What happens if a claim costs more than the limit on your home or car insurance policy? Unfortunately, any amount owed that is over your policy limit is your responsibility and can be financially devastating. The good news is, you can easily protect yourself from large claims by adding low-cost umbrella insurance to your policy.
Umbrella insurance provides additional liability insurance that goes into effect when a claim exceeds the limits on your homeowners or car insurance policy.
How Does Umbrella Insurance Work?
If there is a covered liability claim under your car or homeowners insurance policy, and the dollar amount of the judgment is greater than the coverage limits you have purchased on those policies, umbrella insurance will be applied to the claim.
Before you can purchase umbrella insurance, many insurance companies do require you to carry a certain amount of underlying personal liability coverage on both your homeowners and automobile policies. In addition, you may also be required to insure both your home and vehicles through the same insurance company you are purchasing the umbrella policy from.
How Much Coverage Should I Carry?
Calculating the value of your home, stocks, mutual funds, and retirement accounts is the first step to determining the amount of coverage you should purchase under an umbrella insurance policy.
Any claim amount exceeding your standard liability policy is your responsibility to cover. In order to cover the costs of a large insurance claim against you, you could be forced to use money from your current assets, such as savings accounts, 401(k)s, or even your home. Your future earnings could be at risk as well. While an excessively large claim or catastrophic event is unlikely, insurance companies offer umbrella policies for customers who want to protect their assets and feel more secure. The good news is umbrella insurance is very affordable.
Ensign & Associates are here to make sure your umbrella insurance does its job: keeps you protected in case of an accident. We can do the shopping for you, apply applicable discounts, and – most importantly – make sure you have the right policy for your situation.
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