Homeowners Insurance: What is Umbrella Liability Coverage?

By Compuquotes Team on March 28th, 2008
Homeowners Insurance

They say that umbrella liability coverage is just for the rich; who would want to add extra premiums to pay except those who has the means to buy for one? However, this is just a misconception about umbrella liability coverage. It is more than an extra expense on your part. To explain more how it works, it would be best to see it through a real-life scenario.

  • The scenario

One winter morning, a neighbor's dog ran towards your doorstep. Your neighbor, a middle-aged man, went after his dog. Unfortunately, the walking area in your lawn and your doorstep were slippery. In an attempt to catch his dog, your neighbor slipped and broke his hip. What would you do now that he sues you? If you have an umbrella policy, you wouldn't even wonder where you would get the money to pay your lawsuit-addict neighbor.

  • What umbrella liability coverage does?

Of course, your neighbor has all the right to sue you under your home insurance policy. Well, don't anymore think about, "It's his fault; it's I who should have sued him for trespassing." It was his life that was at stake and it's quite understandable for him to seek redress for the danger that he has faced.

In this regard, you'd become problematic only if your homeowners insurance covers for $50,000 only for such an accident, when your neighbor is asking for $150,000 for damages, or that the court has awarded him for such amount. With umbrella policy this is not a problem. You don't have to shell out $100,000 to pay your neighbor the amount he is suing you for. Your umbrella policy will pay for this; in fact even if it's $1 Million, your umbrella can pay for it.

  • The beauty behind an umbrella policy

Umbrella policy sits above your existing insurance policy, whether it is home insurance or auto insurance. In short, as its name implies, it is on top of your insurance policy and will cover the amount that your existing policy does not.

A normal umbrella policy covers you for a minimum of one million dollars! Yes, that much. In fact, others go as much as two million dollars as the minimum amount of coverage.

  • It's not as expensive as you might think it is

As mentioned, people believed that an umbrella liability coverage is expensive and at the very most, impractical. But it is not expensive as you might think it is. In some cases, umbrella coverage can be as low as $300 a year... an umbrella liability policy that covers you for the unexpected. You read that right; the $300 is for an entire year of coverage.

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