wiseGEEK: What is Personal Umbrella Insurance?
If a person falls asleep at the wheel when driving home, he could cause an accident that seriously injures several people. Someone who has been meaning to fix the deck in his backyard might fail to do so before a guest walks over it and falls through. In these cases, the injured parties may sue the person responsible for a great deal of money. Auto insurance will offer some coverage in the first case, but it will pay only to the amount of liability the policyholder possesses. Likewise, a homeowner’s policy will pay out at the liability rate that the owner has purchased. In these cases, personal umbrella insurance, sometimes also called personal liability insurance. can help the person survive a lawsuit without losing everything he owns.
Personal umbrella insurance acts as protection once an individual's other policies have been exhausted. In cases where it is not purchased, causing an accident can mean that the person responsible must surrender of all his material goods in order to assess their value. Most often, the property is assessed is the home, cars, and boating goods that the person owns. Other property, like jewelry and assets, may also be part of the money that a person in a lawsuit can claim. Additionally, a portion of the person's salary may need to go to any successful claimants for many years, if not for the rest of his life.
Even if a lawsuit does not result in a huge reward, court costs are frequently high and exceed amounts an auto or home insurance will allow. Umbrella insurance will also step in to allow for repayment of court
costs without the policyholder needing to sell assets to meet these costs.
Personal umbrella insurance coverage and costs vary by company. Most require that that a client carry a defined amount of liability on a car or home policy. If he does not meet this requirement, he will be personally liable for the difference between the liability limit he should have carried and the limit that he does.
Most policies can insure liability at huge numbers, often starting in the millions of US Dollars (USD). Policies can stretch to the multiple millions, and what the policyholder owns should determine how much he purchases. Someone who has few assets may find that this type of coverage may actually attract rather than discourage lawsuits. A claimant knows that he or she can get more money as a result of the coverage.
With highly valued property, however, personal umbrella insurance is a must. The investment on such policies is generally not high, and it may translate to about $100 USD a year for $1,000,000 USD in coverage. With lawsuit awards on an upward trend, it’s probably better to purchase a policy that can offer $5,000,000 USD in coverage, although people with fewer assets likely won't need so much.
Financial experts often recommend that most people not skimp on this type of insurance, and they suggest that those in the marked should compare prices and buy a policy. Discounts may be available if the policy is purchased through the same company that provides a person's auto or home insurance. Companies often offer reduced rates when multiple types of insurance are purchased.Source: m.wisegeek.com