While more than 90% of American homeowners have home insurance coverage, about two-thirds of them lack adequate coverage, says the Insurance Information Institute (III). Apart from property damage and theft, a home insurance policy covers some third-party property damage and bodily injuries that happen on your property. For instance, if a neighbor’s child falls off your trampoline and suffers a back injury, your home insurance policy may cover the resulting medical and legal costs as well as any claims arising from the accident. However, even the best homeowners insurance policies typically have exclusions and coverage limits. This is where umbrella insurance comes in to help protect against the coverage gaps left by your traditional home insurance policy.
Umbrella Insurance Explained
Umbrella insurance is the excess liability coverage that you purchase to cover the gaps in your home, auto, and watercraft insurance policies. In other words, it covers liability costs that other personal insurance policies do not cover and provides additional coverage on the existing policies. For instance, if you hit a pedestrian with your car, your auto insurance will cover damages on the vehicle as well as the medical and legal costs involved. However, if the coverage is not enough, umbrella insurance can help cover the rest of the expenses.
Cost of Umbrella Insurance
Typically, insurance companies sell umbrella insurance in $1 million increments. The average cost of an umbrella insurance coverage worth $1 million is between $150 and $250 per year, as reported by the International Risk Management Institute (IRMI). The amount of umbrella insurance you purchase should depend on the size of the gap you have in your current policies and the amount of additional coverage you need to be fully protected. For most consumers, $1 million is a good start.
What It Covers
According to the Government Employees Insurance Company (GEICO), umbrella insurance provides coverage beyond other personal insurance policies. Generally, it covers lawsuit costs resulting from situations such as wrongful arrests, malicious prosecution, defamation, bodily injury, and property damage involving third parties. It does not cover damage on your property to you or your family, such as your child falling off your swing set and breaking an arm.
When to Purchase Umbrella Insurance
Anyone can face a lawsuit at any time, leaving personal assets and finances in jeopardy. However, you should consider purchasing umbrella insurance if you:
- Have high-risk property such as a boat, trampoline, gun, swimming pool, or an aggressive dog breed
- Have high-value assets and huge savings
- Have a teen driver or an inexperienced driver
- Are a landlord
- Are a high-profile person such as a politician
- Serve on the board of a charitable organization
All of the above situations can put you at a higher risk of facing lawsuits. An umbrella insurance policy can help protect your assets and give you peace of mind.
Umbrella Insurance Exclusions
Like virtually all other insurance policies, umbrella insurance coverage has limitations and exclusions. For instance, an umbrella policy will not cover damage on your own property, intentional damage to a third-party such as criminal activities, and transmission of communicable diseases to another person, per the International Risk Management Institute (IRMI).
An umbrella policy can easily cover gaps in liability coverage left by your homeowners insurance. Make sure you get all the coverage you need by talking to one of the friendly experts at Jack Stone Insurance Agency. We serve Antioch, Brentwood, and surrounding cities in California. Contact us today to get started!