Home Finance Umbrella Insurance Policies and What Consumers Need to Know – 2024 Guide

Umbrella Insurance Policies and What Consumers Need to Know – 2024 Guide

by Victoria Boatright

Men and women wish to ensure they remain protected in the event someone sues them. They wonder if their current policies are enough or if they need to purchase additional coverage. Umbrella insurance policies extend the coverage of certain policies a person might already own, including property and casualty policies. When should a person invest in this coverage, and why?

What is an Umbrella Insurance Policy?

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Insurance policies come with coverage limits, including casualty and property policies. In the event the court awards an amount above the coverage limit, the insured becomes responsible for the additional costs. With an umbrella insurance policy, the insured obtains protection from unexpected costs. This secondary liability insurance policy covers the person above and beyond the standard coverage offered in the insurance policy. Many insurers refer to this coverage as a personal excess liability insurance policy and offer it alongside homeowners, condo, car, watercraft, or other personal insurance policies, such as those policies offered at garrity-insurance.com.

How Does the Policy Work?

Individuals find they get an extra layer of protection in the event someone sues them for property damage or injuries and any associated legal defense costs. The policy doesn’t go into effect until the insured’s standard liability policy pays out. Any money owed once the primary insurer has covered their share will become the responsibility of the secondary policy insurer. This policy pays up to the policy limits, and the insured party remains responsible for any award above and beyond this amount.

How Much Coverage Do You Need?

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Experts recommend every person has an umbrella policy with a minimum of $1 million liability coverage. This holds true for those who possess less than this amount in assets. Men and women need to recognize courts often award legal judgments above and beyond the standard policy limit. Any excess funds must be paid, and courts may take them from the insured’s current and future earnings. The individual could find they never get ahead financially because they are spending their money to pay off the judgment years after the event that led to the lawsuit.

However, a $1 million policy might not be enough to cover all individuals. Experts take this a step further and state anyone making more than $100,000 a year should get additional coverage, and the same holds true for those who own more than $1 million in assets. Look for a policy with a limit equal to or greater than the insured’s net worth. Some experts say most people need a minimum of $2 million in coverage or $3 million if they own rental property.

Insurers offer these policies for an affordable price because they recognize their liability only becomes an issue if the standard policy doesn’t cover the expenses associated with the event the insured is being sued for. This means they won’t have to pay out on every case, so they keep prices low to make a profit while still allowing more individuals to get this coverage.

What Does a Person Need to Do to Get Umbrella Insurance?

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People cannot call their insurer and state they want an umbrella insurance policy and assume they will automatically get it. Every insurance company works with underwriters to determine which requirements a person must meet before the insurance company will issue them a policy. With an umbrella insurance policy, individuals must possess the minimum amount of liability required by the company before they can get this coverage. How does this work?

States establish liability coverage requirements for certain types of policies, such as car insurance policies. People get this coverage and then look to purchase an umbrella insurance policy to cover any expenses that go above and beyond this amount. However, the insurance company retains the right to set a higher liability coverage amount required before it will issue an umbrella insurance policy.

Furthermore, certain companies require a person to ensure all properties with their company before they will provide umbrella coverage. They could add this coverage as an endorsement to established policy. This depends on the company selected and its criteria for issuing a policy of this type.

The underwriting requirements for an umbrella insurance policy vary by company, and consumers need to research several companies before deciding which to get this coverage through. The time spend obtaining quotes from several companies pays off when the insured gets a policy that meets their needs and their budget. However, never make this decision based solely on price. Doing so could leave you with unpaid bills after both policies pay their portion.

Why is This Coverage So Important?

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Every property and casualty policy comes with a limit on the liability coverage. This portion of the policy covers expenses associated with medical bills, rehabilitative therapy, and lost wages for the injured party. In addition, it covers any legal defense fees incurred by the insured. Stop and consider how much these bills could be, and it’s easy to see why an umbrella insurance policy has become essential in this litigious world. It protects the individual’s current and future earnings along with their personal assets in the event the worst happens. Fortunately, the cost of this coverage remains less than what many imagine when they shop for a policy.

Consider purchasing an umbrella insurance policy to fill any gaps in your existing coverage. This policy extends the coverage of policies you already have in place, and the cost remains relatively low. Insurers take on less risk with this policy because the underlying liability policy pays out first before they become responsible for any expenses. However, take the time to compare several insurance companies and policies to find the one that meets your needs and your budget. This depends on many factors, so you need to shop around for the best coverage at an affordable cost.

However, don’t discount the importance of this added layer of protection. It’s your future, and you want to make certain you remain covered regardless of what happens. The peace of mind obtained when this policy has been put into place is priceless.