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Umbrella Insurance: What It Covers, How Much It Costs, and Where to Buy

You never know when you are going to be in an accident or how bad it is going to be.  Your liability insurance limits are not always enough to cover the full damages amount in an accident.  If you are at fault, the other party may sue you and obtain a judgement or settlement which requires you to pay money in excess of your liability insurance.  An umbrella policy saves you from suffering serious financial hardship if this were to occur.

What Is Umbrella Insurance?

Umbrella insurance is a type of insurance that you need in severe accidents.  If you are at fault in an accident in which major property damage or severe injuries have occurred, your regular insurance policy may not be enough. Umbrella insurance can make up the difference.  For this reason, some people refer to umbrella insurance as excess liability insurance.

>>MORE: What Does Health Insurance Cover in Car Accidents?

What Umbrella Insurance Covers?

Umbrella insurance does not only cover excess liability in car accidents.  It applies to car insurance, homeowners’ insurance, and several other types of insurance.  Umbrella coverage covers excess liability in any of your policy areas. However, you must have the applicable policy type and meet certain minimums before umbrella insurance will apply.  For example, your umbrella policy will set a minimum amount of automobile insurance you must possess before Umbrella insurance can be applied to auto accident liability not covered by your insurance.

Umbrella insurance is insurance that covers the difference between your liability coverage and a claim or judgement against you. When you are at fault in an accident and do not have enough liability coverage, you still must pay the judgement.  Without adequate protection, you may be forced to use your savings, assets, property, and past and future earnings to cover the judgment. An umbrella policy can offer you the additional coverage that you need allowing you to avoid financial ruin.

>>MORE: What Happens When You’re in a Car Accident With No Insurance?

How Much does Umbrella Insurance Cost?

The minimum amount of umbrella coverage insurance companies typically offer is $1 million. Insurers also tend to increase these policies in million-dollar increments. The usual maximum limit is $5 million. Thus, umbrella insurance provides substantial coverage to those who need it.

According to a study by Insurance Information Institute, insurance companies charge between $150 and $300 a year for $1 million in umbrella coverage. It is not very expensive and can offer good protection for your assets and wealth in a severe accident.

>>MORE: How Much Will My Insurance Go Up After An Accident?

What Umbrella Insurance Does Not Cover?

Umbrella insurance covers injuries and medical expenses, and property damage of other parties but cannot be applied to the policy holder.  If you suffer serious injury in an accident in which you are at fault, your health insurance and other coverage may cover your damages, injuries and medical expenses.  Furthermore, umbrella coverage cannot not be used if an incident was caused by an intentional act. Moreover, insurance companies offering umbrella insurance do not cover incidents arising from criminal acts.

>>MORE: What Is Accident Forgiveness, Should You Get It and Who Offers It?

Do You Need Umbrella Insurance?

No state requires you to have an umbrella policy.  But it can offer you peace of mind and financial security in the event of a serious accident. And insurers charge so little for this coverage, that it is worth it to most Americans. Some people are considered judgement-proof.  They do not have enough money or assets to cover judgement against them and they probably never will. If you do not have significant assets, umbrella insurance is not needed.

Where can You Buy Umbrella Insurance?

Most insurance companies offer umbrella insurance. However, they usually require you to have auto and/or home insurance with them in order to buy umbrella insurance. Auto Owners is the only company that offers stand-alone umbrella insurance policy, which means you can carry your auto and/or home insurance policy with other insurers and umbrella policy with Auto Owners.

Since umbrella insurance isn’t as common as auto or home insurance, you should call your insurance company or your insurance agent to inquire about the details before purchasing the policy.

>>MORE: How To Get A New Car After A Total Loss Accident?

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