Do You Have Umbrella Insurance? Do You Need It?
By Shyam A Sunder
Article Source: http://EzineArticles.com/7443569
Let us start with a dramatic illustration. You are driving and suddenly a pedestrian lunges in front of you. You do not stop in time and hit him.
After getting over the shock, you thank your lucky angel because you are fully covered by an automobile insurance policy. It even covers medical liability. You feel relieved.
Unfortunately, your relief could be temporary. Most automobile policies have limited coverages. They will not cover you in case you are sued by the victim for negligence.
Let us take something less dramatic. There is a heavy storm and the tree in your property splits and falls on your neighbor's garage, crushing his car and other property kept in the garage. Does your home insurance policy cover such a damage? Most probably not.
That is why, while it is important to have your assets such as home and car covered through specific damage policies (fire, accident, theft, storm, uninsured motorist etc.), it is absolutely crucial to have an umbrella insurance policy as an essential part of your overall protection.
Briefly, an umbrella insurance policy covers you from unspecified damages caused by liability arising from a lawsuit. Do not mistake it as a supplement or extension of your other insurance policies. It does not cover your deductible or co-pay liability. It simply kicks in and covers you when you are sued.
Why is it important? If you or your immediately family with whom you have co-ownership have assets worth protecting, there is no other way to protect them in the case of civil or criminal litigation exposure. Such litigation, if it is adjudicated against you can play havoc with not only your peace of mind but also with your livelihood. Here is how:
- Your assets can be attached by court in settlement of the award
- You could lose rights to income from the attached assets
- You may have to pay legal expenses defending the lawsuit
- You do not have anyone professionally looking into settlement options, other than your attorney who again costs you money
An Umbrella policy in fact provides an added layer of liability coverage above and beyond the limitations of specific asset protection policies such as homeowner's, auto, personal property and boat. This policy is also used when you are sued for something which is not normally included in traditional insurance policies.
Such policies are relatively cheap, again depending upon your claims history. A $1 million policy will probably cost you between $200-$400 annually. However, most insurance companies will not sell you one unless you have adequate coverage for your high value possessions--mainly home and car.
Another use of the umbrella policy is if you are holding a board position with a business entity. Such policies are usually referred to as Directors' and Officers' (D & O) policies and you may be able to get them cheaper if you persuade the company itself to go for group coverage.
Article Source: http://EzineArticles.com/?expert=Shyam_A_Sunder
Article Source: http://EzineArticles.com/7443569
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