Extra insurance is available as personal or commercial insurance which gives the insured further protection and coverage than other policies.
In the event of an accident or an unexpected incident, an insurance policy is meant to act as a safety net, protecting the policyholder from paying off from their pockets.
Unfortunately, insurance policies do have their limits. In cases where the damage is more than what the insurance policy covers, umbrella insurance can help by providing extra coverage in addition to the underlying policy.
What is Umbrella Insurance?
Umbrella insurance is a type of liability insurance that provides extra liability protection when the coverage on an existing policy falls short.
An umbrella policy picks up where the underlying policy liability ends, providing additional coverage beyond the liability insurance already in your homeowners or landlord insurance. In other words, it provides coverage when your existing insurance policies are exhausted.
As mentioned, umbrella insurance provides coverage when the underlying insurance policies are exhausted. However, it doesn't provide coverage for every damage or loss incurred. Most umbrella insurance policies will cover:
- Bodily injury – Umbrella insurance policy will cover costs resulting from bodily injuries sustained by another person for which you're at fault.
- Damages to others' property – Umbrella insurance may apply to damages caused to another person's property, such as their home or vehicle.
- Landlord liability – Some umbrella liability policies provide coverage for landlords. For example, if you rent out a flat, you could be held liable for injuries—whether to the tenant or their guests—that occur in that property. In this case, your umbrella policy will cover the medical bills after your landlord policy's limit is reached.
- Certain legal costs – If you're sued for causing bodily injuries or property damage to others, umbrella insurance will cover all the legal costs associated with the lawsuit.
What Does Umbrella Insurance Not Cover?
Umbrella insurance doesn't cover:
- Business losses – A personal umbrella insurance policy doesn't cover any damages related to a business. Commercial umbrella insurance, however, will cover business expenses, such as damages to assets, legal costs in case of a lawsuit, and business-related medical expenses.
- Property damage you sustain – Umbrella insurance only covers damages caused to other people's property. Damages to your own property are not covered.
- Personal belongings – Umbrella insurance policy only covers damages to the personal belongings of others when you're at fault. Your personal belongings are covered under the personal property coverage of your homeowner's policy.
- Losses caused by criminal acts – Umbrella insurance won't cover losses resulting from involvement in criminal activities. For example, if the policyholder is involved in an illegal business that results in bodily injuries to others, the insurer will not honor the claim.
- Liability assumed under contract – If you enter into a contract and assume liability on behalf of someone else, your umbrella policy won't cover you.
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