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How Umbrella Insurance Works in NYS

Feb, 23 2022

Umbrella Insurance

How Umbrella Insurance Works in NYS

While standard homeowners insurance policies cover a wide range of perils, they don't cover everything, such as earthquakes and other extreme events. You can extend your existing plan with endorsements that provide extensive coverage, including umbrella insurance, to fill the gaps. Here's what you need to know about umbrella insurance in NY.

What is umbrella insurance?

Umbrella insurance is a low-cost option for personal liability coverage that gives you broader coverage for risks a standard plan doesn't cover. It pays for bodily injuries, property damage, and lawsuits beyond the limits set in standard policies.

How does it work?

When you or other people in your household cause damage to others, it can lead to a lawsuit. An umbrella policy pays for medical bills and repair bills and accusations such as invasion of privacy. The coverage extends to when you travel, even to other countries.

Why do you need umbrella insurance?

Anyone can get sued, but many homeowners and family members are not in the high-risk category. If you take proactive steps to prevent unfortunate events that harm others by living a careful instead of a carefree lifestyle, you are probably not in the high-risk group. Some people, though, live on the edge and take risks that can adversely affect others around them. The more aggressive you are at causing conflict or getting involved with dangerous hobbies, the more you should consider getting umbrella insurance.

Instances where umbrella insurance will cover you

Your aggressive dog attacks a jogger on your street and causes severe injuries that require expensive medical treatment. The wounds are so bad the victim must miss work for several weeks. After you pay your deductible (the amount you pay upfront before the policy pays the rest), your umbrella insurance pays the remaining balance on medical bills plus lost wages.

Another example is if your teenage kid wrecks your car while learning to drive, as umbrella insurance pays for the repair work to restore a victim's vehicle. Again, you'll first need to pay the deductible, which is an amount you can raise or lower to affect monthly premiums. The more you pay each month, the less you'll pay upfront when filing a claim.

Cost of umbrella insurance

Umbrella insurance costs vary depending on the amount of coverage you seek. The state where you reside also makes a difference because each state sets its insurance regulations. Insurance companies also charge rates based on your history of filing claims, where you live, and other details about you.

According to the Insurance Information Institute, most $1 million policies have annual costs from $150 to $300. To double the coverage limits to $2 million, you'll only pay about $75 extra. In that sense, it's pretty affordable, considering the coverage you get.

Umbrella insurance is cheap because you need to already carry a certain amount of home or auto coverage for an insurer to offer umbrella insurance. In other words, you'll likely need to carry maximum coverage offered by your standard plan, and then umbrella insurance extends the coverage. A typical homeowner carries about $100,000 in liability coverage.

Buying umbrella insurance

You should weigh your options between buying individual endorsements that extend coverage on specific risks or choosing broader umbrella insurance. Despite umbrella insurance being affordable on the surface, it can drive your monthly premiums higher if you currently lack maximum coverage.

Ultimately, if you live with a wide range of high-risk factors, such as having children or dogs and throwing wild parties, it helps to purchase umbrella insurance. The more you engage in activities that can lead to accidents, the more you need extensive coverage. Think of umbrella insurance as a wide safety net protecting against litigation costs.

First, discuss the option of umbrella insurance with your agent to see if it's the best choice for obtaining the most coverage at the lowest cost. Your insurer might offer other more economical options in terms of monthly and deductible costs.

Exclusions under an umbrella insurance

Like most insurance policies, umbrella insurance doesn't cover everything. It covers a broad range of incidents but may list specific exclusions. Here are items an umbrella policy usually doesn't cover:

  • Damage to your own property - Your own property should be covered by your standard homeowner's policy. Umbrella insurance covers liabilities that affect other people's properties.

  • Damage that you cause on purpose - Insurance companies don't offer policies that allow claims for intentional damage, otherwise many people would take advantage of burning down their own homes. Umbrella insurance also won't cover legal costs for violent acts you incite on your own property.

  • Liability issues surrounding your home business - If you run a business from home, you'll need separate business liability insurance. Umbrella plans are limited to personal liabilities.

  • Liabilities you've assumed - When you sign a contract agreeing to assume liabilities for something, you cannot turn to umbrella insurance for coverage.

  • Liabilities associated with war - Financial losses from living in a war zone aren't covered by umbrella insurance because of the massive damage that can occur.

Think about umbrella insurance if you need additional coverage beyond your basic policies. Contact us at Tompkins Insurance Agencies for more information about umbrella plans and other types of coverage.

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