Your traditional homeowner’s insurance doesn’t cover every possibility. Floods, earthquakes, and excessive damage aren’t always part of your policy, but they can present very real dangers. To cover these potential problems, you may be considering umbrella insurance for homeowners in addition to your regular policy.
At its most basic, umbrella insurance is extra liability insurance that goes above and beyond what’s provided for in your traditional policy.
Although it sounds easy enough to understand, umbrella insurance can be confusing to purchase if you don’t know what you’re looking for.
WHAT IS UMBRELLA INSURANCE FOR HOMEOWNERS?
The purpose of umbrella insurance is to protect you in the event that you are sued or held liable for more than what you already have with your traditional homeowner’s insurance policy. Umbrella insurance can also protect you if your liability coverage is exhausted due to claims within the same “occurrence.”
In other words, if you would like to be protected to the highest limit of coverage on any occurrence, umbrella insurance is a fantastic idea. It is designed to protect you from major claims and lawsuits and, as a result, protects your assets into the future.
Umbrella insurance works in two ways:
- Protection for damages over and above the policy limits on your regular policy kicks in once your regular policy limits are exhausted. If, for example, you have policy limits of $100,000 and your claim is going to cost $150,000 to take care of, your umbrella insurance would kick in for the last $50,000.
- Claims that aren’t covered under your traditional insurance may be covered under your umbrella policy, such as libel, false arrest, or claims on rental units you own.
WHO NEEDS UMBRELLA INSURANCE FOR HOMEOWNERS?
Umbrella insurance is not required for homeowners to purchase. In many cases, a homeowner’s policy is their first line of defense against financial loss.
Many homeowners, however, elect to add umbrella insurance as personal protection against claims over and above their regular coverage. This protection includes liability coverage for both personal and property damage that you may be responsible for. If the amount of damages you are responsible for surpasses your policy limits, supplemental protection through an umbrella policy can help protect you from paying for more than what your regular policy covers.
You may want to consider adding umbrella insurance to your homeowner’s insurance policy if you:
- Have significant savings or other assets
- Worry about liability claims that may arise from travel abroad
- Own things that can lead to liability claims, such as a swimming pool, a trampoline, or a dog
- Engage in activities that could lead to claims, such as coaching sports, volunteering, posting reviews online, serve on the board of a nonprofit, rent property to others, or engage in activities where you could injure others (such as hunting, skiing, or surfing).
In reality, umbrella insurance can benefit anyone that owns a property, as it can help cover claims that may arise from lawsuits or damages that you would have to otherwise pay out of pocket.
If you can afford the monthly premiums, umbrella insurance is an investment that can protect you for years to come.
WHAT DOES UMBRELLA INSURANCE COVER?
As you can see from the wide-ranging cases where umbrella insurance may be necessary, it can cover you in a variety of situations.
Umbrella insurance for homeowners can provide you coverage for issues that arise on your property and off it, including:
Bodily injury liability: This covers the cost of damage to another person’s body, including injuries from a car accident; injuries that arise if your dog bites someone; and injuries sustained by someone who falls on your property.
Property damage liability: Covers damage to others’ property, including damage to vehicles and property from car accidents; property damage caused by a pet; and accidental damage your child causes to school property.
Owners of rental property: This covers bodily and property damage that may arise on a property you rent to someone else, such as a tenant tripping over a broken step and getting hurt, or your tenant’s pet injuring someone and you being held liable.
Lawsuits: Coverage also can be available if you are sued for libel, slander, false arrest, malicious prosecution, mental anguish, or other personal liability situations.
An umbrella insurance policy is a form of coverage that provides added protection over and above your primary insurance policy, particularly in the area of liability. Umbrella insurance policies can cover claims for personal injury or wrongful death. They can also cover claims for property damage resulting from negligence or criminal acts committed by the insured.
AN EXAMPLE OF UMBRELLA INSURANCE COVERAGE
Imagine you are in an auto accident somewhere in your hometown, and you are found to be at fault for the property and bodily damage of the other driver.
This accident causes $400,000 of damage that must be covered.
You have auto insurance with policy limits of $200,000. Where does the other $200,000 come from?
If you have umbrella insurance, your umbrella insurance covers that additional $200,000. If you don’t have umbrella insurance, however, you could be ordered to pay that $200,000 out of your own pocket and assets.
As a homeowner, one of the biggest financial assets you can have is an umbrella liability policy. An umbrella liability policy protects you from the possibility that you would become personally responsible for a large claim.
Have questions about umbrella insurance for homeowners in Boston? Contact us today at (617) 657-9811!
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