Standing Under an Umbrella Policy

By Kurt Real Estate Feb 20, 2020

Like any insurance, having good homeowners insurance is important – for we never know what the future holds! But, what happens when your homeowners insurance policy isn’t big enough? Hopefully not, but there could be an instance where you need more than what your coverage offers. This is where an umbrella policy comes in.

Umbrella policies provide additional coverage beyond what your homeowners insurance offers. They cover some of the largest causes of liability claims: bodily injury, property damage, landlord liability, etc. It’s important to note that this coverage is for personal claims and not business losses.

The way it works is, say there is a situation in which someone was injured in your property and the medical bills are going to exceed the coverage provided by your homeowners policy. This is where your umbrella policy kicks in to cover the difference. It’s worth noting that umbrella policies aren’t solely for homeowners, they can cover much more than your residence. As the word “umbrella” suggests, it can protect against other things like automobile accident liability.

Why get one if you have a pretty high limit on your current homeowners policy? Imagine you just bought a house. Between the down payment, closing costs, new furniture, moving costs, you’ve spent a lot. A few days after you’ve closed escrow, a pipe bursts and floods the downstairs causing mold and water damage to the home and all your new furniture. The cost to replace everything is going to exceed your homeowners policy. Now what do you do? You don’t have the extra cash to cover the cost….

Umbrella policies become increasingly important when fixing up a property. Sure you may watch Fixer-Upper on HGTV, but before you get your Chip and Joanna on, know that those shows don’talways give you the truly ugly and unexpected side of fixing up homes – any imperfection can have long lasting negative ramifications if the right actions are not taken to remedy it. The likelihood of having an accident or finding more damage is high.

Not everyone needs to have an umbrella policy, but before ruling it out, talk to your insurance agent to see if it might be right for you. While this type of policy is not generally required by lenders, it may be worth the extra couple hundred bucks a year for the security of knowing you’re fully covered.