Industry Insights

What Is an Umbrella Insurance Policy?


No matter where life takes you, having an umbrella insurance policy is always a wise decision. And with modern insurance plans being so affordable and easy to set up, there's no excuse not to have an umbrella policy in your corner. Then, if something does happen, you can rest assured that you'll be covered and won't face huge costs or settlements.

Keep reading to learn everything you need to know about umbrella insurance.

What Is Umbrella Insurance?

An umbrella insurance policy is a type of coverage that provides liability protection. The protection extends beyond the limits of your standard insurance policies. It can provide added financial security against lawsuits and other unexpected events.

For instance, let's say you get into an auto accident where you are found at fault, and the other party incurs $200,000 in medical expenses. If your car insurance policy only covers up to $100,000 in damages, you would need an umbrella policy to cover the remaining amount. This can help protect your assets, such as your home and savings, from being taken away in a settlement or judgment.

What Does Umbrella Insurance Cover?

An umbrella insurance policy helps in specific situations in which you or your family may be responsible for another person's injury. It can also assist with property damage. Overall, the policy will protect you financially from major claims and lawsuits.

Umbrella insurance typically covers claims such as:

  • Bodily Injury Liability
  • Personal Injury Protection
  • Uninsured/Underinsured Motorist Coverage
  • Property Damage Liability
  • Legal Defense Fees

Umbrella insurance can also cover costs associated with libel, slander, false arrest, and invasion of privacy. It can also provide coverage for household workers' compensation if you are found liable in a workplace injury case.

Do I Need Umbrella Insurance?

In today's world, lawsuits can be unpredictable and expensive. Even if you have enough money to cover the cost of a lawsuit, it's still important to have extra coverage in place. 

Who needs this type of coverage? Umbrella insurance is recommended for anyone with assets that could be taken away due to a liability lawsuit. That includes homeowners and renters alike. It also includes those with multiple vehicles with higher liability coverage limits.

Do you own a pool? What about a dog? If yes, having an umbrella policy can provide extra peace of mind.

Finally, business owners and celebrities benefit from having an umbrella policy. For instance, a crypto-currency-related class action lawsuit against multiple big names is underway. If these celebrities need extra legal protection throughout the suit, it'll come from their umbrella policy.

Liability Protection for Hunters and Boaters

If you hunt or go out on the water, an umbrella policy can help protect you from liability in case of an accident. Take, for instance, this hunting accident that took place recently. The man at fault hopefully has an umbrella policy to help him weather the catastrophe.

Hunting is especially risky as strict regulations exist in some states, and any damages caused could incur large fines or, worse yet, jail time. An umbrella policy can provide extra coverage beyond your existing insurance plan and cover associated legal fees, settlements, and judgments if you are found liable for the incident. This kind of peace of mind is invaluable when it comes to hunting.

Additionally, boating accidents can easily cause an enormous amount of damage, both to people and property. If a boater is found liable for such damages, they could face huge costs to cover the expenses. Fortunately, an umbrella policy provides extra coverage that can help protect them against such costly legal fees and damages.

How Much Does Umbrella Insurance Cost?

Umbrella policies are almost too good to be true! They provide more coverage than traditional policies and cost less. Insurance providers can afford to charge less since the policy isn't serving as primary coverage.

Umbrella insurance is generally affordable and typically starts around $150 to $300 per year for $1 million in coverage. The exact cost will vary based on factors like the policy's size, location, and the number of assets you need to cover.

Consult your insurance agent or provider to get a firm idea of how much an umbrella policy will cost. They can help you determine the best coverage and rate for your needs. Weigh the risks and choose the right coverage for your needs to protect you from whatever lies ahead.

What Coverage Limits Do You Need?

Umbrella insurance provides a wide range of coverage limits. The typical coverage limit for umbrella policies ranges from $1 million to $5 million, although higher limits are available. If a claim exceeds your liability coverage, the umbrella policy will protect you up to the desired limit.

How to Save on a New Policy

If you're in the market for a new policy, one of the best ways to save is by bundling your umbrella insurance with your existing home, auto, or other policies. You can also look into setting up automatic payments to qualify for a discount.

Additionally, you can save a lot by increasing your deductible. Higher deductibles mean lower premiums.

But be careful. Don't raise the deductible so high that you won't be able to pay it. You should also consider setting aside some money to cover the higher deductible cost should a claim be filed against you. 

In terms of your credit score, many providers take it into account when determining rates. Review your credit history and take steps to make any fast improvements possible.

Umbrella Insurance Policy: The Best Protection for Your Assets

It's always better to be safe than sorry when protecting yourself from potential lawsuits and liabilities. An umbrella insurance policy provides extra coverage beyond what traditional policies can offer and can be tailored to your specific needs. With proper research and a few simple steps, you can have peace of mind knowing that you're properly covered.

At Otto Insurance Group, we make it our mission to provide the best protection for your assets so you can rest easy. Contact us today to learn more about umbrella insurance. We look forward to speaking with you!

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