An umbrella policy is an extra insurance that you can purchase above and beyond your existing insurance. It isn’t designed to cover anything already covered by a pre-existing policy, but instead protects you during a worst case scenario.
Umbrella Insurance Basics
An umbrella policy is designed to enhance your existing extra insurance coverage, augmenting and extending the amount you will be reimbursed in the event of a disaster.
Typically, umbrella policies only come into play when someone causes damage to another person’s property or causes harm to others, and the damages they are required to pay are in excess of the limits of their primary insurance coverage.
When this happens, the umbrella policy kicks in to cover the expenses in excess of what primary insurance covers, usually with coverage amounts in the millions. A good umbrella policy also typically cover legal defense fees as well as damages if you are sued, up to the limit.
Your umbrella can also provide coverage that primary insurance doesn’t. Many homeowners, for example, are surprised to learn that their home insurance policy doesn’t cover damage due to floods or earthquakes. If you live in an area prone to these natural disasters, an umbrella policy can cover those risks as well.
More on Umbrella Insurance
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