Liability is inevitable, and it is a good idea to have insurance to protect yourself from any form of liability. An umbrella insurance policy, in its entirety, covers personal liability. You take a homeowner’s policy, auto policy, or watercraft insurance to protect your interests from third-party lawsuits, but there are certain aspects that are not covered under the standard liability terms. An umbrella insurance policy kicks in when you exhaust your homeowner’s policy or auto insurance to pay for an unfortunate accident that was a result of negligence on your part.

The need for umbrella insurance
It takes time and efforts to save up for a decent home or a car. These assets are your family’s future, and it is your responsibility to ensure proper coverage for the same. Do not let standard insurance policies limit your cover for liability as you can get a personal umbrella insurance policy to provide cover for accidental property damage and injuries caused to other parties. It does not cover damages to your personal property. Rather, the additional cover is there to ensure that the aggrieved party is fairly compensated on suffering injuries or losses due to negligence on the part of the insured who caused the accident.

Protection from expensive lawsuits
Injuries to third parties can result in lawsuits. Court proceedings are expensive, and if they hold firm in favor of the injured party, you will have to shell out your life savings just for compensation. A personal umbrella insurance policy pays for medical bills, rehabilitation, and lost wages, and the policy also covers legal expenses incurred during the lawsuit. The additional cover will vary depending on the type of accident, the extent of the injury, and whether the accident was a result of negligence on your part. The inherent terms and conditions will vary slightly depending on whether the additional policy was taken for homeowner’s insurance or auto insurance.

For example, if you have been involved in a car accident that has resulted in heavy damages to the other party, you will be liable to pay for them. If the damages exceed the amount you can claim from your standard auto insurance, only an umbrella cover can pay for the excess claim to compensate the aggrieved party.

Cost of additional insurance
Umbrella insurance is not expensive. In fact, you may be surprised to find that coverage for $1 million in damages can be purchased for as low as $100 annually. Since you already have a primary homeowners insurance or auto insurance to cover for standard liability, the additional insurance can be availed for just a few hundred bucks every year. You must consider factors like the value of your assets, the potential loss, and possible risks in the future to understand how much additional insurance is needed.

In simple terms, an umbrella insurance policy can be taken to solely protect the insurer’s interest. Accidents take place, and a good lawyer can prove negligence if you are at fault, making you liable to pay for any and all damages caused to the party involved in the accident. Without an umbrella cover, the court can seize all your assets to compensate the other party. You must max out your claim for an umbrella cover to kick in and pay for additional expenses incurred as part of the lawsuit.