Travel and Leisure

Insurance policies are straight forward. Automobile insurance covers your car in the event of unexpected damage and other expenses. Homeowners insurance covers your home the same way that auto insurance covers the car. However, insurance policies are not all created equally. The amount of coverage a policy holder is eligible for can vary depending on the state, the specific policy, and what was choose to be included. Since all insurance policies will reach a limit or a liability ceiling, the purpose of umbrella insurance is to pick up coverage where your other policies leave off. Simply put, it is an insurance policy that covers all of the other policies you hold like an umbrella. When they reach their limits in the amount they can pay, the umbrella policy will activate and cover the rest.

An Example of Umbrella Coverage

Typically, an umbrella policy is activated when the policy holder commits an act of gross negligence that will amass a large number of bills. Here is a good example of an umbrella policy at work: Let's say you have a maximum liability of $200,000 on your car insurance policy, and someone driving your car caused an accident that resulted in $300,000 worth of damage. After the first $200,000 is paid off by your auto insurance, the final $100,000 is paid for by your umbrella policy. Due to the nature of their coverage, umbrella policies usually offer coverage in the millions.

Who Needs Umbrella Insurance?

People who have a lot to lose and a number of ways in which they could be held responsible for gross negligence would be wise to consider purchasing an umbrella policy. Having a high net worth, owning a house with a pool, maintaining rental properties or even having teen drivers in your home increase your chances of having standard insurance policies that run the risk of reaching their liability ceiling. Umbrella insurance will cover legal fees, medical expenses, therapy bills and even lost wages, and it will cover you no matter how far your travels take you.

The Cost of Umbrella Insurance

Although it offers a great deal of coverage, umbrella insurance is surprisingly affordable compared to the cost of standard insurance. In fact, since the usual amount of coverage policy holders are entitled to is so much lower than what an umbrella policy covers, this type of insurance is actually inexpensive. The bottom line is that it's a matter of your financial budget and personal prefernce.