Umbrella Insurance Policies
Umbrella insurance is defined as a type of policy that provides what is known as excess coverage for losses beyond that provided through some other policy of insurance. In addition, umbrella insurance can be a primary source of compensation for a loss that is not covered by any other type of insurance.
Who Benefits from Umbrella Coverage?
The reality is that virtually any individual can benefit from maintaining umbrella coverage. For example, a person's homeowner's insurance coverage likely protects a person to some degree against a claim made by someone injured at his or her residence. However, if the damage was significant, the homeowner's policy may not be sufficient to appropriately compensate the injured individual. In such a situation, an umbrella policy would "kick in" and provide supplemental coverage, protecting the homeowner from personal exposure.
How It Works
An insured individual files a claim with the insurer that provides the umbrella policy of insurance. A claim is filed when another insurance source is not sufficient to provide complete compensation for a loss or when no other type of insurance is available to provide compensation.
Different Types of Umbrella Benefits
The benefits associated with an umbrella policy are dictated by the dollar amount of coverage provided in the event of a claim and the breadth of coverage provided by this type of insurance. For example, a person might seek an umbrella policy that provides for $1 million in excess insurance coverage (above and beyond other policies). The umbrella policy can include limitations as to what types of claims will be covered through that policy, allowing some and excluding others.
Major Benefits of Umbrella Coverage
Statistics maintained by the National Association of Insurance Commissioners suggest that the average person will face a point in his or her life at which more standard forms of insurance available will not provide enough compensation in the event of a claim. The primary benefits associated with umbrella coverage is found in the added level of protection afforded to a consumer. The supplemental level of insurance coverage protects a person against having to use his or her personal assets to deal with a loss.