A Low Cost Shield Against High Cost Troubles

Written by on 9/12/2017 1:58 PM . It has 0 Comments.

Get Peace of Mind with Umbrella Insurance

One in 10 people know something important that the rest don't. And they've done something about it. Any ideas?

Umbrella InsuranceHere’s a clue:

Most people think that costly lawsuits only turn up in the world of big business. While that's mainly true, every year individuals get sued for millions. Millions they don’t have.

What those one-in-10 have done is taken out low-cost umbrella insurance that protects them against high-cost lawsuits.

Umbrella insurance, also known as excess liability insurance, is a simple way of adding to your insurance protection. It tops up your coverage with much higher payouts if you land in big trouble.

But because that sort of thing doesn't happen frequently, the premium you pay is actually quite small, usually a matter of just a couple hundred dollars or so every year. It's a small price tag for the peace of mind it provides.

But there's more to it than that. Umbrella insurance covers you for things that other policies may not.

Let's take a closer look.

Why Umbrella Insurance is Important

When you cause an accident, you generally have to take the blame. And you're responsible for the cost of putting it right. That's "liability" in a nutshell.

That's how people end up in court being sued. And that's where the million-dollar-plus settlements happen -- compensation for things like the cost of serious injury or even death you cause to others, or serious big-time damage to someone else's property or livelihood.

Yes, these risks are covered in your car insurance and homeowners (or renters) insurance, or other property coverage such as insurance for your boat.

But sometimes the payout limit in these policies simply is not enough to cover those costs, especially if there are also legal fees. Research suggests that something like one out of every eight personal injury liability awards tops out at more than a million.

Even attorney fees alone can run out at a quarter-million dollars.

Umbrella InsuranceAn average homeowner with standard insurance may be forced into selling their property or have a lien placed on it, or have their wages and savings targeted, to meet such costs.

This type of outcome can result in up to a quarter of an individual's wages being "garnished" to meet settlement -- and that could last a lifetime.

But umbrella insurance, which provides top-up coverage in slices of a million dollars or more, can take care of that.

Protection Against Additional Risk

Umbrella insurance policies differ from one insurance company to another, both in cost and the scope of their coverage (which is why you need a good insurance agent to secure the best coverage for you!).

Some umbrella policies also cover additional risks you won’t always find in a standard policy. For example:

  • Protection against costs for libel and slander -- when people claim you've besmirched their reputation by saying untrue things.
  • Protection against claims of malicious prosecution -- this is when someone counter-sues you for taking out a lawsuit against them.
  • The cost of restoring your reputation if it's damaged because of a lawsuit.
  • False arrest, where someone is held against their will for accusations you make that turn out to be groundless.
  • Mental anguish, where someone claims your actions and behavior have made them distressed and sick.

When Should Your Buy Umbrella Insurance?

Who needs umbrella insurance?

UmbrellaMany of us do -- if we want to protect our assets. It all depends on how much we have that needs to be protected -- what's known as your net worth. That's what's at risk if you are sued.

It may also depend on the particular risks you face day-to-day. For example, if you're self-employed, you're more exposed to the risk of a costly lawsuit than others.

The same applies if you sit on the board of a not-for-profit organization where board members can be held personally responsible for dishonesty or incompetence within the organization.

You might be an individual, a business or, say, a landlord facing the possibility of being blamed and sued. Note that business liabilities are not covered within a personal umbrella policy. You will need a separate, additional excess liability policy for your business.

If you're not sure about whether you need this protection, or even how much coverage you have through your existing homeowners and auto policies, speak to your insurance agent.

How Much Umbrella Insurance Should I Get and What Does It Cost?

Most homeowners insurance and auto insurance policies limit the maximum they will pay out for liability costs to between $300,000 and $500,000.

Umbrella coverage is not added to these policies but provided as a separate policy. When your liability costs exceed these limits, the umbrella policy kicks in.

Most people choose to cover themselves with an additional $1 million, but you can get up to $10 million of coverage. More in some circumstances.

Costs are based on a sliding scale. So, the first million will cost you a couple hundred dollars per year but each subsequent million will cost you less, perhaps $50 to $100.

So, you can get high coverage fairly inexpensive if you need it.

It’s worth noting that premiums can often be reduced further if the individual already has policies with the same insurer.

In other cases, though, insurers only offer umbrella coverage to existing home and auto owners,

It Makes Sense

Commonsense tells us that umbrella insurance is a good and wise thing. The alternative almost doesn’t bear thinking about. Contact RC Cook Insurance today for your free umbrella insurance quote.

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