What are the Benefits of an Umbrella Policy
What is an Umbrella Policy?
Umbrella insurance is a type of liability policy that supplements your other basic liability policies like your home, renters, or auto insurance policy. An umbrella policy covers a higher limit which typically goes above and beyond the claims directly related to your car and home.
The main reason for getting an umbrella policy is for protecting the assets you own from unforeseen events, for instance, a fatal accident in which you get held responsible for injuries and other damages. It gives you additional liability protection in the event that you get sued or claims are made against you. If a person files a lawsuit against you, an umbrella policy pays for the damages for which you are responsible up to the policy limit.
Benefits of an Umbrella policy
Provides Extra Liability Cover - Your cars, house, retirement savings, future income, investments, and normal savings and checking accounts are all considered assets. If you get sued for a large amount of money and your liability insurance isn’t enough to cover those costs, your assets are all exposed and may be used to pay for the damages. An umbrella policy provides additional coverage above the limits of the normal auto insurance policy to protect your assets from any unforeseen events, such as a tragic accident, which you are held responsible for bodily injuries or damages.
It Pays for Legal Fees - Lawsuits are increasingly getting more popular. Lawyers are now awarding bigger amounts of money than ever before. And it’s not just car accidents you need to be worried about; you must protect yourself from any other types of accidents as well. When you get sued, an umbrella not only pays for the excess liability, it also pays for any legal feed you may encounter in the process.
Protects Future Income - Even if you are just starting out with no established assets, the court can still award damages to a third party if you are found responsible for an accident. In such a case, the court may force you to pay off such damages with the future earnings you make. An umbrella policy helps avoid this by paying off the damages.
It may be Tax Deductible - If you are the owner of a business and have an umbrella policy to supplement your other liability policies, the premiums on the umbrella policy may be tax deductible.
Before choosing your policy coverage limit, consider the following:
The risks you face: as a car owner, the risk of causing an accident is always there as long as you are driving a car. Even the best drivers can admit that they have been involved or almost been involved in an accident which they were responsible for.
The value of all your assets – this includes properties, stocks, bonds, possessions, retirement funds, and savings. The more the assets you need to protect, the higher the limit of your umbrella policy.
The potential of future assets or income – even if you currently don’t own much, you still need an umbrella policy to protect your future assets. Liability lawsuits may result in the loss of both current and future assets and income.