Umbrella Insurance: When Extra Coverage Is Prudent

Umbrella insurance, or excess liability, is for cases in which an accident or similar claim exceeds the coverage. Such insurance offers additional funds to cover any amount above the normal value. Although umbrella insurance policies used to be costly - something that only the wealthy could afford to buy - it might be even more costly to not get umbrella insurance.

When you consider the cost of an accident, there may be the high costs of hospital treatment, lost wages from the injured person not being on the job, and possible mental therapy. And that doesn’t include the legal ramifications that result from dragging out an eventual court case. Liability insurance can only cover so much, and if the costs exceed the coverage, an umbrella insurance policy is really the only cure.

There is no standard for umbrella insurance, so policies vary from company to company. The bad news is that insurers can essentially come up with their own premium quotes, which can be quite expensive. The good news is that the price of umbrella insurance is getting lower, and many insurance companies will offer excellent deals if their clients tack it onto their regular insurance programs.

Like any good insurance program, the old phrase "shop around" applies to umbrella insurance. Don't be sold on the very first policy. Each umbrella insurance program comes with certain components that must be examined before any deal can be made. First, make certain that coverage is clearly defined. Second, be sure that any non-covered accidents are also defined clearly. Umbrella insurance is one investment for which you need to read the fine print.