Umbrella insurance is an additional liability policy that supplements existing liability insurance coverage. If you have homeowners insurance, car insurance, or boat insurance, then liability is usually included. This means you’ll receive financial assistance if you’re found liable for damages during a lawsuit. But a situation may arise where your existing liability coverage isn’t enough. That’s when umbrella insurance is of use.
People purchase umbrella insurance for various reasons. Perhaps they have assets they want to protect in case of a lawsuit. Or maybe they own animals or possibly dangerous equipment that could hurt someone. There are also certain occupations that are high-risk for liability lawsuits. Business owners and landlords are just two examples of liability high-risk occupations.
Umbrella insurance helps when you’re found liable for causing harm to someone else. You could’ve caused injuries to someone during an accident. Or damaged someone’s car in the parking lot. Whatever the cause, you’re liable and must pay damages.
What happens if your liability coverage is only enough to cover some of the damages? You’ll either have to pay the expense out of pocket or rely on your umbrella coverage. Without umbrella coverage, you stand to lose assets if you’re unable to pay what you owe. You might have to sell belongings or property. You could even end up losing your savings. But if you have an umbrella policy, it will pay the remaining damages up to policy limits.
If you’re high-risk for being sued, then umbrella coverage is a great way to protect your assets. For example, say you’re responsible for $50,000 worth of damages. And you have $40,000 worth of liability insurance. Your umbrella policy will pay the remaining $10,000. This keeps you from paying out of pocket or losing your assets to pay the remaining $10,000.
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