When It Rains, It Pours – Umbrella Policy
Umbrella insurance is an insurance policy that can provide additional coverage to your existing homeowners, auto, boat, landlord, and professional liability policies. An umbrella policy can provide coverage when an existing policy limit is exhausted or when the claim is excluded from your policy. Umbrella insurance generally provides liability coverage for: injuries, damages to property, certain lawsuits, and personal liability situations.
Let’s look at a couple of examples to better understand how the insurance works:
Example 1
You own a rental home that is occupied with a tenant. One of the tenant’s friends comes over and trips over the front walkway that’s uneven. The cost of the injuries is $500,000 and your landlord policy has a limit on bodily injuries of $200,000. If you also have an adequate umbrella policy, the umbrella insurance would pay the difference of $300,000.
Example 2
You’re a physician and you run into the back of a vehicle with your vehicle. At the time, everyone seems fine and no injuries to report. A month later, there is a $1,000,000 bodily injury claim brought against you. Your auto insurance provides a max of $300,000 for bodily injuries. If you have an adequate umbrella policy, the umbrella insurance would pay the difference of $700,000.
According to the Insurance Information Institute, the average annual cost of an umbrella policy with $1 million in coverage is $300. However, most umbrella policies require that your primary policies have a minimum amount of liability coverage limits, which may raise the cost of those policies.
If you’re interested in obtaining an umbrella policy, reach out to your local insurance brokers to get more details and cost projections.
