Understanding the Basics: Homeowners Insurance vs Umbrella Policy
Owning a home, a car, or a boat may require you to have insurance policies in place. Homeowners insurance and umbrella policies are two forms of insurance that help protect you from unexpected expenses in case of an accident or damage to property. While both of these policies provide some level of liability protection, there are important differences to note. Homeowners insurance is a type of insurance that provides financial protection to your home, personal property, and liability. It is intended to protect you if someone is injured on your property or if you cause damage to someone else’s property. Homeowners insurance covers a range of incidents, including thefts, fires, and natural disasters. It can also include coverage for personal property, such as jewelry, furniture, and electronics, up to a certain limit. On the other hand, umbrella insurance is a policy that provides additional liability coverage beyond what is covered by your homeowners, auto, or boat insurance policy. It is designed to cover the most expensive scenarios where repairs or medical expenses exceed the amount of your base insurance policies.Why Do You Need an Umbrella Policy?
While homeowners insurance may provide protection against claims of property damage or bodily injury, the claims may exceed the coverage limit of the policy. An umbrella policy, such as a personal liability policy, can help cover the difference between the damages claimed and the amount covered by the homeowners policy. Umbrella policies can also provide coverage that may not be available under your homeowners policy. It is important to note that the umbrella policy does not provide protection for the insured property or the policyholder’s family members. Instead, it provides liability protection for the policyholder in case of a lawsuit or claim. For instance, if you cause an accident while driving your car and are found liable for the damage caused to the other vehicle and injuries suffered by the other driver, your auto insurance policy may cover up to a certain amount. However, if the damages exceed the policy limit, you could be sued for the remaining amount. Umbrella insurance can provide additional coverage that bridges this gap, ensuring that you are not personally responsible for the remaining amount.Special Protection Offered by Umbrella Policies
Umbrella policies offer additional protection in various ways. These include:- Coverage for claims from injury caused by at-home employees, guests, or your children
- Coverage for claims arising from rental properties you own
- Coverage for claims from defamation, invasion of privacy, and slander
- Coverage for damage claims from incidents that may occur abroad
- Coverage for legal defense costs, such as attorney fees and court costs
Typical Coverage under Homeowners Insurance
Homeowners insurance policies typically cover the following:- Liability protection for bodily injury and property damage claims filed against you
- Coverage for your dwelling and other structures on your property
- Coverage for personal belongings, such as clothing, furniture, and appliances
- Coverage for living expenses if your home becomes uninhabitable and you need to live elsewhere temporarily
- Coverage for medical expenses if someone is injured on your property