If you own a home or drive a vehicle, in most instances you will have a homeowners insurance policy and an automobile insurance policy. This coverage is required by financial institutions that provide mortgages or automobile loans. Additionally, auto insurance is required by law in all states except for New Hampshire and Virginia and is highly recommended even if not mandated. The purpose of these policies is to protect your property and belongings if damaged and to pay third parties when you are legally responsible for an accident or injury.
But what happens in the unfortunate situation that you are found responsible for damages that exceed the limits of your existing coverage? With the increased cost of medical bills, attorneys’ fees and the frequency of litigation, the risk of this occurring has risen over time, and the likelihood increases if you have other assets that can be used to satisfy claims.
An umbrella policy is specifically designed to cover these excess claims. Umbrella policies can range in coverage from $1 million to $5 million dollars with optional higher limits if needed. Some carriers will offer an umbrella policy with just a home or just an auto policy, while other carriers require both. The umbrella policy kicks in after the limits of your primary policies have been met.
Umbrella policies are generally very affordable and, if bundled with your current policies, can result in premium discounts. Your agent can guide you in determining the appropriate level of coverage, based on the value of your properties and other assets.