What is an ‘Umbrella Insurance Policy’?

Umbrella insurance is extra liability insurance which is designed to protect insurance holder from major claims and lawsuits to protect assets. So a personal umbrella policy provides extra liability insurance for auto & home owners.

Protecting your family along with the other assets should be the top priority of your life. That is why people opt for having an insurance, which will protect their family in their absence. The more your earning power and assets increase, the more there is a chance for having some risks. Thus, there is a need for you to protect all your assets.

Umbrella Insurance

What is Umbrella Insurance?

Umbrella Insurance is an extra liability insurance. This type of insurance has been designed for protecting you from major claims and lawsuits, as a result it can help you by protecting your assets in the future. The single policy which has the capacity of covering all the underlying policies you own and it starts to work when the liability limit of your other insurances are exhausted.

How does Umbrella Insurance Work?

Most types of insurance are there to provide a specific kind of coverage. For example, if you have an auto insurance policy, it will only provide you with a protection, if your car meets with an accident. The homeowner’s policy which can protect you against a theft or some kind of damage occurred in your house.

By contrast, the above mentioned insurance is a single policy that can cover almost every single aspect of your financial life, like an umbrella protects your body parts against the rainstorm.’

For an example, homeowner insurance has a personal liability limit and a guest of yours has injured himself at the time of attaining a party at your home. If that particular person has decided to sue you and you are the one who have to pay all his medical expenses, then at this time the umbrella insurance policy has the capacity of saving you from this critical situation. Without causing any kind of damage to your savings, this policy can manage all your unwanted expanses.

The Coverage Area of an Umbrella Insurance:

There are certain types of damage which can be covered by the above umbrella insurance. The coverage area includes: –

  • Bodily Injury:If someone is injured by you in a car accident and his or her medical bills exceeds the limit of your auto insurance, an umbrella insurance can save you from this mess. You will also be able to get the coverage for a certain type of injuries, that other insurance does not cover.
  • Property Damage:If the teenager of your house mistakenly breaks down the wall or the fences of your neighbouring house, an umbrella insurance policy has the capacity of paying for your damages which has already went beyond the limits of your auto insurance and your homeowners insurance.
  • Legal Damages: – Along with protecting you from the above mentioned disasters, the umbrella insurance policy can also provide you with a protection different kinds of legal issues. The lawyers fee and the other associated court costs can easily be met with this insurance. The cost of a major lawsuit, even if you know that you are not guilty, you can afford a good lawyer for protecting your assets, with the help of Umbrella Insurance.

The coverage of umbrella insurance policy can easily be earned. This type of policy can also provide you with an additional liability protection, that too at a reasonable prize.

Certain Limitations of an Umbrella Insurance:

There are some areas where an umbrella insurance policy has some limitations. Thus, besides developing an idea about the coverage area of the above mentioned policy, there is a need for you to also gather some information about the limitations of this policy.

  • This insurance does not pay for your own injuries.
  • Damage to your personal belongings are also not paid by this policy.
  • Various criminal acts are not provided with a coverage, offered by an umbrella insurance policy.

The limitations of this insurance are so little that, there is no need for you to get worried about you. On the other hand, this insurance can appear as a saviour, at the time when all the limitations of your other insurance policies are over.

Who Needs Umbrella Insurance?

While it may seem that the people who are in possession of a huge amounts of assets are in need for having an umbrella insurance policy. But in reality, anyone can be benefited from this insurance policy.

Let us talk about an example, where your neighbour gets accidentally bitten by your dog, then the umbrella insurance policy can pull you out of this unwanted mess, which you have created. Anyone can get seriously injured after coming in your house, even this problem can be solved with the above mentioned policy.

Umbrella Insurance policy can help you from coming out of various problems, which has been created by you, consciously or subconsciously. The exact amount of coverage needed by you depends heavily upon the value of the current assets, which you have to protect. Keep one thing in mind that, there are some insurers who may provide you with a better rate on your basic liability policies if you add umbrella insurance.

About Tina Roth

Get to Know Me Better. Hi, I'm TINA! I am a financial planner, blogger, and freelance writer and digital marketing consultant. The idea of starting a finance blog has been hitting me for long; I took it seriously after falling into a spiral of finance debacles and recovering from it. Here I write about personal finance and money management tips.

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