Why Your Standard Insurance Might Not Be Enough: Understanding the Gaps Umbrella Insurance Fills

Aug 15

Insurance is a protective shield in our day-to-day lives, guarding against unexpected setbacks. Standard insurance, such as auto insurance, homeowners insurance, boat insurance, pet insurance, and general liability insurance, offers us a sense of security, knowing that we're covered should we face an unforeseen event.

However, what if more than these standard insurances, with their specific coverage limits, are needed? As many discover, there are scenarios where our regular policies can leave us exposed. At National Insurance Brokers, we offer umbrella insurance to our clients.

What is umbrella insurance? You may ask. It’s a supplemental solution to fill the gaps and give us that extra layer of financial protection. Essentially, the policy will add extra liability coverage.

The Limitations of Standard Insurance

When discussing standard insurance policies, we typically refer to common coverages like auto and homeowners insurance. An auto insurance policy covers you in the event of a car accident, offering protection for both property damage and bodily injury.

Similarly, homeowners insurance safeguards your personal property from unexpected events like theft, fire, or certain natural disasters. A general liability insurance policy can also cover any damages or injuries you may inadvertently cause to someone else's property or person.

Yet, while these policies play a crucial role in our financial safety net, they often come with maximum coverage limits. For instance, your car insurance may cover liability claims up to a certain amount, but what happens if you're found at fault in an auto accident resulting in damages or medical bills exceeding that limit?

What is Umbrella Insurance?

By definition, umbrella insurance is a form of liability insurance that offers coverage beyond the limits of typical policies, such as auto or homeowners insurance. So, how does umbrella insurance work?

The mechanics of how umbrella insurance works are straightforward. Consider it as an additional layer of liability coverage. When an incident occurs and your standard insurance policy's liability limit is exhausted, your umbrella insurance policy takes over, covering the remaining costs.

For instance, if your auto insurance covers up to $300,000 in damages, but you're liable for $500,000, your umbrella insurance would cover the $200,000 shortfall. Head to my National Insurance Broker to find out the umbrella insurance worth.

Beyond just acting as a safety net for your auto or homeowners policy, umbrella insurance covers a broad spectrum of risks and incidents.

This spectrum can range from serious car accidents where bodily injury surpasses your car insurance limits to situations like being held liable for damages caused during a rental property mishap or even personal injury claims stemming from slander or libel.

Umbrella Insurance Cost

The average cost of a personal umbrella insurance policy depends on several factors. You should review the options available for comprehensive and cost-effective umbrella insurance coverage.

Understanding the Coverage Gaps

Here are a few gaps you need to keep in mind when it comes to umbrella insurance:

Personal Liability Coverage Gaps

Even the most comprehensive standard insurance policies have their limits, especially when facing high-value liability claims. Imagine a scenario where a guest at your home suffers a severe injury, requiring extensive medical care and rehabilitation.

Medical bills, combined with potential legal expenses if they decide to sue, could swiftly surpass the liability limits of a standard homeowners insurance policy. Moreover, some rare scenarios exist where your standard insurance does not cover personal liability claims.

Property Damage Coverage Gaps

Standard insurance policies, like auto or property insurance, come with specified property damage coverage limits. These limits might be sufficient for minor accidents but can fall short in severe incidents.

For instance, the total property damage can easily exceed typical auto insurance limits if you're at fault in a multi-car pile-up. In such a case, umbrella insurance can help, offering extended coverage for property damage claims and ensuring you and your assets remain protected.

Legal Expenses and Lawsuit Coverage Gaps

In our modern era, legal fees can be exorbitant. A significant lawsuit can lead to mounting legal defense costs even if you're not at fault. Standard policies might cover attorney fees up to a point, but extensive cases can see these costs skyrocket.

Umbrella insurance provides the services of a guardian, offering protection against legal actions and ensuring that legal costs, from attorney fees to potential settlements, don't drain your savings. Excess liability insurance is also considered part of the umbrella policy.

Who Can Benefit from Umbrella Insurance?

Contrary to popular belief, umbrella insurance isn't a luxury reserved for the elite. While individuals with considerable assets or those in professions prone to lawsuits might find it incredibly beneficial, the truth is that anyone can benefit from the extra protection offered by an umbrella policy.

Imagine a young professional just starting in their career. A severe auto accident and the court finds them guilty. This event could see them face damages that wipe out their savings and future earnings. Here, umbrella insurance can be a financial lifesaver.

How to Get Umbrella Insurance Policy

Umbrella insurance is a critical component in the realm of personal financial protection. Its comprehensive coverage can be the key to safeguarding your assets and ensuring you have the necessary financial backing when unexpected liabilities arise. If you're considering this invaluable layer of protection, here's a guide to help you navigate the process.

Steps to Take When Considering Purchasing Umbrella Insurance

Here are a few steps to take towards purchasing a personal liability umbrella insurance:

Assess Your Risk

Start by evaluating your potential risk factors. Do you frequently host gatherings at your home? Own multiple properties? Drive regularly in high-traffic areas? Situations like these can increase your risk of liability claims.

Review Current Policies

Before buying umbrella insurance, examine insurance policies such as auto, homeowners, boat, or renters. Understand their liability limits. An umbrella policy should ideally extend from where these policies leave off.

Consult with an Insurance Agent

Engage in a conversation with an insurance agent familiar with personal umbrella policies. They can provide insights into coverage options and limits and guide you in determining how much umbrella insurance you might need.

Get Quotes

Visit reputable umbrella insurance companies and request an umbrella insurance quote. This quote will give you an idea of how much umbrella insurance costs for your desired coverage. Don't settle for the first quote; compare different ones for the best rate and coverage.

Application and Approval

Once you decide on an insurer, complete their application process. Based on this assessment, the insurance company will evaluate your risk and approve, modify, or decline the policy.

Tips for Evaluating Coverage Needs and Choosing the Appropriate Policy:

Here are a few tips to keep in mind when you intend to buy umbrella insurance:

Consider Future Assets

While it's essential to cover your current assets, remember future ones. Your coverage should also consider properties or other assets you acquire in the foreseeable future.

Understand What's Covered

Umbrella policies can differ in what they cover. Some might offer coverage for things like libel or slander, while others might not. Make sure the approach you select aligns with your risk profile.

Consolidate Your Insurance

Many insurance carriers offer discounts if you have multiple policies with them. Consider bundling your auto, homeowners, and umbrella insurance with the same company to save on premiums.

Review Annually

As with all insurance policies, reviewing your umbrella insurance annually is a good practice. This review ensures it's up-to-date with your current needs and you aren't over or under-insured.

Prioritize Reputable Insurers

It is essential to choose a company known for its financial stability and excellent customer service. Remember, the goal is to have a partner who stands by you in need.

Shelter Against the Storm

In the quest to find the right insurance, umbrella policies often stand out for their expansive coverage and security. With the right approach and guidance, you can seamlessly integrate this layer of protection into your financial safety net. Whether for peace of mind or safeguarding future dreams, umbrella insurance is an investment worth considering.

Annie Sperides