You have probably heard the term umbrella insurance, but you might not fully understand what this coverage provides and why you would need it. Basically, umbrella insurance provides extra liability coverage to help protect you if you are faced with major claims or lawsuits against you.

 

Your basic insurance policy (auto, homeowners, commercial, etc.) coverage is in place to help protect you when a claim is filed, but these policies have their limits. So, what do you do if you if a lawsuit is filed against you that exceeds these limits? This is where an umbrella insurance policy comes into play.

 

How Umbrella Insurance Works

 

An umbrella insurance policy provides extra coverage that you might need if you are faced with a lawsuit for personal damages or bodily injury liability.  Umbrella insurance can also give you coverage to help cover any costs that you might incur if you are accused of slander, libel, false arrest, and if you face legal fees.

 

If you are found responsible for an any of these incidents, you will have to pay damages from your basic insurance policy. These policies have specified limits. After these limits are exhausted the remaining amount due still needs to be paid. Without added insurance, this amount will come out of your pocket. You don’t want to be forced to sell your property and assets to foot the bill.

 

An umbrella policy kicks in when your basic insurance policy’s liability limits have been reached. It will pay the excess funds up to its own specified limit. An umbrella policy can also apply if your basic policy doesn’t cover the specific claim that you are facing.

 

The Importance of Umbrella Insurance Coverage

 

Without added coverage your assets are at stake. Assets can include:

 

• Your bank accounts,
• retirement account,
• investments,
• house,
• vehicles,
• and any collections.

 

If you don’t have enough liability insurance, you need an umbrella policy, so your assets don’t become vulnerable. Without adequate umbrella coverage, you could face financial ruin because of an unforeseen accident or because of one mistake. You could lose what you have worked hard for.

 

What is the Cost of Umbrella Insurance?

 

Umbrella insurance coverage, in general, cost around $150 to $200 price range for $1 million in coverage. The premium increases if you choose to get higher coverage, such as $2 million of liability coverage. When you are given a quote for an umbrella policy, your history of liability claims will be considered.

 

Personal umbrella coverage isn’t tax deductible, but if you have a business and your umbrella policy supplements any business policies, you might be able to deduct some of your premiums on your taxes, but you should consult with a tax professional to confirm that. If you own rental properties and include them under your regular umbrella policy, then you are conducting business, and a portion of your premiums might be tax-deductible.

 

How Much Liability Coverage Should I Have Through an Umbrella Policy?

 

When you are choosing an umbrella policy to supplement your liability coverage, there are three things that you should take into consideration.

 

• What risks do you face? Think about any risks you face as a renter, or as a homeowner, the chance of causing a crash during your commute to and from work or any activities that you regularly participate in that could put others at risk.

 

• What kinds of assets do you own and what is the value of them? Make a list of all your possessions, properties, bonds, stocks, retirement funds, and bank accounts. The greater the number of assets you have, the more you need to insure. Even if you don’t have a lot of assets, you should consider the long-term ramifications of a large judgment or settlement where you are responsible for the damages.

 

• What about the potential for loss of income in the future? Liability lawsuits might cause you to lose the assets that you have now and future income as well. You should consider what would be the long-term ramifications of a major claim being filed against you. When you consider your future income, you should think about your full earning potential. While your assets might not be great now, but if you are on track for a higher paying career, you could be involved in a lawsuit that targets your future assets.

 

Where Can I Purchase Umbrella Insurance Coverage?

 

To learn more about the coverage that an umbrella insurance can provide you and your family, contact the professionals with ProtectiveAgency.com  at (877) 739-9367. Our licensed insurance agents will be happy to answer any questions you have.