When Do You Need a Car Umbrella Policy
The vast majority of drivers follow state law and purchase at least the minimum amount of auto liability insurance required in order to legally operate a motor vehicle. However, liability coverage may be insufficient to cover the entire costs of personal injuries, property damage, and legal costs. The latter can be the result of a suit brought by an injured party, leaving the at-fault driver without sufficient funds.
Umbrella insurance refers to an additional layer of coverage that will protect individuals from legal monetary obligations should their standard auto insurance policy be insufficient. This type of coverage is unknown to many even though it is widely recommended by insurance experts. With the cost of medical bills and vehicle repairs today, having an umbrella policy can make a lot of sense if you have assets to protect.
Why Is Umbrella Insurance Necessary?
Umbrella insurance can be written as part of an auto liability policy or to cover homeowners in the event a suit is brought against them with connections to personal property or real estate. Typically, automobile accidents resulting in personal injury are covered by liability coverage carried by the at-fault driver, up to the amount of the policy limits. If the amount of protection is equal to or greater than the medical costs associated with the accident, the insured likely does not face any personal financial risk.
There are cases where this protection is not sufficient, however. Suppose a driver causes an accident that results catastrophic injuries. The injuries are so severe that the victim cannot work for months or could even be permanent.
The victim may need specialized care, rehabilitation, and some means of paying for the time lost from work. He or she may bring a suit against the at-fault driver because the liability insurance will cover only a miniscule portion of these costs. A court may award the victim millions of dollars which the at-fault driver cannot possibly cover.
Protection Against Lawsuits
An umbrella policy will cover the costs associated with pain and suffering, lost wages, and medical expenses. It will also protect homeowners should a visitor or contractor suffer an injury on the property and blame the incident on the real estate owner.
It is an unfortunate fact that legal settlements generally cost much more than the actual amount accumulated in medical bills and restoration to damaged property. Many individuals are unprepared for this possibility, nor are they aware that umbrella coverage can be added to an existing auto or homeowner policy.
Cost of Umbrella Insurance
Surprisingly, umbrella insurance is relatively inexpensive. This is because the likelihood of such a lawsuit is minimal. However, those who are forced to accept a court ruling on a lawsuit may have their life savings wiped out completely and be subject to monthly payments for the rest of their lives unless they have purchased this optional protection.
The actual cost of umbrella insurance will depend on how the policy is written and what it covers. If the policy is for the protection of real estate holdings, the value of the property is taken into consideration. For the purpose of covering individuals found to be at fault in a major auto accident, insurance companies will want detailed information on all assets owned by the insured.
The insurance company wants to know exactly what assets would otherwise be used to pay for the legal settlement brought by the complainant. The amount of the policy is therefore directly connected to the net worth of the individual.
Obtaining A Quote
Most standard auto liability and homeowner policies are constructed based on criteria gathered by the insurance company and concerns the individual’s property type, worth of all automobiles owned, and credit score.
The quotes can be generated quickly because the insurance provider has easy access to this information. An umbrella policy may take longer to construct because the insurance provider needs to gather more specific data concerning assets and liabilities.
Umbrella insurance is rather inexpensive compared to the average cost of vehicle liability coverage. Adding $1 million in umbrella protection may cost as little as $500 per year. This is a small price to pay should the unthinkable happen.