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Umbrella Insurance- What is it and How Does it Work?

By January 2, 2023Insurance

              What is umbrella insurance?  Umbrella insurance has an unusual name, but it’s a simple concept – it’s an extra liability policy for added peace of mind.  In most instances, umbrella insurance is something you get in addition to either a auto or homeowners’ policy, but it also covers some situations not covered by these policies.  Umbrella insurance focuses primarily on liability claims, which is the cost you may have to pay somebody else for an event in which you are held responsible.   

                So how does it work?  Umbrella insurance provides coverage beyond the limits of your existing policies.  For instance, let’s say you cause a car accident and the cost of injuries you are held responsible for totals $500,000.  Your auto insurance policy covers up to $300,000 for bodily injury, so who pays the remaining $200,000 in liability?  Umbrella insurance! 

                Who needs umbrella insurance?  You may say to yourself, “I have auto and homeowner’s insurance that covers these situations.” Correct, however, umbrella insurance really comes into play when the limits of your auto or homeowners’ policy are exceeded, or when a lawsuit is brought against you.  In our extremely litigious society, you may need it more than you think! 

What exactly does it cover?  Umbrella insurance offers additional coverage above the limits of your auto and home policies, but it also provides coverage in a variety of other situations.  Situations like injuries, damage to property, certain lawsuits, or personal liability situations are all covered in your standard umbrella policy. 

                How much does umbrella insurance cost?  Thankfully they are rather inexpensive. On average they are about $150- $200 per million in coverage. However like all things in insurance, the price of your umbrella policy depends on a few factors.  Factors like location, number/type of vehicles you own, or if you own multiple houses, among other things, will affect the rate of your policy.  To find out if an umbrella policy is right for you, contact our agency today, or head over to our main page to get a free quote!