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Umbrella Insurance

What it is:

One of the benefits consumers get from their auto and home insurance policies is liability protection. Suppose you are in a car accident or someone is injured on your property. You can be sued for damages. Liability coverage means your insurance will pay the claim. However, regular insurance policies don’t always offer enough protection. That’s where umbrella insurance comes in.

How it works:

Umbrella policies, also called excess liability insurance, are policies that supplements a primary policy, usually covering a building or vehicle. Suppose a visitor to your home falls and is injured. You are potentially liable for damages and could be sued. Homeowner’s insurance normally includes liability coverage to protect you against such events, but if it’s not sufficient, you might have to pay out of your assets. Umbrella insurance kicks in and pays when the primary coverage is exhausted.

Types of Umbrella Policies:

An umbrella policy can be either for individuals or businesses. Personal umbrella plans cover events associated with real estate or with cars, boats and other vehicles. Commercial excess liability coverage works the same way, but is purchased for a business. Commercial umbrella policies usually have some exclusions. For example, they might not cover workman’s compensation or pollution claims.

Who Needs Excess Liability Insurance?

There’s no simple formula to determine when you need an umbrella policy or how much coverage to buy. It depends on your situation. For example, if you run a retail store, you probably don’t need as much excess insurance as the operator of a skydiving school. The best course is to consult with an insurance agent and your lawyer before deciding.

The Benefits:

The main benefit of umbrella policies is that they protect your assets in the event you are legally liable for an injury to someone or damage to property. There are other advantages to excess liability insurance. For one, these policies often pay defense costs. Umbrella coverage may cover things the primary policy leaves out, including libel, rental units, or even a car you rent while on a trip to Europe.