How exactly does an umbrella insurance policy works?


In the case of an accident, the car insurance policy would pay for the medical bills, lost wages, and any rehabilitative therapy expenses of the injured person or persons if the owner of the policy had been at fault. If the person at fault had been found to be negligent in driving, the cost of the defense lawyer would also be added to the above costs. The standard policies would not be able to cover the total costs awarded due to negligent driving. In all the states, the laws stipulate that the person at fault could be sued for adequate damage for covering the expenses to treat the bodily injury, the legal costs, and property damage, if any. In such lawsuits, the court could order the seizure of the personal assets of the person found negligent in driving.

An umbrella insurance policy covering personal liability would provide an additional liability protection at a reasonable additional cost. Most umbrella insurance policies are inexpensive, when the added coverage is taken into consideration. Further, these umbrella policies cover even the non-business activities and they are globally applicable. Hence, it is advisable that every person opts for an umbrella insurance policy to get the maximum possible risk coverage.

What information should be provided when an umbrella policy is purchased?

The insurance companies would require that the following information should be provided when an umbrella policy is purchased.

  • First name of the person purchasing the policy and all other driving members of the household, their date of birth, marital status, sex, number of years that they had been licensed, the state or states of the licenses, and occupation of all the driving members.
  • Accident and violation information of the members in the household for the past 5 years.
  • All the property and assets owned by the insuring person.
  • Information about the current policies and insurance companies, with the expiration dates of these policies, along with all the claims and losses in the last 5 years.
  • The liability limit being sought. This would typically be in the range of one to five million.