Over the past few weeks, I’ve had the same discussion with two sets friends about the importance of umbrella policies and what they actually cover. Surprisingly, neither couple really understood the purpose of an umbrella policy nor what this type of policy was meant to cover. With that in mind, do you know what an umbrella policy covers? If not, keep reading; and even if you do, keep reading for a refresher.
During one of my conversations, one of the couples mentioned that they didn’t take out as much property coverage on their homeowner policy because they had an umbrella policy with $1,000,000 limit. They said “why overpay on the homeowners policy when the umbrella provides extra coverage for our house?” The couple was shocked to learn that contrary to their belief, an umbrella policy does not provide property coverage for their home. An umbrella policy provides excess liability coverage, NOT excess property coverage. As you can imagine, as soon as they got home they immediately pulled out their policies and contacted their insurance companies.
An umbrella policy provides an additional layer of liability protection above your home, auto, and rental properties policies in the event a covered liability loss exhausts the limits under those policies. This includes coverages like bodily injury and damage to property of others. For example, if you hit another vehicle and the accident, unfortunately, injures someone else beyond the amount of coverage you have on your auto policy, your umbrella policy steps in and provides an additional amount of coverage for the injured person, while at the same time protecting you and your assets.
So, don’t get hung out to dry by not having enough coverage for your property and not understanding the purpose of an umbrella policy. If you are reading this and don’t have an umbrella policy, contact your insurance agent and get one. The peace of mind that comes with the extra protection of an umbrella policy is well worth the little bit of extra expense.
