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Guide To Umbrella Insurance 740x451
February 8, 2023 | Spending,  Financial Literacy

Guide to Umbrella Insurance

Everything you need to know about umbrella insurance

Despite its name, umbrella insurance is not coverage for your umbrella. Think of umbrella insurance as an extra layer of insurance that protects you beyond the limits of your other policies. Still confused? Here’s everything you need to know.

What is Umbrella Insurance?

Umbrella insurance is a type of personal liability insurance that can cover you should you ever be sued for an amount that exceeds the limits of your regular insurance policies.

What’s Does it Cover?

Umbrella insurance covers you and the members of your household. It typically covers claims that exceed coverage on your homeowners, auto, and boat insurance policy limits. It also typically provides liability coverage for injuries, property damage, some lawsuits, and various personal liability situations.

Some Examples of Umbrella Insurance

The best way to help you understand umbrella insurance is to provide a few examples of when it would kick in. Here are some that might help:

  • Your teen daughter gets in a car accident, and the cost of the injuries to the other driver is over your auto insurance limit.
  • Someone slips on ice that has formed on the sidewalk in front of your home and sues you for the medical bills. The cost of those bills exceeds your homeowners’ insurance policy limits.
  • You get in a car accident and the cost of the damage to the other vehicle exceeds your auto limit.

Is it Worth it?

You don’t always need umbrella insurance. Here are some factors that might make you lean toward getting a policy:

  • You’re a landlord of a rental property
  • You own a pool
  • You have a young driver on your auto policy
  • You have significant financial assets or savings

If you decide to get coverage, it’s usually fairly cheap. A typical price for $1 million in coverage is between $150 to $300 per year.

Content by Savvy Money

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