Homeowner's Insurance Umbrella Policy

In an instant, something can happen that will threaten all of your personal assets, including your home. Insurance professionals recommend that certain homeowners purchase an umbrella policy to protect their property, investments, and future income. Some people have misconceptions about homeowner's insurance umbrella policies, and they need reliable information about their purpose and whether they need the coverage.

Purpose

A homeowner's insurance umbrella policy serves as a safety net by providing extra coverage on top of the basic homeowner's insurance policy. Umbrella policies cover a homeowner in certain cases of natural disaster and accident. The insured can also purchase a policy that includes coverage for personal injury.

Cost

In 2010, $1 million of homeowner's umbrella insurance coverage could be purchased for about $300, according to the National Association of Realtors. Certain circumstances, such as a poor driving record or a teenage driver in the household, can raise the cost of the homeowner's policy. Purchasing your umbrella policy from the same company that insures your home and auto, having a good driving record, and maintaining a good credit score can result in a lower premium.

Considerations

When considering how much homeowner's umbrella insurance to purchase, consider your net worth. If you have millions of dollars to lose, you need millions of dollars of coverage. Homeowners who have businesses or status in the community (celebrities, politicians) have more potential for lawsuits. People who have a pool, trampoline, swing set, or potentially dangerous pets might need a homeowner's insurance umbrella policy.

Exceptions

Some umbrella policies exclude coverage under certain cases. Some don't pay claims involving business activity on the property. For example, if someone visiting to purchase products or services from your home business is injured by falling in your driveway, your policy might not cover a resulting lawsuit. The homeowner might need to purchase a rider policy to cover claims related to the business. Additionally, the policy might not cover people who perform work on the property such as electricians, tree cutters, or domestic workers. You'll need to make sure they carry their own insurance.

Special Features

Homeowner's insurance umbrella policies cover incidents that might seem to have nothing to do with the home. A policy can include personal injury coverage, which protects you against defamation and invasion of privacy lawsuits. You can also use this type of coverage even if you become the object of a frivolous lawsuit, because you will need to pay for a defense.

References

• National Association of Realtors: Houselogic: The Cost of Umbrella Insurance Coverage for Homeowners
• MSN Money Central: Umbrella Insurance Policies Plug Holes in Your Coverage