How Umbrella Insurance Works?

Today, we’re going to be talking about umbrella insurance. Umbrella insurance is a type of liability insurance that adds to the coverage limits of an existing home or auto insurance policy. Most Umbrella insurance policies offer coverage limits starting at $1 million, and some can even give more than $10 million in coverage, depending on the insurance company.

A typical auto or homeowners liability insurance policy can be purchased with limits of no more than $300,000 to $500,000, depending on the insurer. But if your net worth is higher than that, then your assets could be at risk if you’re hit with a hefty liability claim. That’s where umbrella insurance can help. In addition to extended coverage limits, umbrella insurance also covers situations that don’t typically fall under liability insurance. 

For example, umbrella insurance covers claims for libel and slander, malicious prosecution, and personal psychological harm. As far as cost goes, umbrella insurance is relatively inexpensive for the amount of coverage that it offers. On average, a $1 million umbrella insurance policy costs between $150 and $300 annually. After that, each additional $1 million in coverage costs about $50 to $75 per year. If you’re still on the fence about purchasing umbrella insurance, here are two strategies that can help you decide if it’s the right choice for you. 

First, you need to total up your assets, including your home equity, personal savings, and retirement accounts. If the total exceeds the limits of your auto or homeowner’s liability policy, then personal umbrella insurance is a good investment. You should also consider whether there are things in your lifestyle that increase the odds of you being liable for someone’s injuries at some point. These can include things like owning a dog or living in a house with a pool. Now that you know more about how umbrella insurance works, you’re ready to start looking for coverage. I hope you enjoyed this session on everything you need to know about How Umbrella Insurance Works? So always be sure to contact a professional before making any financial decisions.