being used.
UMBRELLA INSURANCE is specially designed to give you protection from major claims and lawsuits which, in turn, protect your assets as well you are future.It is the policy that offers you coverage in excess of other specified policies and also for those losses that are not covered by the other policies.When an insured is liable to any other person, then his primary policies will pay up to their limit and the additional amount is paid by the umbrella insurance (up to its limit).
Generally, Umbrella Insurance Plan safeguards you from the large and devastating liability claim.It typically covers the following:
- Bodily Injury
- Personal Injury
- Property Damage
- Landlord Liability
The following items are not covered by the Umbrella Insurance:
1.Personal belongings:Umbrella Insurance provides coverage if you are held responsible for someone's else's damages.It wouldn't apply in the case, you caused damage to your own property.Suppose, if your bathtub overflows, destroying the wall in your home.Then your loss may be excluded from coverage.But if the overflows cause damage to the property of downstairs neighbors, then the policy may cover the losses arisen due to your negligence, preventing you from paying out of your pocket. But, it's important to note here that Umbrella Insurance Plan benefits will be offered only after the underlying policy's limit has been exhausted.
2.Intentional or criminal acts: Umbrella Insurance won't protect you from the losses resulted from your illegal behavior.
3.Written or Oral Acts: Umbrella Insurance will also not cover those liabilities arisen on account of written/oral agreements you have entered.For instance, if you face lawsuit from someone you hired to work in your house.Then this insurance will not give you protection.
Let's understand Umbrella Insurance with the help of an example:
Suppose you are at a fault in a car accident that causes injury to another driver.In that situation, your automobile coverage will cover up to the limit you chose,say$30,000.But if this limit is not enough to cover other person's medical bills, What we will do?????
If the injury of the driver is severe, you will be legally responsible for damages beyond the limit i.e $30,000.And if the other party sues you, then your assets may be at stake.Imagine, if the driver were a surgeon or any other high profile person.What if the accidents resulted in an injury that kept him away from his work for several months?And he sued you for $ one million for covering his entire loss.
As your regular policy will cover only upto$30,000 but how will you arrange for remaining $70,000?
In such case, Personal Umbrella Policy can help to cover the additional expenses when your regular policy coverage is not enough.It would assure you the extra expenses so that you are not bothered to pay the remaining amount by yourself.In this manner, this insurance plan can save your personal assets/bank account/other property.
UMBRELLA POLICY is specially designed to safeguard the insured individuals' assets from unforeseen events such as tragic accidents in which you are responsible.It provides a sense of security and safety to the insured person in case of any major crisis.
HOW DOES UMBRELLA INSURANCE WORK?
Umbrella Insurance come into play if you are found to be guilty and need to pay damages. Or if you are sued and need to pay for legal claim even if you are not held responsible.It only pays once your basic liability limits have been expired.The insurance company will make payment up to your limit coverage.And if claim amount exceeds your coverage, then you will have to pay the remaining amount.
Umbrella insurance particularly covers those claims that are excluded from basic liability coverage.
HOW MUCH DOES UMBRELLA INSURANCE COST?
Umbrella Insurance starts from the range of $150 to $200 for $ one million policy.And for every insurance policy, you must pay the premium (consideration)to the insurance company. There is direct relationship between the amount of coverage and the amount of premium. As you increase the coverage limit, your premium will also increase.However, getting twice the amount of policy i.e $2 million will not surely double the cost of your premium.
IS UMBRELLA INSURANCE TAX DEDUCTIBLE?
In general, if you have personal Umbrella Insurance Policy, your premium money will not be considered for tax deductible.But, if you own a business and have umbrella insurance plan that subsidizes your other business liability plans, then your premium amount may be tax deductible.One more area exists here,i.e the owner of rental properties.If you own house and rent them out, you are conducting business transaction, but you may include it under umbrella insurance.And you may deduct a portion of the premium on your taxes.
HOW MUCH SHOULD UMBRELLA INSURANCE AN INDIVIDUAL CARRY?
