Umbrella insurance used to be something bought mainly by wealthy people. That's no longer the case, which is a good thing, since it can protect most of us from all kinds of dastardly turns of events.
Imagine that someone who never really liked you trips on your walkway and sues you for a boatload of money. Your homeowner's insurance probably offers you some personal liability coverage. Here's how Bobbie Sage described it at about.com:
Liability insurance is the portion of a homeowners or auto policy that pays for expenses such as the injured person's medical bills, rehabilitative therapy, and lost wages due to the negligence of the at-fault person. The liability portion of an insurance policy also covers a legal defense representative if the negligence would happen to land the at-fault person in the courtroom. After adding up all of the medical expenses for the injured and the legal fees of the negligent person, the standard liability in one's homeowners or auto policy is often not enough. Almost every state has financial responsibility laws that will hold drivers accountable for bodily injury and property damage resulting from car accidents and the at-fault driver could be sued for the damage. Personal assets from the at-fault driver could be seized resulting from a lawsuit.
Enter umbrella coverage. Wherever your personal liability coverage ends on your homeowners, auto, and boat personal insurance policies, umbrella insurance coverage is designed to pick up the slack. You can typically add between $1 million and $5 million in liability protection. Best of all, it usually doesn't cost that much. The annual bill might be between $100 and $300 for $1 million, or just several hundred dollars for $2 million to $5 million.
Here's a description of what umbrella coverage offers, from the St. Paul Travelers
- Protection for covered claims by others for personal injury or property damage caused by you, members of your family/household, or hazards on your property for which you are legally liable
- Personal liability coverage for occurrences on or off your premises
- An additional layer of protection above your primary auto policy against auto-related liabilities
- Protection against non-business related personal injury liabilities such as slander, libel, wrongful eviction, or false arrest
- Legal defense costs for a covered loss (lawyer fees and associated court costs are covered)
- Worldwide coverage no matter where you go, with the only exception being situations involving foreign ownership of dwellings or cars
How much coverage should you consider buying? Add your total current net worth, as well as your expected future earnings. In some cases, that's the kind of value that may be at risk.
Don't ignore the world of insurance; it can protect and even enrich you and your loved ones. Learn more about the not-exciting-but-still-critical topic of insurance in our Insurance Center. You may not have thought about some kinds of insurance, such as disability or long-term care insurance, but they're vital for many people. And, of course, properly insuring your property is vital, too.
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