Umbrella in insurance means a type of policy that extends the liability limits of existing home or auto policies and applies to a wider range of situations than a standard insurance policy. The word “umbrella” is used to symbolize the expanded coverage and protection offered by umbrella insurance. In other words, umbrella policies are a metaphorical umbrella of protection over the policyholder and their assets.
Umbrella insurance policies also provide extended protection in legal situations, like if the policyholder is sued for libel or slander. Umbrella policies are generally designed for people with at least $1 million in assets, and you need to have the highest available limits on a home or auto policy before you are eligible to purchase an umbrella policy.
Umbrella insurance is worth it if the value of your assets exceeds your auto or home liability insurance limits. Umbrella policies are relatively inexpensive so they are worth the investment if you have significant assets you’re looking to protect from costly liability claims.
Umbrella insurance provides additional liability coverage, typically starting at $1 million, and it usually costs at least $150 to $300 per year. Umbrella policies also cover certain situations that don’t typically fall under … read full answerliability insurance, like libel and slander.
How To Decide If Umbrella Insurance Is Worth It
Add up the value of your assets, including your home equity, personal savings, and retirement accounts.
Compare your assets to the limits of your auto or homeowner’s liability insurance policy. If your assets exceed the current limits, then you should consider getting umbrella insurance.
Consider any factors that would make you more likely to have a liability claim filed against you, like owning a swimming pool or a dog.
Most home or auto liability insurance policies can only be purchased with maximum limits of $300,000 or $500,000, depending on the insurer. While these limits may be high enough for the average person, wealthier individuals with more assets may need even more protection. That’s when umbrella insurance is worthwhile. To learn more, check out WalletHub’s guide to umbrella insurance.
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