Before selecting, Umbrella Insurance as a protective tool and setting your coverage limits, you should consider following three things:
1.The risk you may face: Consider risk as a homeowner/renter, the risk of causing an accident during your work, and any other dangerous activity that could pose risk for people around you.
2.The value of your assets: The assets that may put you at risk are possesions /properties/stock/bonds/savings/retirement funds .It means higher the assets you want to protect, higher the umbrella policy you have to consider.
3.The potential loss of future income: When you become liable for other's damages, it may cause loss of both current assets and future income, even those having few assets to protect may consider the long term ramification of a serious claim.
WHERE CAN YOU GET UMBRELLA INSURANCE POLICY?
An interested buyer may purchase insurance policy through many different insurance companies and agents.It is up to the buyer that they either go for an online or offline mode of purchase.Both the types of purchase have their respective merits and demerits.But purchasing through an independent agent is one of the best way, as they would compare shop from various companies as per your needs and helps you find the right policy at a right price.
While you go for this coverage, be sure to keep the following points in mind:
a)Make sure that the company you are choosing is financially sound and can provide you coverage in hours of need.A.M. Best ratings are the good way to determine the financial strength of any company.You may feel secure with a company that has A+ or A++ rating.
b)Carefully read all the mentioned rules and regulations of the policy.Also, take note if there are ways that you can be still be held liable in event of lawsuit.
c)Make sure that you maximize liability on other policies in accordance with an umbrella policy.For example, If your umbrella insurance policy require to maintain $4,00,000 in liability coverage on auto insurance, but auto policy covers only $3,00,000, then you are on the hook of $1,00,000, before the policy can provide coverage, in case you get sued.
Nowadays, various auto and home insurance companies offer umbrella insurance, but the extent of coverage may vary according to different providers.Let's have a look at the umbrella coverage from some of the top insurers:
*USAA-It offers coverage to those members who already possess home and car insurance with the company.USAA policies provide coverage only for personal liability as it doesn't cover any business/professional services.
*State Farm-This company has the best rating of A++, therefore it is a smarter choice if you prefer assurance of strong liability provider.
*Geico-Being the nation's second largest insurer, Geico offers variety of liability protection offers to insured ranging from personal to professional coverage.
*AllState-The company AllState offers umbrella policies from $1 million to $5 million.Depending on your liability coverage, you may also be given protection even if you travel internationally.
*Travelers-It is also a wiser choice of individuals if they have lots of assets.
WHO NEEDS UMBRELLA INSURANCE?
Umbrella insurance is not mandatory.It is commonly purchased by those individuals who
*Have significant savings and other assets
*Are depressed about unexpected liability claim against them when they travel outside the US
*Engage in activities that increase your chances of being sued, like:-
- Being a landlord
- Coaching kids'sports
- Regularly posting reviews of products and services
- Participating in sports where you can easily cause injury to others like surfing/hunting/skiing etc.
PROS OF UMBRELLA INSURANCE
Umbrella Insurance/Excess liability insurance is a better choice if you have lots of assets that you want to secure in case of lawsuit.Initially, it looks like that only wealthy can pursue, the truth is that anyone can be a victim of lawsuit.In the litigious society we live, even there is a danger of lawsuit while driving a car.If you hit another driver on the slippery road and that party sue for damages.In that case, your car insurance may not provide enough coverage e, leaving you to pay hundreds/thousands of dollars.
Umbrella Insurance offers below-given advantages to those who are covered under this type of plan:
1.It provides extra liability coverage and legal defense cost once the limit of your regular policy (home/auto/any other insurance) has been exhausted.
2.It also covers those incidents that your main insurance might not cover such as slander, libel etc.
3.Umbrella insurance coverage applies anywhere in the world.
4.It provides coverage for such rental items for which you don't have insurance such as the boat.
5.It is inexpensive for the amount of liability insurance you are getting.
In brief, it can be concluded that Umbrella Insurance brings higher security to the insured's life.
Related Article : Why You Should Buy Online Insurance?