| Perhaps you've loaded up on insurance: High limits on car insurance,
home and flood insurance, and ample life insurance. But even these
coverages can't account for every disaster in life. To further protect
your assets, there's umbrella insurance. Umbrella insurance kicks in
when the limits of your home or auto insurance
have been exhausted and there are still damages to pay. How could that
happen? Say, for example, someone falls on your sidewalk and sues you
for an ungodly amount. Or say you cause a six-car pile-up on the
highway. Umbrella policies provide an extra cushion of insurance protection.
| Umbrella policies provide an extra cushion of insurance protection. |
Umbrella policies cover damage claims that you, your dependents or even
your pets may cause. They start paying out after the liability
insurance in your homeowners and auto policy runs out. For example, if
you have a home insurance policy with liability coverage of $300,000,
the umbrella policy will pay claims above $300,000, up to the limit you
select, such as $1 million. Or if your liability limit on your car
insurance policy is $250,000 of bodily injury protection per person and
$500,000 per accident, your umbrella coverage kicks in after you
exhaust that coverage. Because the majority of claim risk is paid by your primary
auto or home policies, personal liability umbrellas are relatively
inexpensive. According to the Insurance Information Institute, you can
buy a $1 million umbrella policy for about $150 to $300 a year. The
next million will cost about $75, and about $50 for every million after
that. Many insurance companies require that you purchase both your
auto and home insurance coverage through them in order to buy an
umbrella policy, too. Further, your insurer may require you to buy auto
or home liability limits at a minimum amount, such as $300,000.
When
you buy a personal liability umbrella policy, you're getting more than
just higher liability limits. You're also buying broader coverage in
case you're sued. The umbrella policy covers you if you cause bodily
injury, property damage or personal injury. Some umbrella policies also
cover you if you face liability due to your service on the board of a
civic, charitable or religious organization.
| Umbrella policies won't cover intentional acts. |
But just as with any insurance policy, don't look to your umbrella
policy to cover your intentional acts that cause damage. Nor will it
pay for punitive damages in judgments against you. Umbrella policies
also do not cover damages from any businesses you run; for that, you
need a business insurance policy. Check your umbrella policy for
specific exclusions.
Before buying an umbrella policy,
ask your insurance company about the cost to raise the liability limits
in your current auto and home policies. You may even consider
offsetting the premium increase for that by raising your deductibles.
At any rate, in a litigious society it's smart to protect your assets.
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