An umbrella insurance policy, as the name suggests, is a policy that covers more than a normal insurance policy would. This sort of policy is ideal for a person who needs extra liability insurance. Such policies are designed for people who have many assets or very valuable assets and are under a higher than normal risk of being sued. Such policies even cover the risk of being sued for injuries caused in an accident, property damage, vandalism, libel, invasion of privacy, and slander. It is usually purchased by people who have high net worth and very high asset value that needs higher insurance coverage. Whom is it suitable for? People who might find an umbrella insurance policy useful are those who have a profession or lifestyle that leaves them prone to being injured or causing injury, increasing the risk of a lawsuit:
- Being a sportsperson in a field where injuries to another person are high, like hunting or surfing.
- Being in a profession where being sued is a likelihood, for example, reviewing products and services.
- Owning a swimming pool, firearms, aggressive dogs, or sports equipment like trampolines also puts one at a higher risk.
- Being a coach or being in a high-ranking post in a non-profit organization, volunteering, and owning rental properties are potentially higher risks, which make them good reasons to be under an umbrella insurance policy.
How do they work? Umbrella insurance policies are cheaper when provided by the same insurance company that has provided automotive, watercraft, or home insurance. The umbrella insurance can be added to the existing insurance cover purchased for a home or vehicle. When an unforeseen incident occurs, the basic home or vehicle insurance policies will pay out up to their individual limits. If the liability for the incident is higher than the limit of the insurance policy, the umbrella policy will cover the difference. Excess policies versus umbrella insurance policies There are also called excess policies that cover the excess amount that goes beyond the limit of the basic insurance policy, but they function as add-ons governed by the rules of the basic insurance policy alone. Any other incidental costs incurred that are not specifically covered by the basic policy terms will not be paid by an excess insurance policy. However, an umbrella insurance policy will cover any and all costs incurred even if they do not fall in the specific category covered by the basic policy. These policies have a broader definition of what they cover and usually, have no exclusions. Umbrella policies come into action only when the limits of other policies have been exceeded. Also, they cover the potential damage that could be caused to another’s property and not the damage that a person could cause to their own property. They do not cover business-related losses or any fraudulent or criminal actions of the insured. Umbrella insurance policies cover the legal fees that one might incur in addition to the payout and are available in increments of millions.
