Umbrella Insurance: Who Needs It and How Does It Work?

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You may have heard of umbrella insurance, but don’t know if you need it or how it could work for you. Umbrella insurance is a form of personal liability insurance that provides additional coverage for claims beyond what your homeowners or auto insurance policy will pay. An umbrella insurance policy provides coverage for you and the other members of your household in the case of an injury or damage you cause by accident or negligence.

Umbrella Insurance: Who Needs It and How Does It Work?

Umbrella insurance does not protect the policyholder’s property, but instead covers damage to other people’s possessions and/or personal injury. Depending on the policy you choose for your specific needs, additional liability claims for things such as rental units you own, slander, libel, or false imprisonment may also be covered. Everyone could benefit from umbrella insurance, but it would be especially beneficial for those who engage in a lifestyle that puts you at greater risk.

In today’s world, anyone could be sued for a variety of reasons, and purchasing umbrella insurance could go a long way to putting your mind at ease. Ideally, the coverage amount of your liability insurance should be high enough to fully cover all of your assets if you find yourself in the unfortunate circumstance of a lawsuit.

So how does an umbrella insurance policy work? Here is an example. Let’s say you find yourself in a situation where you are being sued for an amount in excess of the limit of your homeowners or auto insurance policy. You would first need to pay the deductible, and then your insurance company would be required to pay the maximum coverage amount specified on your policy. Your umbrella insurance policy would then kick in and cover any additional claim amount up to the limit of coverage purchased.

Umbrella insurance is relatively inexpensive, and most major insurance companies offer it, but you may be required to have a homeowners and auto policy with the same company as well. If you think an umbrella insurance policy could be the right fit for you, our experienced professionals have the knowledge and resources to help you make an informed decision. Please give us a call at All American Insurance Brokerage today!