You can buy all the coverage you want for home and auto insurance, but it doesn't mean that you will be completely covered. Though the odds of it happening are slim, perhaps you will be served several claims because you were the cause of a multi-car pile up on the freeway, or you will be sued for an unreal amount of money by a man or woman who fell on your property...and they win.
The reality is that your coverage plan can only cover so much, which is why many insurance companies also offer personal umbrella protection to policyholders. This type of coverage works after your home or auto insurance policy exhausts itself after an unfortunate circumstance, and there are still damages and repairs that need to be honored. It is a great way to insure you and your family extra protection because you will never know when a major catastrophe could threaten to wipe you out financially.
Here are some other ways that it works:
Covers the exhaustion of liability insurance. When someone threatens to sue you to pay for injuries that happened on your property, personal umbrella protection will kick in the moment your liability coverage empties.
Example: A kid and his father are severely injured in an auto accident, and the mother sues you to pay for medical bills. However, you only have 200,000 in liability coverage. Since your liability coverage only covers up to 200,000 in hospital bills, personal umbrella protection from 200,000 on up to your designated amount.
The coverage is inexpensive. Normally, your claim risk is mostly paid by your auto and home insurance policies. Therefore, you would receive a very affordable rate for protection, usually up to $300 a year, according to the Insurance Information Institute.
You receive broader coverage. Here are just some of many situations that umbrella protection can cover you, according to the New York Times:
o Lawyer payouts o Legal expenses o Bodily injury liability o Personal injury o Property damage
In many instances, it can help you if you served a charity or a religious or civil organization and you must face liability.
What Not To Expect From Personal Umbrella Protection
Keep in mind though that the coverage cannot cover anything. For example, businesses are not covered; they are covered under a business insurance policy. Moreover, if your accident or unfortunate coincidence was intentional, your policy will not cover you (it's against the law to do so anyway).
Contact your insurance agent to discuss an insurance plan. It could save your financial life or at least give you that extra cushion - just in case.
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