At $12.50 Monthly, Umbrella Insurance Is a Cost-Effective Option
According to a recent report published by Clearsurance.com, What does umbrella insurance cover?, umbrella insurance is one of the least expensive insurance products on the market.
A one million dollar policy costs only $150 – $300 annually. That’s just $12.50 to $25 per month. And adding another million dollars in coverage costs about $75, and every million beyond that is around $50 a year.
What does umbrella insurance cover?
As its name implies, umbrella insurance provides an umbrella of liability protection over other insurance products, usually home and car insurance.
Umbrella insurance will kick in after the primary insurance limits are exhausted. For example, if a policyholder causes a car accident and the other party sustains injuries that cost $300,000 to treat, the liability car insurance would cover up to the policy’s limits. Then the umbrella coverage would provide for the additional costs.
If a liability car insurance policy covers $100,000 of personal injury liability, in the scenario above, the umbrella policy will cover the additional $200,000.
Clearsurance.com shared this list of situations in which an umbrella insurance policy could provide coverage:
- Personal liability situations
- Covered lawsuits, such as libel, slander, or defamation cases
- Injuries to others
- Property damage of others
The events listed above could happen in many different ways, and each individual should evaluate their risk regarding each.
Is umbrella coverage right for everyone?
Everyone should consider umbrella insurance coverage. If an individual believes that the limits on their home and car insurance policies are adequate, they may not need additional coverage.
Another factor to consider is the policyholder’s assets. If the policy limits on car and home insurance are less than the policyholders’ assets, they should purchase umbrella insurance, so they don’t risk losing everything they own in a lawsuit.
Clearsurance.com recommends umbrella insurance for people with any of the following life circumstances:
- Owning things like pools, trampolines, or other recreational items
- Owning dogs, especially certain breeds that are considered higher risk
- Running a home office and bringing clients into the home
- Being well-known or having a higher net worth
- Being at risk for libel and slander lawsuits
Each of the factors above increases the chance that a policyholder will be liable for a high-cost claim. Umbrella insurance is one of the best ways home, and vehicle owners can prepare for high-cost liability suits.
How does umbrella insurance maintain a low customer cost?
Umbrella insurance isn’t a primary line of coverage. So, the risk of a policyholder making a claim against their umbrella policy is low. There’s a much greater chance that an individual will file a home insurance or car insurance claim than that they’ll file an umbrella insurance claim.
Since insurance premiums are based on the financial risk, the insurer assumes when writing a policy. As a result, low-risk policies tend to cost less than high-risk policies.
Are there prerequisites to getting an umbrella policy?
A policyholder must meet a couple of prerequisites before being eligible for an umbrella policy. Clearsurance.com shares that most insurers require policyholders to have a minimum liability protection limit on their home and auto policies before being eligible for a one-million-dollar policy.
This minimum limit is usually $250,000 on a car insurance policy and $300,000 on a home policy. An individual with the minimum car insurance required by their state probably won’t be eligible for an umbrella policy. They would first have to increase their liability limits to the minimum required by the insurance company to qualify for an umbrella policy.
Read Clearsurance.com’s full report here: What does umbrella insurance cover?