For countless generations, umbrellas have been a shield against rain for people all over the globe. Intriguingly, “umbrella” is also a term used in the insurance realm. Here’s the lowdown.
Understanding Umbrella Insurance Umbrella insurance, often referred to as a personal umbrella policy (PUP), steps in when you’ve exhausted the liability coverage of your standard auto, homeowners, or renters insurance. As stated by DMV.org, this insurance typically covers bodily harm that occurs on your premises or during a car mishap you’re responsible for. It might also account for damage to property caused by you, your child, or even your pet. Moreover, it offers a shield against libel and slander liabilities.
Why Opt for Umbrella Insurance? Imagine being at the heart of a car mishap or an accident taking place at your residence that leads to someone’s injury. Such incidents can prompt legal actions against you. Legal charges, combined with potential settlements, can deplete your finances in no time.
While your standard auto, homeowners, or renters insurance provides you with some liability coverage, it may not suffice. This is where umbrella insurance proves invaluable. For instance, if you find yourself in a car accident leading to a lawsuit demanding $2 million and agree to a $1 million settlement, your auto insurance might cover up to its cap, say $250,000. With an umbrella policy of $1 million, you can address the outstanding $750,000.
Pondering Over Umbrella Insurance? Here’s What to Reflect On Before taking the plunge into umbrella insurance, give thought to:
- Your Risk Exposure: Do you frequently travel or partake in actions that might jeopardize others? Greater risk typically implies a higher need for umbrella insurance.
- Asset Valuation: To decide on the coverage extent, evaluate all your possessions. This encompasses your residence, cars, savings, retirement plans, securities, and even luxury items like artwork and jewelry.
- Potential Earnings at Stake: In litigation scenarios, your projected earnings could influence the amount to be settled. Hence, your current and anticipated earnings should be factored in. This holds true even if you’re on the cusp of a lucrative career but haven’t reached its peak earnings.