Insurance policies exist to protect individuals and families from unforeseen disasters that can otherwise wipe out their assets. However, basic homeowners policies only cover so much, so it’s crucial to periodically review your insurance policies to ensure all your valuable belongings are protected. For many individuals, umbrella insurance is a catch-all solution for various types of coverage not mentioned in a standard policy.
How Umbrella Insurance Works
Umbrella insurance essentially extends liability coverage in various ways with add-on coverage. While umbrella coverage doesn’t protect the policyholder’s own property, it covers lawsuits involving personal injuries to others or damage to their property. Here’s a closer look at umbrella insurance and how it helps fill in the gaps that standard policies do not cover.
1. Legal Costs – A standard homeowners or auto plan includes liability coverage, but only up to certain limits. If your liability coverage only goes up to $100,000, you would have to pay the remaining legal costs that exceeded that amount in a lawsuit. Umbrella insurance gives you greater coverage as an add-on to a homeowners or auto policy. The coverage can be used to pay court costs if you are found to be at fault for causing an accident.
2. Teen Auto Insurance – If your teenage son or daughter is learning to drive, you must by law carry auto liability coverage for them on your policy. However, since teen drivers present high risks, you may need umbrella insurance. You can cut costs under an umbrella plan for monthly premiums, whereas adding riders to a standard plan may lead to higher costs. Be aware that the 16-19 age group accounts for up to 10 percent of fatal collisions per year.
3. Party Attendee Liability – Homeowners must be careful about throwing parties involving alcohol. Sometimes parties lead to drunk driving and confrontation with law enforcement. An intoxicated party attendee who gets in an accident might try to sue you for not offering them the opportunity to stay the night after being served alcoholic drinks. Some states make the party host partially liable for such events that lead to drunk driving disasters. Luckily, umbrella insurance covers indirect liability.
4. Dog Attacks – When a dog attacks another dog or a human, a lawsuit may arise to cover injuries from a bite. The sharp teeth of dogs are so dangerous that dog bites can run up medical bills into thousands of dollars. The owner of the dog that bites first is the one who usually faces the liability for medical treatment and lost wages. A homeowners plan may not cover such severe injuries, whereas an umbrella policy does.
5. Homeowners Liability – Your standard homeowners plan covers liability to a certain limit for a wide range of incidents. It usually covers slipping and falling accidents as well as damage to a neighbor’s property. Nonetheless, when you have kids or pets, damages can run up much higher, which again is where umbrella insurance helps. It doesn’t cost much more and provides peace of mind that one disaster can’t destroy you financially.
6. Defamation – A standard homeowners plan may touch on defamation in the liability section, but chances are it will offer limited coverage. Umbrella coverage picks up where your basic liability coverage leaves off. This coverage protects you against people who accuse you of slandering them. Besides, when someone’s professional reputation is damaged, they can sue the party they believe caused damage by publishing or circulating a false statement. Defamation cases can turn into lengthy legal battles that sometimes result in multi-million dollar settlements.
7. Pain and Suffering – When you cause an auto accident that leads to injuries, the victim can sue you for “pain and suffering.” This additional cost outside of medical bills for physical injuries can add up to a substantial amount of money. A victim may claim the accident caused psychological stress, leading to a much higher settlement, even in the millions of dollars. The minimum coverage limit for umbrella insurance is $1 million, which can help in extreme cases.
8. Volunteering – People who actively volunteer for community service work should consider taking out umbrella insurance. Despite trying to help your community, you can be accused of inappropriate behavior or negligence. Yet, with umbrella insurance, you can limit your exposure to the resulting legal costs.
Deciding on whether or not you need umbrella insurance comes down to your home activities and risks. You may not need to worry about lawsuits as much if you never throw wild parties and have no kids or pets. However, for families that engage in playful events with kids, there’s a need to be prepared to pay for accidents like a ball that breaks a glass window. Umbrella insurance works as a last line of defense against unpredictable fiascos.
Umbrella insurance is the answer for many families who want to make sure they are well protected against worst-case scenarios involving legal action. Talk with an insurance expert to make sure your coverage is sufficient. Contact us at Gant Insurance Agency for more information about the type of customized insurance plan that fits your needs.