Most individuals are relatively familiar with the basic types of insurance coverage such as auto, homeowners, health and life insurance. Even those who do not have an active policy are likely to have a basic understanding of how they work given the prevalence of insurance in today’s society. One of the lesser known types of coverage is umbrella insurance, and despite being lesser known it can be extremely helpful in a wide range of circumstances. The following will describe what umbrella protection is and highlight the basic protections it offers. Please note that this article is not intended to replace professional advice.
Simply put, umbrella insurance is fills in the gaps where auto and/or homeowners insurance leaves a shortfall. It is a way for insured individuals to receive extra protection and cover aspects of auto insurance policies and homeowners insurance policies not already covered. As is to be expected, those who obtain an umbrella insurance policy will have to pay an annual premium on top of their other insurance coverage policies, but the annual premium is often worth the extra peace of mind which an umbrella insurance policy provides to insured persons.
In order to gain a better understanding behind the concept of an umbrella insurance policy, we can look at examples of what a policy will cover in the real world. One example pertaining to your auto coverage – if you get into a car accident and the court rules in favor of the other party, you will usually have to pay some sort of monetary amount to settle the matter. As your auto policy may only cover part of the damages, you can use your umbrella insurance policy to cover the remainder of the costs. This extra protection can be extremely useful in a matter such as this one.
Another example in relation to homeowner insurance – suppose an incident occurs on your property and your homeowners policy does not cover it. Depending on the circumstances, your umbrella insurance policy may. This gap filling coverage is extremely handy and is one of the main reasons why more and more individuals are obtaining an umbrella policy in addition to their auto coverage and homeowners coverage.
Before obtaining an umbrella insurance policy, it is important to evaluate whether doing so is the right move for you to make, and if necessary seek professional advice. Initially it is a good idea to speak to your current provider(s) to determine whether there is a shortfall. In the event that you do identify a shortfall, call around to insurance agents to see which one offers the best deal. If the annual premium is simply too high to fit within your budget, then you may choose to pass on an umbrella insurance policy for the time being. However, if the premium is reasonable and you can fit it into your budget, then you may decide to move on to the next step and considering your current policies to see what liability limits exist on them.
Reviewing your current auto insurance policy and homeowners insurance policy liability limits is important when considering if you should obtain an umbrella insurance policy. If your current policies have high liability limits on them and reasonable deductibles, then acquiring an umbrella policy may not be necessary, at least not as much so as for those who have less favorable liability limits. On the other hand, if your liability limits are on the lower side, you may find that an extra cover in the form of umbrella protection is a wise move to make.
By: David J Wright
About the Author:
David Wright has worked in and around the insurance industry in Australia for the last 10 years.Currently he is a manager a Travel Insurance Cover, a discount reseller of travel insurance to Australians travelling for leisure and business. Visit the website to find out more.
