An umbrella insurance policy is an added liability policy that covers you above your standard insurance. As such, it is not a standalone policy. Umbrella policies work to protect you when your standard coverage falls short or does not cover the damages you have to pay. It works to protect your current and future assets. Let’s take a look at five crucial facts on an umbrella insurance policy. Its value is more than the cost Most people fear taking umbrella policies as they worry about possibly high premiums. The price is not too high at all. A typical plan might cost a homeowner anywhere between $250 to $400 for a one million policy. When you look at it, the benefits outweigh the expense of the premium. Most financial advisors recommend taking an umbrella insurance policy that is at least two times more than your net worth. Liabilities are everywhere Like most people, you may feel that an umbrella insurance policy is an entirely unnecessary investment of money as you do not own much property or are not involved in a high-risk business. You must remember that liabilities are everywhere. For instance, your teenager could ram your car and damage someone’s property. Or, your dog could bite someone. An umbrella insurance policy helps you to be prepared for any possible contingency that might put you in the line of a lawsuit. Securing your finances Any financial advisor will tell you that an accident can be a life-changing event. Your savings and assets can go down to zero, and you can be left in high debt for the rest of your life. The average liability settlement for an accident can range anywhere between $250,000 to $300,000. An umbrella insurance policy can thus secure you against complete financial ruin by covering the damages and paying for legal fees. Does not cover floods It is important to note that umbrella insurance does not typically cover damage caused by a flood. It does, however, include certain types of water damage. For instance, if you have leakage at home or your bath overflows and causes damage to your neighbor’s expensive furnishings on the floor below, your umbrella insurance can step up in the event of a lawsuit. Flood insurance can be purchased as a standalone policy through the National Flood Insurance Program (NFIP). May need to update the standard cover Many umbrella policies have a minimum requirement on the standard policies that they work to supplement. For instance, most umbrella policies require that your home is insured for at least $300,000. Additionally, some insurance companies only offer umbrella insurance to standard policies that they have issued. Taking both policies from a single company does have its added advantages as you end up saving a lot of money on the premium that you pay.
