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One big reason for paying for insurance is to protect against catastrophic events. From medical insurance for diseases, to car insurance for accidents, or homeowner’s insurance for fires (among other things). But there are many things that these insurance policies don’t cover. Further, in this day and age, it seems that people are more likely to sue you than ever. After working hard to accumulate assets, losing them to a lawsuit or freak accident would be devastating. This is where umbrella insurance comes into play.
What Is Umbrella Insurance?
Umbrella Insurance is a special type of insurance policy that you get over and above your normal insurance. It covers you – like an umbrella – for the costs of things beyond your normal insurance levels. If an accident or lawsuit occurs that is beyond the level of your normal insurance policy, the umbrella policy kicks in and covers that extra cost.
When Might I Need Umbrella Insurance?
The situations in which you might need an umbrella policy are numerous. First, and perhaps most likely, is in a car accident. But wait, you’re saying, I already have car insurance! This may be true; however, with the exorbitant cost of hospitals and medical bills these days, your insurance may not cover all the bills. For example, if you get into an accident where the other car is carrying multiple passengers, each of their medical bills could run into the hundreds of thousands of perhaps millions of dollars. If your car insurance policy only covers a few hundred thousand of that, you will be personally sued for the difference. But if you have a few million dollar umbrella policy, that will kick in and cover the difference.
A pet owner (especially one who has large dogs) is another individual who may want an umbrella policy; damage done by your pet is often covered under umbrella policies. A landlord likewise may want an umbrella policy. With tenants actively using your property daily, the chance of an accident goes up, and with the ownership of property and those extra assets, you have more to lose. Even a normal homeowner will feel more comfort knowing if an accident occurs on their property, the umbrella policy is there to back up their homeowner’s insurance.
What Is the Cost of Umbrella Insurance?
The costs of an umbrella policy vary based on your situation (limits on your other policies, if you own rental properties, boats or ATVs, etc.), but umbrella insurance is often cheaper than what many expect. Umbrella insurance is usually relatively inexpensive.—typically, a one million dollar policy costs a few hundred dollars a year. A 5-million dollar umbrella policy may cost you around fifty dollars per month. Check with your current insurance company to see if you can get a bundled discount, and shop around to find the best prices.
Knowing the many situations that can occur every day and the risks one takes just by stepping outside their home, don't you think you might want umbrella insurance for a rainy day?
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