Insurance serves a variety of purposes. Some compensate for damage to vehicles, personal belongings and other property while some insurance policies cover medical bills after an accident. Liability insurance is a common type of coverage that comes with home and business insurance. What most policyholders don’t know is that liability coverage can be extended with a personal umbrella liability policy.
Umbrella liability policies cover lawsuits that cost more than the maximum of your other liability coverages. For example, say a driver has $25,000 in bodily injury liability for car insurance. The driver causes a crash, resulting in bodily injury for the other driver involved, who in turn sues for damages. The lawsuit turns out to be $30,000. Where the $25,000 limit of bodily injury liability ends, an umbrella liability policy well step in to cover the remaining $5,000.
There are many reasons someone may need an umbrella liability policy. Lawsuits are notoriously expensive and even more so if they’re drawn out. You may need an umbrella liability policy if you:
Host Parties
Frequently hosting parties can be fun, but it comes with its own dangers. Any large gathering of people can lead to accidents, disagreements and injuries. The danger increases if your home has a pool or trampoline where people are more likely to be hurt.
Insure Teenage Drivers
Most teenagers remain on their parents’ car insurance policies for at least a few years. Teen drivers are statistically more likely to cause an accident and file a claim than other age groups. Any damage or injury they cause can turn into a lawsuit. Teenagers don’t generally make enough income to pay for a lawsuit and all the fees it includes, which means the claim would fall back to the policyholder.
Own Pets
Pets are fantastic and adorable companions, but accidents happen. If a pet causes injury or property damage to someone else, the victim could sue for the damages. While this may be covered under your homeowners’ general liability coverage, umbrella insurance can help fill in the gaps.
Work in a High-Risk Industry
Some professions lend themselves to higher liability risks. Public figures and other positions that frequently provide a service to the public (doctors, lawyers, etc.) are at a higher risk of being sued than others. It’s not uncommon for work to spill into personal life. If an angry client visits your home and is injured, they can file a claim. Even if the claim isn’t valid, court fees and lawyer costs can be expensive without extra coverage.
Limits for umbrella liability policies typically start at $1 million, but can go up to $5 million.