What is Umbrella Insurance and Why Do You Need It?

On a rainy, stormy day, a good umbrella keeps you relatively untouched and mess free. The same is true of an umbrella insurance policy when it comes to the mishaps and accidents we may meet along our way in life. But who needs it, and why is it so important? Let’s get into the details.

What Is Umbrella Insurance?

Umbrella insurance is an added layer of protection that goes above and beyond your standard insurance policies. For instance, homeowners and business owners have their respective policies for their personal or commercial property, and those policies come with coverage limits for certain losses, like a third-party accident or legal liability. But sometimes these situations incur costs that go well beyond standard coverage limits. Without an umbrella insurance policy, any additional costs would have to be paid out of pocket. A personal or commercial umbrella policy comes into cover the difference while protecting and preserving personal or business assets. 

Who Needs Umbrella Insurance?

This invaluable financial shield is one of those protections that you don’t think you need, until you do–everyone who owns a home or business would benefit from the peace of mind that an umbrella policy can bring. That said, there are certain categories of folks who are at greater risk and so would be more likely to utilize an umbrella insurance policy.

These can include:

• People With Significant Assets–The more you own, be it in homes, vehicles, savings, investments, or rental properties, the more you stand to lose in a lawsuit.
• High-Income Earners–If you lose a lawsuit, future wages could be garnished to pay the winning plaintiff.
• Homeowners with Risk Factors–Having a swimming pool, trampoline, large breed dog, or frequent and large parties with many people at your home, inevitably increase the risk of a serious accident and lawsuit.
• Drivers with Higher Exposure–If you have a long commute in high-traffic areas, or you are on the road frequently for work, the increased exposure naturally makes the likelihood of a serious at-fault accident higher.
• Parents of Teenage Drivers–It’s a known fact that teenage drivers are more likely to be involved in an accident. If it’s serious and leads to multiple individuals being injured, you could face a costly lawsuit.
• Landlords and Property Owners–Renting property brings various individuals and their guests onto your property and increases the probability of dealing with injuries, accidents, and even claims of negligence.
• Business Owners–Working with customers, vendors, suppliers, and employees opens business owners up to more potential lawsuits. This is especially important coverage for small business owners who often have fewer resources to lean on.
• Board Members–Serving on a board of an organization can expose individuals to a greater liability risk.
• Boat, ATV, or Recreational Vehicle Owners–Out on the boat or ATV, accidents can happen fast, and bad can quickly turn to worse, leading to property damage and injury.

In short, anyone who has significant assets and/or income to protect, or who faces more risk than average because of their property, lifestyle, or profession, should seriously consider adding umbrella insurance coverage to their suite of protective policies. The peace of mind alone is worth it.

How Umbrella Insurance Works

Umbrella insurance acts as a financial shield in the face of large liability lawsuits. When a plaintiff is awarded an amount that far surpasses the liability limits of your homeowners or business owners policy, your umbrella coverage steps up to pay the difference.

For example, consider these real-life scenarios:

• You or your child is at fault in a multi-vehicle accident. Multiple people are injured, including a pedestrian bystander. When medical bills, lost wages, and pain and suffering damages are tallied, costs reach over $1M. Your current car insurance policy’s liability limit caps out at $500,000. But that still leaves you with over $500,000 unpaid. In this case, your $1M umbrella policy would pay the remainder, preventing you from having to sell off assets and pay out of pocket.

• Your business sells a product that ends up causing injury or illness to customers. You are sued for negligence, and the claims begin to stack up. In the end, your company is required to pay customers roughly $3M in damages, but your business liability insurance tops out at $1M. An ample enough umbrella insurance policy–$3 to $5M–would cover the rest and protect your business from total financial ruin.

These are just two examples, but a serious dog bite that lands the victim in the hospital, or a business slip, trip, or fall situation, are also common risks. Then there is the risk posed by an advertising injury claim, if copyrighted media is accidentally used and the owner seeks restitution, or if a commercial vehicle is involved in a car accident. In business and in life, big risks are always lurking around the corner. Umbrella insurance is a way to ensure that, come what may, you and yours are protected against the worst-case scenario.

Now, it’s worth knowing that there are certain things that umbrella insurance won’t cover. Most importantly, it’s only for third-party liability; an umbrella policy won’t pay for injury or damages sustained by the policyholder. That really isn’t the point of the policy. It also does not extend to cover businesses that are operated out of a home, or cases of professional liability or cyber liability. Some vehicles or watercraft are also not covered in an umbrella policy. That said, separate coverage options are often available for the things that an umbrella policy excludes. Risks vary, and in order to properly cover those risks, different policies need to meet various parameters to ensure proper protection.

Personal and Small Business Insurance In Ohio

If you carry high levels of risk in your personal or business life, don’t take chances–an umbrella policy is the best way to prevent financial harm in the case of a lawsuit. But maybe you’re unsure of how big a safety net you need. No worries; your local provider of personal and small business insurance in Ohio is here to help. At BK Insurance & Financial Services, we understand risk and liability, and we know what’s at stake when things go sideways. That’s why, for the past two decades, neighbors in the Ravenna, Kent, and surrounding Northeast Ohio communities have depended on our expertise.

Contact BK Insurance & Financial Services to learn more about our personal and commercial umbrella insurance offerings.