The rich buy this insurance. Should you?
Everyone should have the right kind of insurance coverage in order to protect themselves against financial ruin. For wealthy people, it’s especially important to make sure they’re fully covered, as they usually have a lot of assets to protect.
As a result, many people with higher incomes purchase a special type of insurance called umbrella insurance. While this insurance is usually purchased by the wealthy, it is possible that many other people who do not have huge bank balances could benefit from it as well. Here’s why.
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How does umbrella insurance work?
Umbrella insurance is a type of supplemental insurance policy that people can purchase in addition to other coverage, such as auto and home insurance.
Specifically, it offers additional liability insurance protection that goes beyond the limits of existing coverage. For example, say a driver had an auto insurance policy that included liability coverage of $ 100,000. If the driver was in an accident and caused $ 200,000 in damage, auto insurance would pay the victims the first $ 100,000 in losses and umbrella insurance would cover the difference.
Umbrella insurance can cover the policyholder and other family members. In addition, it offers protection in a wide variety of situations where someone could bring an action for damages against the policyholder. For example, a typical umbrella insurance policy would not only provide coverage after the auto insurance policy runs out, but could also pay for additional damages that a home insurance policy would not pay after an injury to the property of the owner. the insured.
In some cases, umbrella insurance covers not only damages that exceed the limits of the policy, but also excluded types of claims that standard insurance does not cover, such as defamation and slander claim protection.
Why would a person need umbrella insurance?
If a claim exceeds the coverage of a standard insurance policy, the injured victim could still pursue the claim and try to recover the difference.
In the example above, for example, if a victim of a car accident suffered damages of $ 200,000 and the at-fault driver’s auto insurance paid $ 100,000, the accident victim could try to recover the remaining $ 100,000 directly from the driver. They could do this by going to court and getting a judgment, which the court could then enforce through a wage garnishment or a levy on the property.
Rich people tend to have high incomes and many assets, so they know their wealth is at risk in the event of an accident and they buy liability insurance to protect their assets. But even the people who are not very rich people could run the risk of losing part of their salary or important personal property if they end up being held liable for costly damages.
Now, it is possible to increase the limits of auto and home insurance policies to provide fairly substantial coverage. But rather than, say, buying $ 1 million in auto liability insurance, umbrella insurance policies can be cheaper. Those who purchase umbrella insurance can follow their insurer’s requirements for the amount of liability protection they need on their other policies. Then a policyholder could get much more protection from umbrella insurance at a lower price.
So, anyone who wants to protect property that they have worked hard to acquire or ensure that their income belongs to them can seriously consider an umbrella insurance policy. They are relatively affordable given the substantial protection they offer, and they could make all the difference in saving an insured’s finances in the event of a problem.