Umbrella insurance provides coverage for the ultimate rainy day
April 14, 2016
The average auto liability claim for property damage was $3,290 in 2014, while the average auto liability claim for bodily injury was $16,640, according to the Insurance Information Institute. The average insurance claim is a manageable amount for a policyholder with applicable coverage. In severe or catastrophic accidents, however, the limit of insurance coverage can be exceeded, and the assets of the policyholder may be at risk. Insurance generally provides coverage for “rainy days” when accidents happen, but umbrella insurance can provide added protection against larger claims.
How does umbrella insurance work?
Umbrella insurance can provide important protection for businesses and personal policies beyond the limits of what the other policies cover. A business will typically carry insurance for the building, any company automobiles, and professional liability. Private individuals get most of their protection from homeowners insurance and auto insurance. Umbrella insurance policies often require a minimum of $300,000 of coverage with other insurance before a person is eligible for an umbrella policy. In the event of a serious or catastrophic accident where the $300,000 coverage of insurance is surpassed, then the umbrella policy kicks in.
What can umbrella insurance cover?
The areas of coverage for umbrella insurance depend upon the selected policy. Many policies provide additional coverage for the situations already covered by other insurance. Policyholders sometimes forget the extent of their potential liability; a good example of this is parents of teenage drivers. As explained by Joe Stanley, managing partner at Stanley Law, “If somebody is driving your car (that you own) with your permission, you are responsible for them if they get in an accident. Period.” Typical umbrella policies cover injuries and property damage, but some also cover special circumstances.
Who needs that much coverage?
Individuals and businesses with valuable assets at risk should consider umbrella insurance. It’s also important to compare the costs of simply maxing out homeowners or auto insurance coverage, as some providers offer policies of up to $500,000 in coverage. “Umbrella insurance is generally not expensive,” said Stanley. “The basic coverage is what’s expensive because the $300,000 of primary insurance will cover 99 percent of claims.” If you have valuable assets, it’s worth looking into the costs of umbrella insurance. A lawsuit or other damages in excess of $300,000 can cause serious problems for individuals and businesses with vulnerable assets.