Umbrella insurance provides blanket liability protection for individuals and their assets. These policies go above and beyond the limits of a primary auto and home insurance policy, and also fill-in the gaps in those policies. The high limits of an Umbrella policy protect an individual in the event of a large dollar amount claim. Most Umbrella plans begin at one million dollars in coverage, but they can be purchased with much higher coverage limits.
For instance, an umbrella policy would pay out in the event of auto accident in which someone was severely injured or killed. In the event of a severe traffic related injury, liability payouts in the court system have been as high as millions of dollars. With most people only carrying $100,000 per person and $300,000 per accident liability limits, its easy to see how necessary an umbrella policy is to one's financial health. Without that coverage, the at-fault party is responsible for the remainder of the payout after the policies coverage limits have been exhausted. So, if you cause an accident that results in $800, 000 in damages to one person, and only carry liability limits of $100,000 per person and $300,000 per accident, you will be stuck paying $700,000 of the bill.
The need for umbrella coverage is large, although largely unfamiliar to many people. Most people who have a net worth under $500,000 assume they do not need such a high liability limit. What most of these people don't realize is that, in the event of a large dollar amount claims, not only can real property be taken, but future earnings can also be garnished to pay for the remainder of the bill after the insurance limits have been exhausted. This makes Umbrella coverage a crucial coverage for any wage earner to carry.
The cost for this type of coverage is relatively low. The premium depends on the risk, of course, but the average annual cost for one million dollars in coverage is $200-300. The coverage amount of liability blankets the coverage on your existing policy (i.e. if you had $500,000 liability limit on your home and a one million dollar umbrella policy, you would have coverage up to $1.5 million). Umbrella insurance can also fill in the gaps of liability coverage where your home or auto policies may not provide coverage. For instance, umbrella policy can provide coverage in the event of libel, false arrest, slander, or invasion of privacy. In this sue happy world we live in, many are finding that it is better to have ample coverage than try to save a few dollars.
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