If you know a little about what liability insurance is, you understand that according to the law, you are legally required to pay for the damage and financial loss someone suffers if you did something on your end to harm them. If you are sued, and a liability allegation is made against you by someone, you might have damaged that person’s property, caused them bodily injury, or defamed them unjustly. But these examples don’t even begin to touch the surface of the sea of reasons people can get sued for in the US.
One common scenario in which someone could file a lawsuit against you is that of a personal liability situation. In such a circumstance, you are responsible for any accident you caused (inside your home or anywhere else) that resulted in someone else getting injured. This also applies to when you’re at someone else’s house and end up causing an accident that injures them. Alternatively, accidentally causing property damage while on someone else’s residential premises is also a personal liability situation.
Here’s an example of a personal liability scenario: You don’t have your dog on a leash, and it ends up mauling someone who is visiting your home. Similarly, a different scenario is if you were at somebody’s house and mistakenly left the stove on, resulting in a gas explosion.
Since it’s all too easy to get woven into these kinds of situations, people like to have personal liability coverage to fall back on in case of a lawsuit.
There are 3 ways to get personal liability coverage:
- Through your homeowners’ or renters’ insurance policy.
- By purchasing personal insurance on its own.
- By adding personal liability coverage to another existing insurance policy, you might have already.
Usually, the coverage limit you have on your existing insurance policies will be enough to cover the victim’s medical expenses and your legal expenditures following a lawsuit, but what happens if you run out of coverage? There’s a possibility that the sum you owe after losing the lawsuit ends up being far greater than what your existing insurance can cover. In such an instance, your assets and savings could very well be wiped out completely.
But there is a way around it; you can always get extra liability coverage.
Umbrella Insurance
An umbrella insurance policy is a type of personal liability insurance that you can turn to when your homeowners’ insurance, auto insurance, or another existing type of insurance isn’t enough to cover the compensation costs you owe. It’s essentially asset protection in the sense that it prevents you from losing your car, housing, and more by giving you insurance coverage in excess after your existing limits run out.
What Does It Cover?
If you purchase umbrella insurance, it covers medical expenses you owe your victim, the property repair expenditures you need to compensate them for, and also the fees associated with your legal defense and attorney.
It also covers the costs for more things your homeowners’ insurance and other existing policies do not cover, like invasion of privacy. Another example includes slander, an injurious statement you may have said to someone that caused them mental turmoil.
What Does It Not Cover?
Many people make the mistake of thinking that an umbrella insurance policy also covers their personal expenses, but that’s not true. The insurance will not cover the costs for your own injuries or personal property damages, only your victim’s.
Moreover, it does not give you coverage for acts of crime you committed intentionally. So if you caused someone to slip and break their bones, the intention (or lack of intention) could make all the difference in how you’re going to be penalized and what insurance you can avail. The umbrella policy also does not provide any coverage for war crimes.
Additionally, if the incurred liability has anything to do with your business or professional life, you’ll need business liability insurance instead of personal liability coverage.
Who Needs Umbrella Insurance?
Being fearful of losing retirement savings, housing, investment accounts, or other kinds of assets as a result of a lawsuit is a major push factor that makes people purchase umbrella insurance. You can assess your risk of being sued to determine whether the umbrella policy is right for you.
How likely are you to run into a situation where someone makes a personal liability accusation against you? The fact of the matter is that virtually all of us are at risk of being sued, so really, it’s up to your discretion. However, some factors put you at an even higher risk. For instance, if you’re a reckless driver or a public figure, the chances of you hurting someone and then the person seeking reparations from you are greater.
Additionally, this also applies if you have a potentially dangerous animal for a pet, like a bulldog, for instance, which could end up biting a guest at your home.
How Much Does It Cost?
The following factors affect how much you will have to pay to purchase umbrella insurance.
- The premium cost in your state.
- The amount of coverage you’re purchasing.
- The amount of assets you own.
- The number of family members the policy will cover apart from you.
- The risk you present to the company insuring you.
Umbrella insurance can be pretty cost-effective, considering the coverage it provides. For other policies, you pay from $150 up to $300 in a year for insurance coverage of $1 million. On the other hand, umbrella insurance gives you exactly double the coverage, costing only around $75 more than other insurance policies.
About the Author
The writer is an insurance broker at Integrity Now Insurance, a reputable agency experienced in connecting organizations to insurance companies and specializing in church insurance policies in specific. The team’s areas of service span many states in the US.
Moreover, the company specializes in a whole suite of other insurance services, including but not limited to property insurance, general liability insurance, business auto insurance, workers
compensation insurance, directors and Officers insurance, EPLI, mission insurance, and more for nonprofits and faith-based organizations.
