What Is Umbrella Insurance? (And How to Tell if You Need It)
Health insurance, homeowners insurance, car insurance, life insurance—the list goes on and on. There are so many different policies we need to take out in order to protect our lives and assets. And it might be prudent to add one more kind of coverage in there; that’s right, we’re talking about umbrella insurance. This kind of insurance can come in handy for a wide range of situations, but do you really need it? Below, we will answer all your burning questions about umbrella insurance.
What exactly is umbrella insurance?
Let’s start with the basics. Umbrella insurance is a term used to designate a particular sort of insurance, often referred to as excess liability insurance. This insurance coverage helps look after any potential gaps you may have in other insurance policies already taken out. It is essentially an extra layer of protection that allows insurance owners to avoid any financial hardship in the case of unforeseen events. For example, if you make claims that go over the coverage provided by your existing insurance, that’s where umbrella insurance would come in handy.
How does umbrella insurance work?
Umbrella insurance works by offering you a backup for your existing policy coverage. Let’s take a look at a specific example to truly understand how this type of insurance works. Imagine that you find yourself in an accident where a car is damaged and an individual is injured. You may face claims of $30,000 in repairs and injuries amounting to $150,000. The individual affected is also suing you for lost earnings worth $150,000.
That means you have $330,000 owed in payouts alone. However, your insurance covers only $250,000! Instead of having to pay the remaining $80,000 out of pocket, your umbrella insurance would pay the difference. In addition, if you need legal fees for a counterclaim against the lost injuries suit, that would be covered as well.
Coverages Included in Umbrella Insurance
Umbrella insurance covers a wide range of events and circumstances. Most commonly, it will protect you as well as household members against personal injury suits, property damage to others, and claims including defamation, false imprisonment, and landlord liability. Of course, the exact details of your coverage will depend on the provider you choose.
Another critical aspect of umbrella insurance is that it will cover the legal costs associated with lawsuits and claims. This includes legal fees that may exceed the amount of coverage you are covered for. For example, even if you have a $2 million policy, your insurer will pay the total $2 million and the legal fees through your umbrella insurance policy.
What doesn’t umbrella insurance cover?
While umbrella insurance is an excellent all-encompassing policy, there are certain things it doesn’t cover. For example, it doesn’t cover liability related to business dealings, as you’ll require commercial umbrella policies for that instead.
In addition, umbrella insurance doesn’t cover personal injuries and property damages. Why? Well, that’s what your auto or health insurance is there for! As well, if there’s a breach of contract that you have legally agreed to, then umbrella insurance won’t be there to cover you. A deliberate crime is another aspect that remains uncovered by umbrella policies.
Is umbrella insurance right for you?
Next, you might be wondering if you even need umbrella insurance. After all, it is an optional policy that isn’t required by provincial laws. However, there are certain kinds of individuals and asset levels for whom taking out an umbrella insurance policy will come in handy. If you find yourself in the following circumstances, then umbrella insurance might make sense for you:
- You have significant savings and assets that need to be protected.
- If visitors could injure themselves on your property (this is particularly important for those with a pool, treehouse, or pet in the house).
- You are in a position of responsibility; for example, as a landlord, coach, or other vulnerable positions.
- You need to protect yourself from lawsuits, including defamation cases, libel, and slander.
- You participate in sports or other activities where injuring others is possible (as with martial arts, skiing, or surfing).
What do you think? Do you need umbrella insurance coverage? If you’re still confused, be sure to refer to expert insurance brokers to learn more about its suitability for your needs.
Insurance is based on the principle of uncertainty. We never know what life may throw at us, so setting ourselves up for success in the face of extenuating circumstances will be important. Umbrella insurance is an essential strategy you can use to protect yourself against a wide range of unforeseen events. However, it can be challenging to find the right coverage option for you.
That’s where Goodison Insurance comes in. Our qualified and trusted brokers have years of experience matching clients with the right insurance for their needs. To find umbrella insurance policies in Canada, call Goodison Insurance at 883-932-1368 or contact us here for more information.