As Usual, In The World Of Insurance Exclusions Apply

Category: Finance, Insurance.

Most of our insurance agency clients, whom I ask if they know what umbrella insurance is meant for, cannot answer positively.

So, let s start with the square one. Yes, they have heard about it, but they cannot say what it is for, why people need one, and who should consider buying one. Liability coverage is needed when a policy holder is being sued in a civil court( not criminal) . The driving liability protection comes from a car insurance policy. The lawsuit against a person might come as a result of a bad driving( the most frequent case) or from whatever else one can be liable for. The rest is covered under homeowner s liability policy( condo or renter s policy will do the job too) - dog biting, and many other, insulting strangers things, which have not much to do with one s residence. So, let your insurance agent take care of gaps and exclusions.

As usual, in the world of insurance exclusions apply. The maximum liability you can get on your car insurance policy is$ 500, 00The same goes with homeowner s insurance. If the real ugly thing happens and you are liable for more than you are covered for then guess what? Some companies would go up to$ 1, 000, which does not, 000 make much difference if one s total assets exceed that number. Now you have to pay the difference out of pocket. Because you do not have that extra liability provided by that really inexpensive umbrella insurance policy, two, which adds one, three or more million liability on the top of what you have on your car or home insurance. Why?

Most of the people would say" I do not have that much in assets" . While calculating the value of your assets do not forget to include 25% of the household income for the next 10 years( garnishment of wages) on the top of bank accounts and equity in your real estate. If that is the case then you do not need the umbrella insurance policy. When you buy a personal liability umbrella insurance policy, you are getting not just higher liability coverage limits. Your liability coverage pays for lawyer s fees and defense costs, which normally add up quickly. You are buying a broader coverage as well. By the way, if you have rental property( up to 20+ units) in your state or in a number of states you can use your umbrella to cover that exposure as well.

The title to the rented property should be on your name, not a business entity name. And the cost is very nominal- around$ 15 a year per rental unit. The personal injury protection under umbrella insurance policy offers coverage not sometimes found in your auto and homeowner s policy. Many primary policies cover bodily injury and property damage, but not personal injury. It includes defamation, false arrest, invasion of privacy, false imprisonment, wrongful entry, malicious prosecution, or eviction. One of the best things about Personal Umbrella Insurance is that you get lots of coverage for the money.

The total annual premium for a$ 1 million umbrella is very affordable and could be as low as$ 200 a year. Coverage start at$ 1 million, but you can go as high as$ 10( sometimes even 50) million. The premium depends on many factors including number of cars in household, how many young drivers are there, previous claims. Umbrella liability insurance can be purchased as a stand alone policy. Many companies will not sell umbrella insurance to someone who does not meet the definition of a good driver. However, insurance companies require that you buy an underlying basic liability coverage first( homeowners/ renters insurance, or both, car insurance) before you can purchase an umbrella liability policy. Many insurers will not offer an umbrella policy to someone whose car is insured somewhere else.

If you do not meet this requirement, you will be personally liable for the difference between the liability limit you should have carried and the limit you do carry. It is important to distinguish between actual umbrella policy and excess liability policy, which many mistakenly call an umbrella. Normally, the umbrella won t cover claims arising out of a business endeavor. The difference is very clear- excess liability policy does not cover anything, which is not covered by underlying policy, while umbrella offers a broader coverage. If you own a business, even a small one, you ll need to buy a business insurance policy to be covered against liability claims. Also, as a general rule, the umbrella policy will not cover intentional acts.

If the court assesses punitive damages against you, those damages will not be paid by your umbrella insurance.

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