When an accident occurs, liability insurance covers the legal costs and payouts that result in bodily injuries or damage to the property of another. However, this policy has limits that may not be enough for your needs. For increased protection, consider adding umbrella insurance.

What Should You Know About Umbrella Insurance?

How does it work? 

In a lawsuit, liability insurance will pay for the defense attorney and the settlement, but only to a specific limit—even if it's determined you’re not responsible for the incident. 

If the expenses exceed the limits of the liability policy, the rest would be paid out of pocket. Owned properties, vehicles, current investments, potential future earnings, and accounts (including checking, savings, and retirement) are all considered personal assets that would be used to cover the remaining fees. 

Umbrella insurance will cover the rest of the money without affecting personal assets. The policy will also absorb the costs of claims that aren’t covered by liability insurance and incidents that occur outside of the country. 

What does it cover?

Standard umbrella insurance covers bodily injury and property damage claims. Expanded forms cover false arrests, legal fees, or being accused of slander or libel. 

It can also supplement current homeowners, auto, and renter’s insurance policies to ensure increased protection.

Does it cover my entire family? 

The policy covers immediate family members, such as a spouse or children. But, umbrella plans may not cover a family member with insurance policies in their name or through another insurance provider. 

However, this isn’t a hard and fast rule, as different insurance companies have different rules. Speak to an agent about the specific details of the plan. 

How much should I carry? 

This is dependent on several factors. The first is the potential risk. A homeowner has an increased risk level when they have attractive nuisances. Those who often drive for work are more likely to be in an accident than those who don’t. 

Also, consider the value of personal assets. The more one has, the more umbrella insurance is needed to protect them. 

Finally, there’s the potential loss of future income. Even those who aren’t wealthy can have their assets compromised if a portion of their future income is used to settle a claim. Earning potential is also a factor considered in court. An individual currently in college wouldn’t have many assets. But, if they’re on track to become an anesthesiologist—one of the highest paying jobs in the country—the money that hasn’t been earned yet can be claimed during a lawsuit. 

Umbrella insurance can be the safety net you need when an unexpected incident occurs. If you’re interested in extending your coverage, reach out to Pearson & Barnes Insurance in Somerset, KY. As independent agents with more than 20 years of combined experience, they compare the services and premiums of numerous providers to find the right plan at an affordable rate. For more information on their coverage areas, visit their website. Call (606) 679-1450 for a quote.