Umbrella liability is designed to protect you when you are sued for damages sustained during an accident that occurred on your property, whether you have individual insurance or business insurance. Such a policy could protect you from being ruined financially especially when you consider the high amounts that have been awarded by the courts in recent years. Claims in excess of $2 million are not uncommon.
Under the terms of umbrella liability insurance, any claims over the amount you have listed on your policy will be covered. It is too late to consider the purchase of such a policy after the fact and for the relatively low cost involved, it is better to take outs such a policy as soon as you purchase insurance. All insurance policies, whether they are for home, auto, marine or business carry a limit on the liability amount.
The limit of liability on most insurance policies today is $2 million. You also have the option of choosing a lower amount and to save on insurance premiums, many people opt for a lower amount. The basic goal of having insurance at all is to give you peace of mind in knowing that you are covered if something unexpected does occur. You hope that you never have to use it, but it is there if you need it. These consumers find out too late that by saving themselves a few dollars in premiums, they have put their finances and their possessions at risk.
With umbrella liability you can add an additional $1.5 million to the overall liability coverage. This comes into play only after the standard limit on your policy has been reached. The liability portion of your insurance policy helps to pay the medical bills of a person injured because of some action on your part and for their lost wages if they have to be off work as a result of the injury. It also covers the cost of legal counsel to represent you in court and to make sure your interests are being taken care of.
If you are found to be at fault in a car accident in which several passengers in the other vehicle were injured, the medical costs would soon amount to more than the liability coverage on a standard policy. In most states, the driver who is at fault in the accident is responsible for paying all of these medical costs and such a financial burden could wipe out your savings and even result in the loss of your home.
The cost of adding umbrella liability to your insurance policy is about $200 or $300 per year. This is a small cost indeed when you consider everything you have to lose if an injured party brings a lawsuit against you.