With the number of lawsuits increasing every year, not having enough liability insurance is a concern. Even if you have a sufficient amount of insurance, you may still feel underinsured in the case of a lawsuit. Here is where an umbrella policy can come in handy. Learn more below.
What is an Umbrella Policy?
An umbrella policy is a type of insurance that goes above and beyond the limits of liability insurance offered by your regular insurance policy. Umbrella policies can be used with various types of insurance policies.
What Does it Cover?
Umbrella policies are often referred to as “excess liability” because they cover excessive amounts of liability insurance beyond what your regular policy covers. They offer protection against property damage and bodily injury liability claims and offer legal protection against slander, libel or false arrests. They also provide help with legal expenses.
How Do They Work?
Say someone is seriously injured on your property, sues you for $500,000, and wins the case. Since your regular commercial policy only carries a limit of $250,000 in liability insurance, you would be responsible for the additional $250,000 and may have to pay the money out of your own pocket. If you have an umbrella policy with at least $250,000 of insurance, your umbrella policy would pay the remaining balance.
Different Types of Coverage
Umbrella insurance is generally used in situations where the individual or company requires an excessive amount of liability insurance. It’s not used for collision or comprehensive claims or with basic homeowners insurance. It’s a way to protect yourself or your business in the case of a lawsuit. It can be used with auto policies, home policies, commercial business policies, landlord insurance, boat insurance and motorcycle insurance as long as it’s part of the liability insurance.
Benefits of an Umbrella Policy
With lawsuits often resulting in six-figure settlements, many defendants find themselves at the losing end of a lawsuit where their regular policy doesn’t offer enough coverage. Umbrella insurance can make up the difference. Another benefit of umbrella policies is that they are relatively inexpensive in terms of the amount of coverage they offer.