Umbrella Insurance
Umbrella insurance is a type of liability
insurance that provides coverage beyond the limits of primary policies, so
called because it provides an umbrella of coverage against claims from all
policies underneath it, such as home and auto policies. For example, if you are
involved in an injury accident which is deemed to be your fault and the injured
party sues, the amount of the damages could exceed the policy limits of your
auto policy. In a case like this, umbrella protection would cover amounts
between the limits of the auto policy and the limits of the umbrella policy,
protecting your assets from the suit.
Once the purview of the wealthy, and typically sold in increments of $1million, umbrella policies have gained broader popularity in recent years. Premiums are typically $200-$300 per $1 million in coverage.
One factor: the cost of these policies has come down in the past decade.
Actual coverage amounts are determined by a variety of factors, including the policyholder’s financial status, lifestyle and existing insurance coverage. However, net worth is also an important factor, as judgments can exceed net worth in certain cases, and umbrella policies help to fill that gap.
Certain umbrella coverage will also provide coverage for issues not covered under the underlying home or auto policy. Policy limits, conditions and costs vary considerably, depending on the underwriter, so it is a good idea to do some research prior to a purchase decision.