Once you have your basic insurance needs met, it’s time to start thinking about umbrella insurance. Umbrella insurance is mostly excess liability coverage over your existing policies, but it can also cover a few things you may not have coverage for.
What is Umbrella Insurance For?
Umbrella insurance protects your assets against lawsuits. When you have an auto insurance or homeowner’s claim, you aren’t covered for everything, even if your insurance policy covers the claim. You’re only covered up to your policy limits and are personally responsible for any amounts over the policy limit.
For example, you might lose a $500,000 lawsuit for someone getting hurt at your home but only have $250,000 in home insurance liability coverage. Your insurance company will pay the first $250,000. You’ll need to use $250,000 from your savings, cash in your retirement accounts, sell your home or other assets, or risk having your wages garnished until you pay off the balance.
What Does Umbrella Insurance Cover?
The main job of umbrella insurance is to expand your home insurance, auto insurance, and possibly boat or recreational vehicle insurance. It will typically cover anything covered by those policies. Those policies pay up to their limits, and then umbrella insurance covers the rest up to your umbrella insurance limit.
Umbrella insurance may also cover certain types of lawsuits that your other insurance policies don’t cover. This will usually include tort claims like libel, slander, and false arrest. It may also include liability coverage if you rent out your home even if your home insurance excludes that type of coverage. Exactly what your umbrella insurance covers depends on your specific policy.
What Doesn’t Umbrella Insurance Cover?
Umbrella insurance is a liability policy. It doesn’t expand any of the other types of insurance that you have. If your own property damage exceeds your home or auto insurance limits, umbrella insurance doesn’t provide extra coverage. It also won’t pay for your medical expenses, lost wages, additional expenses, or any other type of claim except liability to someone else.
Umbrella insurance may also have its own specific exclusions whether or not your other insurance policies have the same exclusions. These often include criminal acts, intentional acts, and liability you assume by contract. Personal umbrella insurance also typically won’t cover any business activities, even if it’s a smaller or more casual side gig.
What is Business Umbrella Insurance?
If you do need to cover business activities, you may need a business umbrella insurance policy. It works similarly to personal umbrella insurance but expands protection on your business liability coverages. If you don’t have any business insurance coverage yet, you’ll need to start with a commercial general liability or similar policy.
How Do You Use Your Umbrella Insurance?
Umbrella insurance is just like any other insurance. When something happens that you think your policy covers, file a claim with your insurance company. The main difference is that if your umbrella insurance is through a separate company, you need to notify both companies. They’ll then guide you through the process, including what documents you need and what each insurance company will pay. Don’t forget that you may need to send in paperwork by a specific deadline, even if you talk to someone by phone.
How Do You Get Umbrella Insurance?
Umbrella insurance is a separate insurance policy from your other policies, so it takes just a little more work than calling in and asking to increase your limit. But it’s still just as easy as buying a home or auto insurance policy. The main thing you need to do is make sure your underlying home, auto, and other insurance policies have the minimum liability coverage required by your umbrella insurance company. This is typically around $300,000 to $500,000, but it varies by policy. If you don’t have those minimum limits, you’ll need to increase your other coverages first.
How Much Does Umbrella Insurance Cost?
The costs will vary based on your specific situation, but umbrella insurance is one of the least expensive insurance options. The reason is that you have to use up your home or auto insurance before umbrella insurance kicks in. The big claims that umbrella insurance covers are very rare. So even if millions of dollars in coverage sounds like it would cost a lot, it actually doesn’t, because insurance is priced based on the odds that you’ll need to use it.
Does it Matter Which Insurance Company You Use?
You can buy umbrella insurance from any insurance company. It doesn’t have to be one you have another policy with. Just like when you choose whether to get your home and auto insurance from the same company, where you get umbrella insurance from comes down to convenience, if the insurance company gives a discount for multiple policies, reviews on how they handle claims, and where you can get the best deal.
How Much Umbrella Insurance Did You Need?
Many people use their total assets as a rule of thumb for how much insurance they need. That approach is a good start, but some liability claims can follow you in the form of judgments or garnishments if you don’t have the insurance or assets to pay them. They may also be difficult or impossible to discharge in bankruptcy. You may also want to get enough coverage to protect your projected future earnings as well.
Get Help From Your Insurance Agent
Your independent insurance agent can help you explore how much umbrella insurance you need and where to find the best rate. If you’re near Janesville, WI, contact Adam Johnston Insurance today.