Umbrella Insurance: Knowing When You Need Extra Protection
One of the many decisions a person needs to make when it comes to their insurance portfolio is if they need to purchase an umbrella policy. The costs and risks associated with umbrella insurance is well worth the value it can bring in the form of providing protection beyond the traditional coverage offered by underlying policies. But what exactly is umbrella insurance, and when should a person consider getting it?
What Is Umbrella Insurance?
Umbrella insurance is an extra layer of liability insurance provided on top of other insurance policies. It generally provides extra protection in the event that the limits of your underlying insurance policies, such as auto and homeowners insurance, are exceeded. It can also provide protection against certain types of lawsuits that may not be covered by your other policies. Umbrella insurance is usually provided in the form of a personal liability policy with a high limit.
When Should You Consider Purchasing Umbrella Insurance?
Umbrella insurance is a necessary form of additional coverage for those with a high-asset portfolio or those who face certain risks. It’s important to consider the cost-benefit analysisof umbrella insurance and weigh how much coverage you need for the cost of the policy.
The following groups should consider umbrella insurance:
• Individuals with a high net worth or asset portfolio – Having expensive possessions or property makes you a target for claims from people seeking a large amount of compensation.
• Individuals with higher-than-average liability exposure – If you take part in high-risk activities that could result in an injury to another person, it’s important to have additional coverage in the form of umbrella insurance.
• Homeowners with a pool– Homeowners with a pool or spa that is used by people outside of their own family should consider umbrella insurance to provide extra coverage in the event of an accident.
• Business owners – Owners of small businesses should consider purchasing umbrella insurance to protect their business and personal assets in the event of a liability claim.
• Renters – Renters should consider umbrella insurance to provide protection for their personal assets if they are found liable for damages to someone else’s property.
Conclusion
For most people, umbrella insurance is an unnecessary expense. However, those with a high-asset portfolio, higher-than-average liability exposure, or who take part in activities that could increase their liability risk should strongly consider the added protection that umbrella insurance can provide.