Many people plan for sudden incidents that may affect their finances and accidents that may affect their home, health, property, and more. Yet, there are times when an insurance policy may not cover all the cost of a fine or settlement if you are sued. To avoid financial ruin, umbrella insurance will take care of extra costs that are more than what your insurance can cover.

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Umbrella insurance is simply insurance for other insurance. It lifts the limits of liability for the scheduled insurance underneath it (home and auto, for example). It saves you when you have to pay a fine that is more than what your actual insurance can cover. You will most likely buy car insurance, homeowners insurance, health insurance, property insurance, etc. But if you are sued and the damages exceed the amount your insurance can carry, umbrella insurance will save you. You wouldn't need to pay with your money or sell properties to cover the bills.

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Imagine you lose focus while driving and hit a car alongside some people. The damages to be paid to the owner of the car may be $15,000 for repairs and the treatment cost for injured people may amount to $200,000. The driver may also sue for $100,000 if the accident will prevent the individual from going to work for some time. This means you will pay about $300,000 as a fine. If your car insurance limit is $150,000, then you will most likely have to pay the rest yourself. However, if you have umbrella insurance then it will take care of it for you and save you from the huge amount. That is how umbrella insurance works. You think that it's not necessary because you'll only need it if your normal plan can't cover the cost of an incident. However, you can't be too careful. It's wise to plan for unexpected things even if they don't happen. Umbrella insurance will give you peace of mind and save you from losing all your money to a lawsuit.

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Umbrella insurance covers the buyer and family members. If you or anyone in a household damages a property, fights and causes an injury, or defames a person, the insurance will pay for the liability. It also pays for the legal fees added to the damages. Some common things that umbrella insurance covers are the following:

• If you cause an accident and you were sued for the cost of injury and damage to the car, the umbrella insurance will take care of the cost if it exceeds the payouts of your auto insurance.
• If someone falls while in your home and sues for a medical bill, if your home insurance can't cover the amount charged, the umbrella insurance will take over.
• If you are sued for defaming a business and found guilty, the cost for this fine is paid by umbrella insurance.

To summarize, the insurance will pay the cost for:

• If you cause injury to another person.
• When you damage the property of another person.
• If you are charged for saying negative things or defaming a business or another person.
• The legal fees during the lawsuit.
• The cost of treating anyone who falls and gets injured on your property. This often applies to a landlord.

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Umbrella insurance will not cover the cost of treating yourself or repairing damages to your house. You'll use other types of suitable insurance to take care of such expenses, like your personal health insurance. It also doesn't cover legal problems that affect your business - commercial umbrella insurance has similar coverage for your business (also known as excess liability).

If you do certain wrong things intentionally, the umbrella insurance will not cover the cost. Also unless you have insurance for your boat, all types of boats are not included in the insurance. To show you again, let's list some cases not covered by the insurance.

• Your injuries
• Damages to your property
• Damages concerning your business
• Intentional illegal acts

Today, in a world of hungry lawyers and changing state legislation, the likelihood of getting sued is unfortunately common. People often assume a personal umbrella policy is only for wealthy people with lots of assets, but the reality is, everyone should have one. Here are a few of the most common people who should have an umbrella policy:

• Single Family Renters: if you rent or lease an apartment, or house, then an umbrella will protect the excess limits to your renter's insurance.
• People with Children: if you have children, their actions will fall on you. An umbrella increases the liability limits on your primary home and auto insurance
• Families with lots of property: if you own multiple homes, then your liability increases significantly
• High-Risk Individuals: if you take part in activities that increase your chance of getting sued, well, an umbrella is a no-brainer.

TIP: business owners should also have a commercial umbrella policy increasing their business liability limits.

On average, umbrella insurance costs about $200 to $300 per year and will give you up to $1 million coverage. This is not the price for all insurance companies, some may be lower or slightly higher, and will increase with the number of policies under it. Factors that increase the price of an umbrella policy are the following:

• Number of Primary Insurance: the more policies scheduled under the umbrella will increase pricing (multiple homes and cars)
• Limits of Liability: the higher the liability, the higher the price ($1mil vs $10mil)
• Hazardous Elements: things like trampolines, dogs, pools, and off-road vehicles increase pricing
• Prior Claims: if you've had any claims in the past, the price of your umbrella will increase

In a state like Washington, D.C., to get umbrella insurance of $1 million to $5 million your other insurance must have the following limits: home insurance worth $300,000 liability coverage, and auto insurance of $500,000. Only then can you get an umbrella plan. In other places, the worth of home and auto insurance you need can be higher or slightly lower.

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