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Umbrella vs. Homeowners Insurance: How Does It Work

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 | May 15, 2015
Umbrella

Umbrella insurance is, to put it simply, an extra layer of liability coverage if anything should happen, such as a lawsuit, where your home or car insurance liability coverage wouldn’t be enough. Many people wonder why they need extra liability coverage. Why isn’t your home and auto liability coverage enough? Would you ever really use an umbrella policy?

Take a look at some numbers for home and auto liability coverage from Travelers Insurance:

Minimum home insurance liability coverage is $100,000.

Highest home insurance liability limit is $500,000

Minimum car insurance liability coverage is $25,000 per person and $50,000 per accident.

Highest car insurance liability limit is $250,000 per person and $500,000 per accident.

The fact is that sometimes the above isn’t enough, especially if your assets exceed the regular coverage. If you are involved in an accident or lawsuit that goes beyond your limits, the money starts to come out of your pocket. Don’t have the money to pay? You may be forced to sell your car, your home, or any other valuable asset. The more assets you have and the more you earn, the more you are at risk of losing.

Ranging from one to five million in coverage, umbrella insurance can help keep the above from happening.

How does it work?

Depending on the accident, whether it is related to your home or auto (or boat), your liability from that insurance policy will kick in first. After that runs out, your umbrella insurance policy will help you out. In order to obtain an umbrella policy, you must have certain limits already on your home and auto policy.

Sources: Travelers, The Hartford

 


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