WalletHub, Financial Company
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The pros of umbrella insurance are that it is inexpensive and it protects policyholders from large home or auto liability claims. The cons of umbrella insurance are that it usually requires an existing home or auto liability policy and it cannot be purchased unless the liability policy has high enough limits.
Pros and Cons of Umbrella Insurance
Pros of Umbrella Insurance | Cons of Umbrella Insurance |
Protects the policyholder against expensive home or auto liability claims | Insurers usually offer coverage only to their own home and auto customers |
Offers coverage limits starting at $1 million | Your home or auto liability limits must meet the insurer’s minimum requirements |
Covers scenarios that don’t fall under normal liability insurance | Only useful for people with a high net worth |
Relatively inexpensive | Does not cover your own injuries or property damage |
When You Should Purchase Umbrella Insurance
It’s generally a good idea to purchase an umbrella insurance policy if you have a high net worth. Otherwise, if you’re faced with a home or auto claim that exceeds your policy limits, your assets could be seized in order to cover the full extent of the damage.
As a result, you should figure out the value of all your assets and compare it to your liability insurance policy. If your assets exceed your liability limits, you should consider purchasing umbrella insurance in order to give yourself enough protection from significant claims.
Umbrella insurance may also be a good idea if you expect to have a substantially higher net worth in the future or you’re at risk for expensive liability claims. To learn more, check out WalletHub’s guide to umbrella insurance.
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