Life is meant to enjoy, from backyard barbecues to taking a Sunday drive to your favorite ice cream shop. But if something bad happens on your property or even when you are in your car, the cost could be devastating and affect the rest of your life, says Kay Godfredsen, first deputy commissioner for the Iowa Insurance Division (IID) in Des Moines.
That’s why people should consider an umbrella insurance policy. Just like it insinuates, umbrella insurance covers you to protect assets and future earnings. With litigation becoming such a prominent part of society these days and rising, an umbrella policy gives you more peace of mind, she adds.
If you’ve never heard of umbrella insurance, also known as excess liability coverage, it basically is liability insurance which protects you and your assets from large lawsuit judgments against you, Godfredsen explains. It could be anything from a houseguest becoming paralyzed from falling in your shower to a bicyclist you accidentally hit while driving who needs major surgeries.
Umbrella insurance provides liability protection beyond your standard homeowner and rental insurance along with auto or boat insurance. It also could help cover claims against you that are exclusions on your other liability policies. Plus these days, it gives you protection against slander, libel, wrongful eviction or false arrest.
Who needs umbrella insurance?
“We used to look at it a decade ago saying that anyone who owns their home and has a pool or a trampoline should get an umbrella policy,” Godfredsen says. “But now, it’s really smart for consumers to consider their risk. You need to think about where you are today, but also think about your lost income and potential income if something happens. Look at umbrella insurance as guarding your savings account and everything you own.”
She adds that even people who rent should look into a policy.
Where can you get umbrella insurance?
Talk with your current rental or homeowner’s insurance carrier if they offer it, she says. It could be less expensive when you bundle with your auto and home insurance. Also, check with carriers that offer it as a standalone product.
What can umbrella insurance exclude?
Godfredsen says that some umbrella policies may exclude certain hobbies, such as an ATV machine and Jet Ski. Also, state laws differ on what dogs are not covered under certain policies. If you have pets, talk with your insurance agent. If you have pets of certain kinds, even an umbrella policy might not cover attacks from those pets.
What other things can an umbrella policy cover?
“We are in a different age these days with blogging and writing reviews of products. People allege libel and slander,” Godfredsen adds. “Those aren’t under a typical homeowners’ policy, but could be under some umbrella policies.”
What is the cost of an umbrella policy?
For about $150 to $300 a year, it is possible to buy a $1 million personal umbrella liability policy, says the Insurance Information Institute (III). The next million could cost about $75 plus $50 for every million after that. However, Godfredsen says it all depends on your insurance carrier, the area of the country you live and your circumstances.
How does the umbrella policy work?
The III explains that your umbrella policy only goes into effect after the underlying coverage is exhausted. So many carriers will want you to have certain limits before being able to sell you an umbrella policy.
For instance, many insurers will want you to have at least a $250,000 of liability insurance on your auto policy and $300,000 of liability insurance on your homeowner’s policy before selling you an umbrella policy for $1 million of additional coverage.
Could you be turned down for an umbrella policy?
The International Risk Management Institute Inc., (IRMI) says that some companies just don’t offer it. But also some won’t offer an umbrella policy if one or more drivers in the family have too many tickets, accidents or driving while under the influence tickets.
“Most people never read their homeowner, renter or auto insurance. They are difficult to read,” Godfredsen states. “But we recommend consumers sit down with a licensed insurance agent and become very familiar with their policies and their limits.”