Umbrella insurance is a type of insurance that provides additional liability coverage beyond the limits of your existing policies, such as home, auto, or boat insurance.
In the event of a lawsuit or settlement, umbrella insurance can help protect your assets and provide financial security.
However, not everyone needs umbrella insurance, and it may not be the best choice for everyone. In this blog, we’ll discuss who should own umbrella insurance and why.
What does umbrella insurance cover?
First, let’s look at what umbrella insurance covers. Umbrella insurance provides liability coverage for claims that exceed the limits of your existing insurance policies.
For example, if you are sued for a car accident and the damages exceed your auto insurance policy limits, your umbrella insurance would kick in to cover the additional costs.
Umbrella insurance can also cover legal fees and other expenses related to a lawsuit.
Who needs umbrella insurance?
Now let’s look at who should own umbrella insurance. Generally, umbrella insurance is recommended for people with significant assets to protect.
If you own a home, have a high net worth, or have significant savings, you may want to consider umbrella insurance.
This is because if you are sued and the damages exceed your insurance policy limits, you could be held personally responsible for the remaining amount. Without umbrella insurance, you could be forced to sell assets or dip into your savings to pay the damages.
In addition to those with significant assets, umbrella insurance may also be a good choice for those with high-risk occupations or hobbies.
For example, if you own a pool or trampoline, or if you have a job that involves a high level of risk (such as a pilot or surgeon), you may be more likely to face a lawsuit. Umbrella insurance can provide an extra layer of protection in these situations.
Does umbrella insurance cover other people in your home?
Another group that may benefit from umbrella insurance is parents with teenage drivers.
Teenage drivers are statistically more likely to be involved in car accidents, and if they are at fault, the damages could exceed your insurance policy limits. Umbrella insurance can help protect your assets in these situations.
It’s important to note that umbrella insurance is not a substitute for other insurance policies. You still need to have adequate coverage for your home, auto, and other assets. Umbrella insurance is designed to provide additional protection beyond the limits of those policies.