Umbrella Insurance | Bankrate
Standard homeowners and auto insurance policies include liability coverage to help pay for medical expenses and legal costs when someone is injured in your home, if you’re responsible for damage to someone else’s property. neighbor or if you are involved in an at-fault accident but some policies do not provide enough protection, especially if your assets increase your liability risk.
Comprehensive insurance provides a second layer of liability protection. An umbrella policy picks up where your limited liability coverage ends. You can purchase an umbrella policy with $1 million or more in liability protection to ensure your assets remain safe when disaster strikes. While this is the typical level offered by insurance companies, you can opt for higher or lower limits depending on your needs. Best of all, an umbrella insurance policy is often relatively inexpensive and offers an affordable way to maximize your protection.
what is general insurance and how does it work?
Homeowners liability generally covers the medical expenses of people outside your household when they are injured on your property. If the victim sues you, your liability coverage will also help pay your legal costs. Liability coverage also pays for damage to someone else’s property when you are at fault. For example, if your lawnmower throws a rock and breaks your neighbor’s window, your liability coverage would help pay the repair bill. Like your homeowners liability coverage, auto liability coverage (bodily injury and property damage liability) extends coverage to help cover the other driver’s medical bills and repair costs if you are involved in an at-fault accident.
Comprehensive insurance provides additional protection when your auto or homeowners liability coverage isn’t enough. it’s designed to cover costs that exceed your home insurance policy’s liability limits or liability expenses that may not be covered by a typical homeowner’s policy, such as personal injury (also known as slander). it also acts as additional liability coverage above the liability limits of the underlying auto insurance policy.
Most standard home insurance policies provide $100,000 to $300,000 in default liability coverage. Insurers generally allow you to increase your liability coverage limit. Still, some homeowners need more protection than standard homeowners liability can provide. To qualify for an umbrella policy, you typically must have at least $300,000 in liability for the underlying policy first.
For example, if you have a pool and like to entertain guests, you could face significant medical and legal costs if someone is seriously injured or drowns. If you need $1 million or more in liability protection, you may need an umbrella insurance policy.
An umbrella policy can also protect property you use but don’t own. For example, if you rent a house for the summer vacation and accidentally burn down the deck while barbecuing, your umbrella policy may pay to rebuild it.
These policies may also extend liability coverage in cases where your car’s liability limits are maxed out. For example, if you are involved in an accident in which four or five other vehicles are damaged and other drivers are injured, or if a catastrophic injury occurred, an umbrella policy may extend coverage to help cover costs.
what does a general policy cover?
An umbrella policy can save the day when you’re faced with a costly liability, but it’s important to understand what it does and doesn’t cover. most umbrella policies will cover:
- bodily injury: Hosting guests in your home increases the risk of an accident. If a guest falls down the stairs and breaks their leg, their homeowners liability coverage will likely cover medical costs. but if the victim falls into a prolonged coma and then sues you for pain and suffering, you may have to rely on the additional coverage provided in your umbrella policy.
- landlord liability : Some umbrella policies provide a certain level of coverage for homeowners. For example, if you rent an apartment with a garage to a tenant who is injured when the apartment’s balcony collapses, your umbrella coverage may help pay for medical expenses and legal costs.
- damages Property : General coverage applies to property damage caused to others for which you are responsible. it would also only apply if the damage exceeds the limits of your underlying policy.
- Personal Injury: Personal injury coverage covers legal costs when someone sues you for defamation, slander, or unjustified eviction. Liability coverage on homeowners policies often excludes personal injury coverage, although an endorsement can sometimes be added. your umbrella insurance policy will kick in to help cover the costs of personal injury lawsuits.
generally covers beyond your typical policy limits or areas not covered by the underlying policy.
what does a general insurance policy not cover?
There are some types of damage that are not covered by general policies:
- business losses: An umbrella policy will generally not cover your home office property. Similarly, umbrella insurance will not cover court costs or attorney fees associated with lawsuits brought against your home-based business. however, you can purchase commercial insurance that includes liability coverage.
- losses caused by criminal acts – just like the liability coverage on your home insurance policy , an umbrella policy will not cover losses caused by illegal activities. For example, if a policyholder operates an illegal home fireworks business and an accidental explosion sets a neighbor’s house on fire, the insurer may not pay a claim.
- personal belongings: Your homeowners policy’s personal property coverage will pay to replace your belongings, such as clothing and furniture, after a covered loss, but an umbrella policy will not. umbrella insurance only covers the personal belongings of others when you are at fault for a loss.
- oral or written contracts: if a contractor sues you for breaking an oral contract or written terms, it is likely that your general policy will not cover your legal expenses.
how much does general insurance cost?
Many companies offer umbrella insurance as optional coverage. If you already have a homeowners or auto policy, ask your agent if the insurer sells the coverage. Your insurer may have certain requirements before you get an umbrella policy, such as making sure your auto and homeowners policy liability limits meet a certain threshold or bundling your underlying policies with the same insurer before adding the umbrella policy .
Some premium homeowners policies allow you to increase your homeowners liability limit to $1 million or more, which may eliminate the need for an umbrella insurance policy. For example, Chubb’s standard home insurance policies provide personal liability protection of up to $100 million. however, you may want to consider whether your automatic limits can also be increased to cover your increased risk in cases like this.
According to the Insurance Information Institute, a $1 million blanket policy typically costs between $150 and $300 a year. however, the cost of insurance varies by location, along with factors such as your home’s age and construction, safety and security features, and your age and claims history.
do I need to buy a general insurance policy?
Although most insurers allow you to increase their default medical payment limits or increase your liability limits, you still may not have enough coverage to pay all the medical bills a guest may have. For example, medical bills for a broken leg can run to $7,500 and a three-day hospital stay can cost $30,000. If the injured person sues you, attorney fees, court costs, and a settlement can cost hundreds of dollars. thousands of dollars.
In general, you should consider an umbrella policy if you have any type of item that presents higher liability risks and if you have high-value assets. Homeowners with amenities like hot tubs, pools, trampolines, and tree houses might consider blanket coverage because they increase their liability risk. Even if you don’t frequently entertain guests, an uninvited visitor can enter your property and suffer injuries, for which the law may hold you liable. Vehicle owners with expensive cars or other expensive assets, such as a high-value home, may want to consider this type of coverage.
many general policies cover more risks and offer more protection.
frequently asked questions
how much does general insurance cost?
While you can buy a $1 million blanket policy for a few hundred dollars a year, you may pay more or less if you opt for higher or lower blanket limits. In addition, the cost of a policy can depend on many factors, including your home’s safety and security features, its age and construction, and your insurance claim history.
Should I buy general coverage if my house has a swimming pool?
Home features such as pools, fire pits, hot tubs, and tree houses increase your liability risk. If you or one of your family members is injured on your property, you can usually look to your health insurance to help cover the costs. But if a guest is injured in your home, she’ll need adequate liability coverage. umbrella insurance can help cover medical expenses and legal costs.
Are liability coverage and an umbrella insurance policy the same thing?
Liability coverage and an umbrella insurance policy offer liability protection. however, the umbrella insurance policy is only used if you exhaust the underlying liability coverage in your auto or home policy or in cases not covered by the underlying policy, such as personal injury. The umbrella insurance policy acts as a second layer of protection on top of your auto or home liability insurance.