When Should You Consider Getting Umbrella Insurance for Yourself?

Do you run a small business in the United States? Purchasing an insurance policy is one of the best ways to protect yourself from third-party damages and any other form of claims that may arise.

We have had some individuals asking when should you consider getting Umbrella Insurance? This is important, but first, you need to understand how the policy works and what it covers.

How Important is Umbrella Insurance?

Generally, insurance policies are in place to provide additional (financial) security to businesses and individuals. As an individual, understanding how important umbrella insurance is can help you decide if it is the right policy for your brand.

What is umbrella insurance and why should you get it? Umbrella insurance is a type of insurance policy that provides additional coverage to you and your loved ones. It is ideal for existing policyholders who want to bolster their insurance-related protection.

For example, you may exhaust the number of claims available in your auto insurance policy. This means that you cannot be covered the next time your vehicle gets into an accident. But with an umbrella insurance policy, you may be able to cover those damages.

How Does Umbrella Insurance Work?

First, the policy acts as “secondary coverage for your liability coverage.” You only get to claim it when you must have exceeded the limit of your liability insurance.

Second, umbrella insurance works by allowing the policyholder to get an out-of-court settlement if the third-party sued him or her.

Now, there is an important aspect of knowing when should you consider getting umbrella insurance. That is the provision of additional coverage beyond what your auto and home insurance policies could offer.

Depending on the terms of the policy and the insurer, the coverage may extend to:

  • Personal liabilities caused by a member of your household.
  • Damages or personal injury caused by your pet, such as biting someone.
  • Defense coverage, especially when you are sued for damages and personal injury.
  • Certain personal injuries, including defamation of character and slander of a third party.
  • Protection of vacation rentals, including scooters and boats.

What Does Umbrella Insurance Cover?

You cannot know when you should consider getting umbrella insurance if you don’t know what it covers.

The primary thing to have in mind is that the coverage works the same as your liability coverage. The only difference is that its limits are higher than the former. So, when your personal liability coverage is exhausted, the umbrella insurance policy gets you covered.

Below are some of the coverage options of umbrella insurance:

1.    Bodily Injury

This type of umbrella insurance coverage is ideal if someone gets hurt in your home. For example, someone visited your kids and, on the way, out, slips and falls. The cost of treating the bodily injury will be covered with your umbrella insurance.

Bodily injuries covered with umbrella insurance include:

  • Dog Bite: If your dog bites someone.
  • Lawsuits: Assuming the person injured sues you, what are you going to do? Plead? It may only work if the injured person is lenient. Otherwise, you will be sued and that costs money! With umbrella insurance, the insurance company will cover the costs.
  • Car Accidents: The policy also protects you from the lawsuit and medical bills arising from bodily injuries caused to someone with your vehicle.

2.    Property Damages

Third-party damages to people’s property are also covered with umbrella insurance. The coverage extends to damages caused to someone’s building, vehicle, and any other tangible property.

The umbrella insurance provider also covers the cost of repairing or replacing those damaged properties.

3.    Rental Property

It is exceptional to have coverage that protects your rental property. If someone gets hurt or has the property damaged by items in your property, repayment is required.

Umbrella insurance typically covers the cost of replacing or repairing those items.

4.    Reputational Injury to Third-Parties

Imagine that you insulted someone or called the person unprintable names. You may be lucky to walk away if the person doesn’t sue. But what if the person does?

You will be charged to court on different counts, ranging from:

  • Slander
  • Lies
  • Mental anguish
  • Libel
  • False arrest

In that case, your umbrella insurance policy kicks in to save the day. The policy helps you navigate through the storms that come with injury to someone’s reputation.

Should I Carry an Umbrella Insurance Policy?

Why do I need umbrella coverage when the personal liability coverage is already there? When should you get umbrella insurance should be determined by the following:

1.    Risk of Being Sued

Wealthy families are usually the target of lawsuits. You need to be careful so you don’t end up attracting a lawsuit.

Here are some of the reasons why you may be susceptible to a lawsuit:

  • You have a swimming pool, which has a likelihood of drowning a non-experienced swimmer.
  • Your household is huge, and typically includes workers or employees, such as chefs.
  • Certain animals, including dogs, are in your home.
  • If several persons visit your home throughout the year.

2.    Your Asset-Base

The number of assets you have can also be a reason why you should take note of when you should consider getting umbrella insurance.

Being a high-profile individual comes with several challenges, including being a target of people who want to cause you trouble.

How to Determine How Much Umbrella Insurance You Need

How much umbrella coverage is needed to protect you and your loved ones? The rule of thumb is to check your assets. The more assets you have, the more umbrella insurance coverage you need.

To make it simpler, the policy starts from $1 million. Although, some umbrella insurance providers may charge a flat fee of $150 to $300 yearly to keep it active.

Higher limits of the policy can be purchased at an increment of $1 million. For example, if you started with the $1 million coverage, the next limit would be $2 million and it continues like that.

How to Purchase Umbrella Insurance

Now that you know when should you consider getting umbrella insurance, let us talk about the purchasing process. Typically, you need to look up the available umbrella insurance companies in your area to compare the options.

The major focus is on meeting the requirements. Most insurance companies require intending policyholders to hold the maximum liability limits for both auto and home insurance policies.

That proves your exhausting of the previous coverage limits and the need to get umbrella insurance for additional coverage.

Wrapping Up

The best time to consider getting umbrella insurance is when your existing home and auto insurance policies are nearing the limits. That way, you wouldn’t be left in the lurch if an accident or damage happens on your property with no coverage to protect you.

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