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What is Umbrella Insurance and When Should You Purchase It?

umbrella insurance complete guide

Out of the 72 million American homes with insurance, a whopping 66% are still underinsured, as reported by the Insurance Information Institute (III). With disasters such as floods, fires, earthquakes, and storms happening every year, homeowners with underinsured homes face a higher risk of paying for damages out-of-pocket, which is likely to strain their finances. Additionally, homeowners also face the risk of legal battles resulting from third-party injuries that happen on their property, defamation, as well as damage to other people’s property. For instance, if your aggressive dog bites a passer-by, you may receive a lawsuit, which may put your assets and finances at risk of auction. Thankfully, that’s where the umbrella insurance policy comes in handy. Read on to learn more about this type of insurance.

What Is Umbrella Insurance?

The Government Employees Insurance Company (GEICO) defines umbrella insurance as a policy that provides additional coverage beyond your personal insurance coverages. For instance, if you hit a pedestrian and face an expensive lawsuit that goes beyond the liability coverage on your auto insurance, the umbrella insurance will cover the remaining costs and save you from serving jail time or facing property auction. Usually, insurance companies sell umbrella insurance in $1 million increments, which cost between $150 and $300 per year, according to the Insurance Information Institute (III).

When Should You Purchase Umbrella Insurance?

While umbrella insurance provides excess coverage on your personal insurance policies, not everyone needs it. In other words, you can opt to increase the amount of coverage on your personal insurance policies for full insurance instead of buying umbrella insurance. However, with the following categories, you should purchase this policy if you:

  • Own High-Risk Property – Every year, about 100,000 children in the U.S. visit the emergency room (ER) due to trampoline injuries, with some succumbing to them, as reported by the American Academy of Pediatrics (AAP). This shows just how dangerous a trampoline can be in your home and why the risk of lawsuits is third-party lawsuits is so high. If you own such a property, ensure that you purchase enough umbrella insurance to protect yourself from lawsuits and claims. Other high-risk possessions include swimming pools and aggressive dog-breeds.
  • Are a Law Enforcement Officer – Working in the field of law enforcement, you are more likely to face lawsuits due to issues such as wrongful arrest, malicious prosecution, and defamation of character. Therefore, having umbrella insurance will enable you to afford the legal costs that may result from such situations.
  • Own High-Value Property – If you have huge savings and high-value property such as cars, investments, and houses, people will be more likely to try to claim your assets in case of damages. With your assets at risk of an auction, you should have umbrella insurance to protect them, as well as your finances.
  • Are a High-Profile Person – Public figures such as politicians are also at risk of facing lawsuits due to issues such as slander, which means they need umbrella insurance.

Umbrella Insurance Exclusions

In general, umbrella insurance does not cover any damage to your personal property. Rather, it covers the damage you cause to other people’s property. However, it won’t cover the damages resulting from criminal activities, nuclear war, or transmission of a contagious disease, per the International Risk Management Institute (IRMI). Besides, this policy only provides coverage once you’ve exhausted other personal liability coverages.

When shopping for umbrella insurance, make sure to remember the information related above.  If you’d like to learn more about umbrella insurance, talk to the professionals at Humble & Davenport Insurance today. Serving Renton and neighboring Washington cities, we are ready to help you find suitable coverage today.