This is a question that many homeowners do not ask of their insurance company because they do not know very much about it if even if it is necessary for them to have such a policy. If you are sued by a third party that has been injured on your property, your standard homeowner’s insurance policy will cover your legal fees up to amount specified in your policy. If you have an umbrella liability policy, it will cover costs that are incurred in excess of the specified amount. Some people who do know about such a policy think that only the wealthy can afford it because it is so expensive. This is not so, because such a policy is really affordable and you can have it in conjunction with your regular home insurance policy.
Umbrella insurance sits on top of your regular insurance policy similar to an umbrella giving you extra protection, that is protection in addition to what you already have. If a person sues you for some accident on your property and the settlement is $300,000 and you only have $100,000, under a regular policy you are responsible for paying the difference. If you have an umbrella liability policy, the insurance will take care of the whole settlement. Umbrella liability insurance has been known to settle claims as high as a million or two million dollars. However, you have to set the amount that the insurance will pay out as it cannot be an unlimited amount. Most people specify one million dollars because most claims are for less than this amount. Having a policy that protects you against high claims is not costly. It would probably cost about an extra $200 or $300 per year on your insurance premium.
The amount you specify in an umbrella liability policy doesn’t really have anything to do with what you own. It really has to do with where you live. If you live in a wealthy neighbourhood, you may be a target for a large settlement. There are people who love to sue for large amounts of money for the slightest injury. With the many people that go in and out your door, you cannot think that your friends will not sue if they fall and hurt themselves. These are often the ones who do sue. Usually they state a very high amount, and the court will agree with the amount or reduce the settlement claim. Generally the final dollar amount is much higher than the standard $100,000 of coverage you get with a standard home insurance policy.
You cannot get an umbrella liability policy unless you already have a homeowner’s policy. These policies usually carry a high deductible of $300,000 or more because they do not take effect until your regular insurance policy has been tapped out. Insurance companies require you to have insurance equal to the deductible of the umbrella policy and if you take out your home, auto and umbrella policy from the same company, you will get a substantial discount on your premiums. It also eliminates the hassle of dealing with different insurance companies when something happens and you need to make a claim.
Having an overall umbrella to take care of any gaps in your home insurance gives you peace of mind that if something unforeseen should happen you have the protection you need and will not be in debt for the rest of your life. With the minimal extra cost involved spread out over twelve months, you will not even notice the difference in your monthly premium payments. You can’t afford not to have an umbrella liability policy.
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