What Is Umbrella Coverage?

Life is
unpredictable. One minute you can be relaxing in the backyard, hosting a BBQ and the next thing
you know, your neighbor has accidently burned his hand on your grill. This burn ends up
preventing him from returning to his job as an electrician
the next day. Thankfully, that’s what we have home insurance for…but what happens when
home insurance doesn’t cover the full bill? The truth is, we may never truly be
able to prepare for all of life’s surprises. However, we can create a contingency plan with “umbrella coverage.”

What is Umbrella Coverage Exactly?

NYCM Insurance defines “umbrella coverage” as an
extra layer of personal liability protection above what your automobile or homeowner liability limits
will cover. In other words, your
standard
auto and homeowner policies have limits which apply to both – what they cover and how much
they cover. If you find yourself being sued, or somehow
responsible for someone else’s medical
bills, it is not uncommon for
the expenses to exceed your standard coverage limits. Under
circumstances like these, many insurance providers can offer additional
coverage above and beyond what you already carry. Although it may seem unlikely
that you’ll ever need this kind of protection, umbrella coverage can come in handy.

Let’s take a look at a few scenarios:

Action Has Been Brought Against You

The reality is, we live in a highly
litigious society. Simply put, it is not uncommon for a person to be sued. Imagine
you’re driving
along one day and suddenly someone runs out in front of your car. You hit the
brakes, but you aren’t
able to stop fast enough, and you hit them. The paramedics are called and
thankfully no one seems to be hurt. You might be a little bit shaken up but
other than that, it appears that everyone is okay to leave.  

A few weeks later you receive a notice in
the mail stating that you
are being sued by the person that was hit in the accident and that you now need to go
to court to resolve the issue. In cases like these, umbrella
coverage can help protect
you and your family from financial
difficulty if the judgement or settlement exceeds
your underlying policy limits. Without umbrella
coverage, the claimant may be able to go after
you for your personal assets.

Let’s take a look at another scenario:

Swimming Pools and Other Backyard Hazards

For those who have a
backyard pool, trampoline,
playset, or pets, having umbrella coverage
is a critical component of your home and asset protection strategy. Take for
example, your pool. Pools can the perfect place to spend time bonding with
friends and family. However, it’s important to know that having friends over to
swim in your pool can bring along its own set of risks.

For example, say you are outside
supervising the children while your friends are busy putting lunch together. As
a safety
precaution, you’ve reminded the
children not to run near the pool. Unfortunately, your friend’s son has ignored
your warning and proceeds to then trip and fall onto the
concrete, breaking his arm in the process. Even though you might have thought
that you’d be in the clear since you and the child’s parents are friends, you may still be held
responsible for some hefty medical bills. Umbrella coverage will help you cover
these types of costs. Pools, playsets, trampolines, and pets
should all be considered high risk when it comes to having company over.

What Happens If There’s
Not Enough Umbrella Coverage?

“Umbrella” is the term
that is used for this kind of coverage because the coverage functions just as
an actual umbrella would. Umbrellas keep you covered when the rain of
misfortune is falling. Unfortunately, there are many who continue to go unprotected. According to a report from ACE Private
Risk Services “Liability
coverage in home and auto policies rarely exceeds $500,000, yet 13% of personal
injury liability awards and settlements are $1 million or more.” That is a gap
in coverage of half a million dollars which an individual can be held responsible for in the
event of being sued. The general rule of thumb for adequate umbrella coverage is
to have a policy that is as much as your net worth.

While it may be impossible to mitigate
and avoid risks at all
times, it’s important to expect the unexpected and set up a safety net to
protect your assets. With umbrella coverage you can be better prepared for
life’s surprises. For more information about an umbrella policy with NYCM
Insurance, reach out to one of our
local agents by clicking the link below!