Many people are unsure of what umbrella insurance really is. They see insurance companies using umbrella logos and pictures and they assume that this means the insurer is covering us on a rainy day or during a time of need or that they cover you for every eventuality. As heartwarming as that may be it has nothing to do with rainy days and everything to do with liability cover.
Quite simply, umbrella insurance covers the holder for liability beyond the value of any other short term insurance policy they may hold. Why would you need this additional cover? Quite simply people today can and often do sue for absolutely anything and everything. Umbrella insurance offers additional cover to you in the event of you losing a lawsuit and your current insurance policy's liability cover being insufficient
Umbrella cover is not a necessity for everyone though. You need to evaluate the value of your assets and determine if your personal liability will cover you sufficiently in the event of a lawsuit. In addition, what are the chances of you getting sued? This will be a very important consideration. For instance, if you are a business owner who sells a particular product, you could easily be sued in the event of a product failure or injury as a result of your product. However, if you are an office worker who does not deal directly with customers or produce any products, you are much less likely to get sued. It may also cost you significantly less to simply increase the personal liability on your current insurance policy rather than buying additional umbrella cover.
So when do you need umbrella insurance? You will need this extra liability cover when one or more of your other insurance policies do not have an adequate level of liability cover. Your primary policies will often only cover you for bodily injury and property damage. A good umbrella policy will include bodily injury, personal injury and property damage which could be caused by you, your dependants or even your pets. In addition, an umbrella policy can also cover you for false arrest, invasion of privacy, malicious prosecution, defamation and eviction, among others.
An umbrella policy will kick in after you have used up the entire limit of your liability cover on your primary policy. Umbrella policies are usually very cheap as they are hardly ever used. Primary insurance policies often cover the full extent of liability claims. For individuals liability cover is not something worried about much. However, businesses are far more conscientious of liability levels and liability cover, so it is far more likely for umbrella policies to be included in risk cover for businesses. However some business insurance policies come with extra liability cover built into the policy thus negating the need for additional umbrella insurance.
Be sure to discuss the fine print of any umbrella policy with a broker and/or insurer as there are often limitations and loop holes in these policies which may leave you exposed when claiming. Shop around for umbrella insurance policies as comparing insurance quotes and policies could save you money both in premiums and in possible losses. Being sure of what your cover entails will stand you in good stead in the long run.
Stuart Broad is a marketer who works for a number of South African insurance sites. If you are looking for a budget insurance, he recommends trying to get Insurance Quotes at InsuranceHound.