When you heard about umbrella policies or umbrella insurance, did you picture buying insurance for your umbrella to protect it from strong gusts of wind? No, that’s not at all what an umbrella policy is about. It’s also not “the one policy to rule them all,” as the term “umbrella” may suggest. Umbrella, when it comes to insurance, is more of a “just in case” protection for a very rainy day when your other policies can no longer cover you. Our Maryland insurance agents are happy to explain how an umbrella policy works and what type of coverage it provides.
Umbrella Policy Coverage
An umbrella policy is designed to provide additional coverage when your primary coverage is not enough. A personal umbrella policy (PUP) can supplement liability coverage offered by your auto policy, homeowners, boat, renters or condo insurance. Liability coverage offers protection in case you cause a significant amount of damage to someone or in case they decide to sue you to recover more than what your insurance company can pay for you.
For example, if you accidentally rear-end a car and the other driver sues you to recover damages, your liability coverage may pay for attorney fees, the other driver’s medical bills, lost wages, pain and suffering and even death benefits in case of a fatality. But let’s say the person you injured in an accident was a wealthy CEO who earns so much, one week of his lost wages would eat up a quarter of your liability coverage! And he’s going to be in the hospital for a while… This is when the umbrella policy comes handy.
A typical umbrella policy provides the following types of coverage:
- Bodily injury liability
- Property damage liability
- Protection for owners of rental units
Most umbrella policies will also cover claims not covered by your traditional liability insurance. These claims may include slander and libel, malicious prosecution, false imprisonment and many others.
Why Umbrella Insurance is Important
If you ever run out of your liability coverage or get sued for a lot of money, this can put your entire financial future at risk. Your assets, such as your savings and retirement accounts, real estate and income, could end up being used to compensate for your lack of coverage. An umbrella policy helps protect your assets, giving you an extra layer of cushion in case you fall.
The Cost of an Umbrella Policy
An umbrella policy may cost anywhere from $100 to $300 a year or more, depending on the amount of coverage you are purchasing. For most situations, $1 million of additional coverage is plenty, but depending on your unique needs you might need even more than that.
Can Anyone Purchase an Umbrella Policy?
There might be certain requirements your insurance provider may have in place for umbrella policy buyers. As you can imagine, insurance companies would rather reduce the number of payouts they have to make, especially when it comes to large sums of money such as the coverage included in PUP. Therefore, most will require you to purchase a decent amount of liability coverage with your primary home or auto policy, typically around $250,000 – $300,000 depending on the type of policy. This will ensure that you truly exhaust your resources before resorting to PUP.
How Do I Purchase Umbrella Insurance?
When shopping for umbrella insurance, keep in mind that you don’t have to buy it from the same company that insured your home or vehicle. An umbrella policy may or may not be included in the bundling discount, so you may not get any extra benefits for staying with the same provider. The best thing to do is to shop around with the help of your Maryland insurance agent. At Freedom Insurance, we can help you compare umbrella policies from several providers and determine the best amount of coverage at the best rate.
Contact us today to speak to one of our agents!