Liability lawsuits are unpredictable these days. Juries are increasingly giving outsized awards to plaintiffs, and just about any accident can become prey to unscrupulous, and even manufactured, claims of serious injury. While homeowners and personal auto insurance off er liability protection, they most likely aren’t designed to handle a big claim, such as permanent disability.
If you lose a lawsuit that results in a judgment amount larger than what your insurance policy covers, the remainder will have to be paid out of pocket. Would you have to dip into savings, retirement accounts, your home’s equity or money set aside for college tuition?
A personal umbrella insurance policy is designed to protect you from such over-the-top financial losses.
The low-cost policy that may save the day
Umbrella insurance is a kind of personal liability insurance that takes over when the liability limit on your standard homeowners, auto or other personal insurance policies is maxed out. An umbrella policy also extends liability coverage if you have a renter’s or condo owner’s policy.
Umbrella policies will not make payments to cover losses to your own property or possessions. Instead, this blanket-like policy provides any additional payment needed (up to the umbrella policy's limit) when you are found at fault for someone else’s injury or death, or damage to their possessions. Most policies also provide coverage worldwide, with the exception of some foreign homeownership and vehicles titled in other countries.
Ultimately, an umbrella policy is an attractive stopgap option. Premiums are typically much less expensive than the standard primary policies an umbrella policy supports. This is because the umbrella serves as a payment backup; it typically doesn’t come into play with average claims, only very large ones.
A personal umbrella policy protects you as well as your dependents living in your household and those specifically listed on your auto or other personal property policies. In addition, umbrella policies will cover some liability claims that are excluded from most primary policies, including libel, slander, false imprisonment, malicious prosecution, wrongful death, invasion of privacy, and other specific hazards related to nonowned or rented vehicles. Your insurance professional can detail what’s covered and what's excluded on any policies you consider.
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