What Umbrella Insurance Policies Don't Directly Say

Umbrella insurance policies are designed to give you liability protection beyond what other insurance policies provide. While your existing policy will cover some liability costs, they usually apply caps that limit how the amount of money they will spend.  Personal umbrella insurance helps you cover the difference. Umbrella insurance policies have many advantages, but they also have a few disadvantages that may not be readily apparent.

Understanding Umbrella Insurance

Umbrella insurance will cover liability costs that your home insurance and vehicle insurance won’t cover. Because of home or vehicle insurance is required, you have to have either home insurance or vehicle insurance policies (or both) that offer liability coverage in order to qualify for umbrella insurance. Depending on the insurance company, you may also need to make sure that the amount of coverage offered by your existing insurance policies is lo less than a certain amount (usually a five-digit figure).  Umbrella insurance can only be used once the liability coverage from other policies is completely exhausted and in most cases, it goes in to effect automatically.

Often left out of the shopping equation, is the fact that the best rates are given to those who buy umbrella insurance from the existing insurance company for both home and vehicle insurance.  Additionally, getting your umbrella insurance from a different provider than what you many currently have may complicate things. Different insurance companies can potentially fight over who gets to cover you and how much each company would be willing to cover. If you have umbrella insurance, home insurance and vehicle insurance from the same company, said company may be more inclined to help you fight the lawsuit. That is because the insurance company would want to avoid having to cover your damages.

What Umbrella Insurance Covers

Umbrella insurance covers the same claims as your existing home and vehicle insurance, as well as some claims that they may not necessarily cover. While, in may cases, insurance  This includes:

  • Bodily injury – covers the costs of damage to another person’s body. Depending on the terms of the lawsuit, this can include another person’s medical bills.
  • Property damage – covers the costs of damage to another person’s property. This can be something that you caused or something that was caused by a member of your family.
  • Rental units – covers the costs of damages that occurred on your rental properties. This doesn’t necessarily have to be the result of something you did – if you are being sued for bodily injury and property damage caused by any of your tenants, you are covered.
  • Personal claims against you – this includes claims of libel, slander, malicious persecution, shock, mental anguish and unlawful detention. This isn’t covered by all umbrella insurance policies.

What Umbrella Insurance Doesn’t Cover

While umbrella insurance is fairly generous about it’s coverage, there are some claims that it umbrella insurance policies will not usually cover.  This includes:

  • Punitive damages – damages that awarded to the plaintiff as a way to penalize the defendant (you) for doing something that is deliberately damaging to the plaintiff.  Different states have different laws governing the way punitive damages work.
  • Liability claims against your business – even if the business is run from inside your house, umbrella insurance wouldn’t cover it. Rather, this falls under business insurance.

Umbrella Insurance Costs

While the umbrella insurance is fairly generous, it does have it's limits. It usually covers 1-2 million dollars worth of expenses, but some policies go as high as five million. The premiums are usually $200 to $300 per year. This is frequently touted as proof that umbrella insurance is affordable. However, the low premiums are counterbalanced by much higher deductibles - in fact, they rarely go below $300,000.

Umbrella Insurance and Damages

Having umbrella insurance can increase your legal fees. If the injured party realizes that you have umbrella insurance, they may not restrain themselves from suing you for larger damages than they would otherwise request.  Judgements are often awarded based on the maximum value of your insurance policy, which makes it easier for the plaintiff to get more money.

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