When it comes to a question about roofing, your net worth doesn’t play a big role. The question is more what you need to protect yourself, your assets and your family. This has more to do with your risk and your risk of loss than the size of your loss. In fact, when asked if someone would need umbrella insurance in this scenario, the answer is “maybe.” This will depend on your current insurance coverage, the cost of additional coverage, and the specific risks you are concerned about.
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What is umbrella insurance?
Umbrella insurance is a secondary insurance policy that comes into effect after your primary insurance policy expires. It covers any losses or payouts beyond the coverage provided by your primary insurance policy.
Let’s say you have car insurance that covers liability and damage claims up to $150,000. In a car accident involving a driver who suffers $95,000 worth of damage to their car as well as $155,000 worth of personal injuries and lost wages, you are considered at fault.
Your insurance policy could pay the first $150,000 of this claim. Then blanket insurance could pay the remaining $100,000 that you would otherwise be personally liable for.
Why buy umbrella insurance?
The main reason for purchasing umbrella insurance is third party liability. By and large, you can determine the value of your own property and assets, whether personal property or real estate, in advance. Knowing this, you can purchase insurance that covers most personal injury cases.
Liability is another matter. It is impossible to predict with certainty the value of third party assets or injuries. You might be in a car accident one day or accidentally injure a guest at a party. Since accidents cannot be predicted, the associated costs and damages cannot be predicted either. This is where umbrella insurance comes into play, covering you in the event of unforeseeable liability that goes beyond the scope of your policy.
Most consumers who take out general insurance use it as a supplement to their car or home contents insurance. Typically, you must have existing primary insurance as this does not act as your primary insurance. For homeowners, this can be a supplement to the insurance coverage you receive based on your personal needs and mortgage requirements. For drivers, this can be a supplement to your insurance coverage based on your personal needs and your state’s minimum insurance laws.
Costs and coverage of umbrella insurance
As with all insurance, the specific costs of master insurance vary depending on your policy and your coverage needs. However, in most cases, individual umbrella policies provide liability-based coverage. This means your policy will typically cover injuries, damages and property damage to third parties. For homeowners, this coverage typically extends to general liability coverage, for example if someone sues for defamation.
For this reason, the need for umbrella insurance typically has nothing to do with your personal assets. The reason for having umbrella insurance is the risk of accidents and losses, not necessarily collectible assets. Someone with $25,000 in cash is just as at risk of losing everything as someone with $1 million. In fact, the more money you have, the less likely you are to need roofing because you are more likely to be able to afford overspending, even though roofing can be expensive.
These policies typically do not protect your own assets and personal property because you are assumed to be pricing out your own assets under your primary insurance policy. They also typically do not cover intentional or criminal acts and often do not cover cases of contributory negligence.
Because these are high coverage policies, you typically purchase blanket coverage in $1 million increments. While professionals such as doctors and lawyers typically have liability protection through their workplace, someone who is more publicly known or frequently invites people onto their property is at higher risk of lawsuits and therefore may want to consider stronger protection.
Bottom line
Umbrella insurance is a policy that gives you additional protection beyond your basic home or automobile insurance. Most policies are liability-based, protecting you from third-party claims that exceed the limits of your policy.
Homeowners Insurance Tips
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If you own a home, having the right homeowners insurance can make a big difference. It can save you money and offers tremendous security, so shop wisely.
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